What if profit is less than 6% of the turnover and you opted for presumptive taxation?

Taxation
1

opted for presumptive taxation last year
and now profit is less than 6% of the turnover –

I understand that one can opt for audit this year and can not go back to presumptive for 5 years but what is the penalty for doing this this year ?

How do I find out what is the turnover amount for FNO reported by broker to income tax department?

Also, one must pay tax as per 6% of the turnover? what is the way out of this without audit ? @Quicko @Jason_Castelino

2

Hello @curiousvi

If you opt out of the presumptive tax scheme within 5 years from the year you opted in, there will be below consequences to it:

  1. There is no penalty for opting out of presumptive tax scheme.
  2. Maintain books of accounts for the next 5 years from the year you opted out.
  3. Get books audited by a CA for the next 5 years from the year you opted out.
  4. Could not opt for the same scheme for the next 5 years.

If you opt out of presumptive tax scheme, now you do not have to pay tax as per 6% of the turnover. Tax has to be paid on the actual profit.

Turnover from F&O is absolute of profit and loss. You can get the same from the broker statement.

Hope, this clarifies your doubts.

Thank you.

3

Even if I stop trading so wont have business income from next year …do I still need to maintain books and get those audited for 5 years?

Turnover from FNO is absolute profit and loss but when we use scripwise it is lower than trade wise so even though does not provide scrip wise …can we calculate ourselves and use that instead tradewise?

Also do brokers report FNO turnover to income tax dept ? if yes is there any way I can find out what is reported by broker? I can see AIS/TIs shows interest income paid/dividend paid and capital gain but I dont see turnover so wondering where do I find FNO turnover reported ?

Thank you @Jason_Castelino

4

@curiousvi

If you do not have any business income in the following years, you are not required to maintain books of accounts or undergo a tax audit, even if you had opted out of presumptive taxation earlier.

While it is generally recommended to report trade-wise turnover for F&O transactions, in the absence of trade-wise data, scrip-wise turnover is also acceptable and can be used for tax reporting.

As of now, F&O turnover is not specifically reported in the AIS or any other publicly accessible tax data sources.

Thanks

5

But do brokers report actual turnover (I mean their software calculates absolute PNL and report the same as FNO turnover to tax dept?
How will tax dept know what is client’s actual turnover otherwise?

6

Hello @curiousvi

Currently, there is no rule to report F&O turnover to the Income Tax Department by the broker. However, the tax department can ask for trade data from the taxpayer if think necessary for scrutiny.

Thanks

7

So IT dept can ask trade data from the taxpayer but they can’t/don’t ask the same from broker?

8

Hello @curiousvi

Yes, the IT Department can request trade data or other relevant information from the taxpayer as they think is necessary for processing of ITR. They are continuously making the changes to get the information from the source such as broker , banks etc.

Thank you.