Question regarding Section 44AD

Taxation
1

Suppose I have salary, short/long term capital gains and intra day profits as income and the intra day profits are over 8 percent of my Intraday TurnOver (which is less than 2 crores). Since Intraday profits are part of speculative business, I need to file ITR 3. So ,
1.Am I eligible for Section 44AD?
2. If I am eligible then I dont need to keep books and no need to be audited. Am I right?
3. Suppose in the next year, I dont engage in intraday trading, so now my income is only from salary and short/long term capital gains and hence my business income is zero.Now should I file ITR 3 again since I applied for Section 44AD in the previous year? Or can I file ITR 2 since I have no business income?

2

@Quicko Please help

3

Hi @Sap_452

  1. Section 44AD presumptive taxation for Business is applicable to those who are engaged in a specified business and have a total turnover of up to INR 2 crores. Intra-day profits are considered speculative business income and are not covered under Section 44AD. Hence you’re not eligible for the section 44AD presumptive scheme. Section 44AD - Presumptive Taxation for Business - Learn by Quicko

  2. Since you are not eligible for Section 44AD, the provision of not maintaining books of accounts and not requiring an audit does not apply to your situation. As you have income from speculative business (intra-day profits), you would need to maintain books of accounts and get them audited if your total income exceeds the specified limits. Income Tax on Intraday Trading - Learn by Quicko

  3. Since you no longer have any business income, you do not need to file ITR-3, and as your income is only from salary and short/long-term capital gains, you should file ITR-2.

Hope this helps.

1 Like
4

But here Income Tax on Intraday Trading - Learn by Quicko, it says:

Tax Audit on Intraday Trading

Trading Turnover up to INR 2 Cr

  • If the taxpayer has incurred a loss or the profit is less than 6% of Trading Turnover and total income is more than the basic exemption limit, Tax Audit is applicable.
  • If the taxpayer has a profit of more than or equal to 6% of Trading Turnover, Tax Audit is not applicable.

Since I have profits more than 8 percent of Intraday Turnover and my turnover is less than 2 crores, will Tax Audit be applicable to me?

5

@Sap_452

As per the stated information, the tax audit is not mandatory in your case.

1 Like
6

The definition of eligible business is not capable of excluding speculative business. 44AD can be applied in this case.