Under Budget 2020, the turnover limit under Sec 44AB has been increased from INR 1 Cr to INR 5 Cr. However, the turnover limit under Sec 44AD has not been changed. When the Trading Turnover is between INR 2 Cr and INR 5 Cr, neither Sec 44AB is applicable nor Sec 44AD. Thus, Tax Audit is not applicable irrespective of profit or loss.
Hence, in our view tax audit is not applicable in your case but you should maintain books of accounts.
For more insights, you can read below article on tax audit and bookkeeping :
F&O Income is a non-speculative business income taxable at slab rates. So if you earn any income from trading in F&O then it would be taxable. Moreover, If such income is invested in tax-saving investments such as PPF, you can claim such investment as a deduction to reduce the taxable income.
hi @Quicko few questions on depreciation for computer asset: Given useful life as 3 years (as per the act), WDV method and depreciation rate as 40%, and zero salvage value - how would the expense split in the 2nd and 3rd year? (because 1st year is easy, its 40% of the initial cost). Let’s take an example. Cost of computer - 1 Lakh
1st year expense - 40,000. (40% of 1 lakh) carrying cost to the next year = 60,000.
2nd year expense - 40% * 60,000 = 24000, carrying cost to next year = (60,000 - 24000) = 36000
3rd year expense = 36000
Is this right way?
The calculation of depreciation under the Income Tax Act is different. Here Block of asset method is used.
Block of Assets means a group of assets falling under the same category and having the same depreciation rate.
Calculation of Gross Block of Assets is as per the table below:
Particulars
Amount
Opening WDV as on 1st April
XXXX
Add
Cost of Assets purchased
XXXX
Less
Sale Value of Assets sold
(XXXX)
WDV of Block of Assets
XXXX
Less
Depreciation
(XXXX)
Closing WDV at the end of year
XXXX
In your example,
Value of block of computers - 1 Lakh
1st-year expense - 40,000. (40% of 1 lakh) carrying cost to the next year = 60,000.
2nd year expense - 40% * 60,000 = 24000, carrying cost to next year = (60,000 - 24000) = 36000
3rd year expense can either be 36000 or 40%*36000 depending upon the useful life of other computers in the block.
You can write off the full amount only when the block of an asset ceases to exist.
Audit is required/applicable
AA] if your turnover crosses the threshold limit in the current year. (FY 2020-21) or;
BB] if you are opting OUT of presumptive scheme in the current year(FY 2020-21) (meaning you had opted for presumptive scheme in the previous year) and your net FNO Income in the current year is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then tax audit is applicable.
Going by info, since turnover 3.5 crores is less than the threshold limit - audit is not applicable.
When Trading Turnover more than INR 2 Cr and up to INR 10 Cr
Tax Audit is not applicable irrespective of profit or loss.
Under Budget 2021, the turnover limit under Sec 44AB has been increased from INR 5 Cr to INR 10 Cr. However, the turnover limit under Sec 44AD has not been changed. When the Trading Turnover is between INR 2 Cr and INR 10 Cr, neither Sec 44AB is applicable nor Sec 44AD. Thus, Tax Audit is not applicable irrespective of profit or loss. The Income Tax Department is expected to make an amendment to the turnover limit of Sec 44AD to resolve this loophole.
Since in your case losses are quite high. You can go for a tax audit being conservative.
@Quicko@San78 When we consider the turnover threshold of 10 crores, this limit of 10 crores is after adding all the turnovers? (Future+Option+Intraday) or Individual limit?
This limit of 10 crores is after adding all the turnovers (Future+Option+Intraday). Therefore, the aggregate turnover shall be taken into consideration.
Some time ago, I didn’t make much profits from my trades. When it was time to pay taxes, I didn’t have to pay anything on them. Was it because the profits I made were too low to be taxed?
Total tax turn over (intra day equity+futures sale+Option ) is 1 crore or less than 10 crores, if profit lessthan 6% tax audit applies right? (overrides all other conditions)(income above basic limit of 2.5 lakhs)
In case of audit applicability where your turnover is less than 1 crore, all the conditions should be checked. No condition overrides others. If you fall under all the criteria of audit only then the audit will be applicable.
@Quicko
My friend who is a Central Govt. employee joined in mid Feb. 2021. He received his March 2021 salary in April and his TDS was also deducted by the employer.
Now to get his TDS returned, when to file ITR ?
Will his March’s salary be counted under current FY, because salary was credited in April or it is still counted as last FY income so ITR will have to be filed this July 2021 or next July in 2022, for getting back the tax deducted in March ?
Income is taxable on the accrual basis, therefore the salary of March will be taxable in FY 2020-21, even though it is received in April 2021.
ITR for FY 2020-21 should be filed before the due date i.e. Sept 30, 2021 to get the refund of the TDS deducted.
You can find the details of TDS deducted in your Form 26AS
