How to avoid tax audit


#1

Dear all, My main source of i income is from agriculture around 1 lakh per annum. Also i receive a rental income of 72000

So what is the turnover in intraday or delivery based should i limit so that not to require to get audited.
I Mean…
Till now I don’t have taxable income. So i don’t have to file IT RETURN
Now my question is
What’s the limit my earrings in shares is that 250000-72000(rental income) =1,78,000 or
78000 (include my agri income)?

What style of trade i should do ?


#2

No audit required in the following cases.

  1. Turnover is less than Rs. 40 Lac (whether u want to declare loss or profit)

  2. Turnover is less than Rs.2 Crore (under presumptive taxation clause) in case if you wish to pay tax on 6% turnover (6% is considered as net profit here)

If you want to declare loss and turnover is above Rs. 40L. audit is mandatory


#3

Turnover limit increased to 1 cr long back for compulsory Audit and 44AD its 2 Cr Audit is not required if Income is more than 6% of other than cash turnover and 8% for cash turnover.


#4

ohh. tats good.


#5

A related question here

@nithin @TAXIQ.IN @Bhuvanesh

Do the brokerages share profit / Loss statement of traders with Tax authorities. Just curious. How will tax authorities counter check our profit / loss figures.


#6

Tax authorities has right to any enterprises like your bank, broker to provide certain information required to ascertain the taxes if any evaded. Tax authority do get information from AIR ( Annual Information return ) by Stock exchanges for complete trade details. When these things wont match or computer select few for verification.

Broking houses are compelled to provide information as asked.


#7

@TraderVenk I have turnover of less than 40,00,000 with losses in actual but @TAXIQ.IN and @nithin mentioned that audit is mandatory if I want to carry forward my losses. They even indirectly suggested me to declare 6% of my turnover as profit and avoid audit.

I am confused again. Are you sure ?


#8

My understanding is you dont need an audit. you can use ITR3 to show loss and carry forward losses. (latest Java XML utility available in income tax site allows showing negative income from business in non-audit cases)

I know one of my friend had earlier told me that he had declared trading loss and carry forwarded it with out audit. There was no issue from IT department.

(This is only a suggestion based on what I know. I am not an auditor or tax consultant.)

Warren Buffett: “Never ask a barber if you need a haircut.”


#9

@TraderVenk Thanks for your views.

In my case, Can i use No Account Case to report losses or I should be using proper Balance sheet and P&L sheet ?

I will try to play around with latest ITR3 XML and Let us see what happens !

And Yes, That quote man ! :smile:


#10

I love that quote


#11

AND

Never ask your broker if “Scalping” is better than positional trades. :grinning:


#12

Advisers normally say this if the loss is less and don’t have to carry forward means instead of paying for the aduitor just show the 6% of the turnover as profit and file your tax yourself
That’s the funny thing of the 1961 rules when no internet or fully accountable transactions not present.
That’s why i asked this question


#13

Please read my edited question and answer me sir
Thank you in advance


#14

This is an interesting analysis ! @TraderVenk It totally supports your suggestions.

@TAXIQ.IN @nithin Please take a stand and Clear the air around the Audit requirements in less than 1 Cr turnover cases !


#15

Hey there.
Let me clarify few things about tax audit.
Tax audit is attracted in the following cases.

If your income is less than 8 or 6% of the actual turnover then you may go for a tax audit.
if your income is more than 8% of your turn over you may not get your books of accounts audited.

Now the transactions involving speculation futures and options are considered as business income which means trading is considered as business and hence tax audit will apply.

A tax audit may apply if your turnover is more than 2 crores this is mandatory provision. Or I said earlier if your income is less than 8 or 6% of your turn over.

the calculation of turnover is tricky however I believe zero does provide you to understand what is the quantum of your turnover that is eligible to be called as a turnover as per Income Tax Act.

if you are in losses which means your income is less than 8% of 6% you must compulsory get your books of accounts audited by chartered accountant for carrying forward the losses.

Whether or not you get your books of accounts audited in which case you must compulsory disclose income higher than 6 or 8% do you may not have actually earned it. The taxmann requires you to pay taxes on the percentage basis that is presumptive basis and not on the actual income earned