Hey All,
I am a full-time trader, My FnO profits are 32 LPA+ , shorterm losses 6 LPA , And Intraday profits at 1 Lakh . FnO turnover :- 60 Lakhs .I filled my 2024-2025year return under 44AD . However I am confused regarding 2025-2026 ITR filling?
Had few business expenses, like employees on profit sharing, Office rents , Subscriptions , etc.
Now, Despite 32 LPA in FnO , I feel my profits are somewhere close to 17-19 Lakhs. And I am confused whether I should opt for 44AD or tax audit ( If I opt out for presumptive then mandatory )
What is a more safer approach in showcasing expenses, Since I am not presenting books of accounts in 44AD , I fear that the AO might scruntinise me or request for some expenses due to the discrepancy between the actual profits and profits showcased on brokers?
One CA recommended that if I opt for Tax Audit and showcase Share trading as an individual-based firm , I can set-off the short term loss with FnO profits by showcasing short-term as business income? Is that possible and a correct approach ? Can I also do the same in 44AD ?
Also, if I opt for this route, can the previous carried-forward short-term losses continue or will I lose the chance to claim them in future?
If I choose the 44AD route, By declaring 27% of my turnover as deemed percentage. Can I be in any trouble whatsoever?
You can do that even without audit and even with 44AD, AFAIK. But the problem with 44AD in this case is turnover would be based on share sell value and 6% of that will be too much. With 44AD, it’s better to show share trading as STCG.
You only need to declare 6%. No point declaring 27%. Note that you still need to declare 6% even if you lost like -15% in the next years or in a black swan event. Account for that if you voluntarily chose a higher amount. You aren’t going to get a medal for declaring higher amounts.
I am also curious since FnO turnover is based on absolute value. I have multiple bank credits in my accounts, As per capital requirements, transfer of funds between family accounts to myself , repayment, constant deposits and withdrawls in broker etc. The total credits in my bank account might exceed 2-2.5 Crores. Now since the turnover reported will be 60 Lakhs as per absolute value. Can this high transacion value lead to any trouble ?
Don’t know. if AO questions it, explain it what’s there to worry? It’s all legal right? They will also have bank records and who paid whom. Turnover calculation is provided by broker - so you have records to back it up. Pay 6% in the 27% and use the tax on the remaining 21% to pay lawyers, CAs - if AOs are hell bent on destroying you for whatever reason. Bending the knee or fearing what might happen isn’t the way to go, IMhO, unless you did something that’s illegal.
Got it. Its a interesting take . I will declare 8%. Also one more thing that concern me. Other than share income, I have also gotten 2-2.5 Lakhs of receipts other than family and friends . How should I choose to declare this ? Should I increase my FnO turnover while declaring 44AD or should I add these as income from other sources? @BB789
What’s this from? Is it income? Is it loan? Do you have any documents to back up that? Only direct family gifts are exempt. Other friend gifts are subject to 50k exemption only. Rest are taxed as income from other sources. Loan is not income but you need to have documentation in case of query. Consult your CA regarding exact laws governing each type of income. Business is business and the rest is rest. Increasing business turnover or declaring higher percentage won’t help if you miss declaring other income.
Hey,
Yes, that is income and it is not related to FnO turnover/ business which I am declaring under 44AD. I think I should report it as income from other sources as you said. Thanks!
I suggest you to show the actual profits. Your concerns are genuine. Do not declare lower profits than you have earned. Internet will give you answers which look convincing to you. Always take professional guidance.
You can do this.
You can do this too. You are not under declaring you income here.
They apparently did a raid and got the detailed formal books of accounts maintained there(However the case started with the assessee claiming incorrect turnover, though it was corrected before ITAT case was filled and after tax survey). Therefore it is not recommend to create or maintain any books of accounts if you’re using 44AD/ADA.Do note that just bank statements are not books according to CIT v. Bhaichand H. Gandhi, [1983] 141 ITR 67 (Bombay High Court) and cash flow statements are also not books as per Nand lol popli Nand Lal Popli, Shimla vs Assessee on 14 June, 2016