Section 44AB Says this: “if turnover less than 1cr and profitability less than 8% tax audit is required.”
So if anybody who made a small loss in FO has to go for tax audit?
For example, 1 FO trade with loss of 10K.
Total turnover 10K
Profitability -10K (loss).
This satisfies the rule above.Here profitability is less than 8% of turnover.
Now since a person’s salary is above basic exception limit with 10 LPA and since he made loss in FO , tax audit is required in this case?
If the turnover is extremely small, it would make sense to declare 8% of turnover as profit and then pay taxes on it. A lot more simpler than an audit. So in this case Rs 800 as profit (8% of Rs 10k). If you are in the 30% bracket, Rs 240 is the tax due.
But if you want to show this loss and carry forward, you will need that audit.
Yes. It is better to show “deemed” profit and get away with Audit. One more thing, check whether your total income/net profit is below the tax slab of 2.5L, in which case you can avoid Audit as well.
For all non-speculative transactions, the article says that turnover to be determined as follows –
The total of favorable and unfavorable differences shall be taken as turnover
Premium received on sale of options is also to be included in turnover
In respect of any reverse trades entered, the difference thereon should also form part of the turnover.
The above is a guideline from ICAI (CA association). Turnover doesn’t have any affect on the tax liability, it is just to see if you need an audit or not. As a business we have to put up the most conservative to calculate the turnover, you can take the most aggressive way.