Tax audit requirement for derivatives trading ( budget 2020) increased?

does this include derivative trading ?

something for derivative traders there ? >>>>>


Govt raises turnover threshold for audit of MSME accounts to Rs 5 cr

YES, definitely.

party time :partying_face: :partying_face: :partying_face:

:smiley:

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…this tax proposal is conditional. Objective is to reduce cash dealings n increase on the record/electronic payments. The threshold for tax audit is proposed to be increased from 1 cr to Rs.5 cr of turnover subject to the conditions that:

  1. Not more than 5% of the receipts/turnover should be in cash;
    And

  2. Not more than 5% of the payments (believed to be for expenses etc) should be in cash.

So those having all the turnover only in F&O (which is all on the record=non cash= electronic) and incurring all but 5% of the business payments n expenses by cards, wallets, netbanking, cheque, upi will be liable to tax audit only where their turnover exceeds Rs 5 cr. Applicable from next financial year !

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@lotus @skj.pro woow ! there is something for traders :smile:

See, it does apply to trader of goods in a major way. Just that it can be applied to your derivative trades also

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@Quicko

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Hi @arvindnrm,

In Budget 2020 (applicable for FY 2020-21 / AY 2021-22), the threshold limit for a tax audit for traders is increased from 1 Cr. to 5 Cr. provided following two conditions are fulfiled:

  1. Cash sales/ turnover <= 5% of total sales,
  2. Cash Expenditure <= 5% of total expenditure.

Yes, the above conditions will apply to derivative traders as well. Also, the due date for ITR Filing has been changed from 30th September to 31st October. However, a tax audit report needs to be submitted by 30th September.

Hope this helps. We at Quicko are on a mission to simplify taxes for all! You can either drop us a message requesting a callback or write to us on help@quicko.com.We are on a mission to simplify taxes for all! :slight_smile:

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stock market traders do all the transactions via banking . So , no question of cash sales or cash expenditure !!
then , how can you say like this ? ? ?

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Hi @HSL,

The budget 2020 says that not only your cash sales but also your cash expenditure should be taken into account. A lot of full-time traders pay advisory fees, subscription fees via cash. Which they should avoid for taking benefit of increased turnover limit.

Hope this clarifies your doubt. We at Quicko are on a mission to simplify taxes for all! You can either drop us a message requesting a callback or write to us on help@quicko.com. We are on a mission to simplify taxes for all! :slight_smile:

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thanks @siva Siva
& @Quicko

@Quicko Another quick question : this thing also removed ( from audit requirement ) in budget 2020 ? >>>

If the turnover is less than Rs 5 crore, and if profit less than 6% of turnover and total income exceeds basic exemption limit

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@Quicko Whether the profit less than 6% of turnover criterion for audit has been dispensed away with for those with total income exceeding basic exemption limit ?

Hi @nakrj @arvindnrm,

In the budget 2020, FM increased the threshold limit of turnover from INR. 1 Cr. to INR. 5 Cr. for a tax audit applicability . Provided your Cash Sales (Receipts) and Cash Purchase (Payments) are less than 5%.

There is a situation where if your turnover is more than INR. 2 Cr. but less than or equal to INR. 5 Cr. then Tax Audit is Not Applicable irrespective of profits/losses. Since the turnover limit in Sec 44AD is INR. 2 Cr. or less. And the turnover limit of Sec 44AB has been increased from INR. 1 Cr. to INR. 5 Cr.

This is an anomaly, where neither Sec 44AB nor Sec 44AD gets hit. Hence under this turnover limit, a tax audit is not applicable to taxpayer/trader irrespective of profits/losses. Here a taxpayer will not be able to file ITR-4. But will have to file ITR-3 without audit. Hence an amendment in the turnover limit of section 44AD is expected from INR. 2 Cr. to INR. 5 Cr. from CBDT.

Read More: No more Tax Audit for Business/Trading Income having turnover up to INR. 5 Cr…is it true?

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I am a salaried person. I invest in equity market directly as well as through mutual funds. I do not trade on intraday basis. But I do swing trade and the trade generally lasts for few week.Now I want to know how profit from swing trades will be taxed. Are the profits will be clubbed with my salary or do I Have to pay short term capital gains tax at 15%…
Thanks

Hi @setia.sahil,

Hope this helps! :slight_smile:

thank you quicko for wonderful explanation & article

wouldn’t tht be short term capital gain & charged @ 15 % since its equity trade ?

@arvindnrm

Glad to help you. For determining the type of income under Income Tax, you need to keep in mind the intention with which the trading is done. In traders case, the intention is to earn profits from trades hence it is covered under the head Income From Business and Profession.

Hope this helps!:slightly_smiling_face:

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@Vinay_S

In case of loss from FNO trading, you will need to file ITR-3 and tax audit will also be applicable.

Read More: Is tax audit applicable to traders in India?

For further queries, you can DM us at help@quicko.com.

Can i mention profit as 6% to avoid tax audit?