Are You Covered Under Tax Audit

[headstrong007]

Wow, I got it, the penalty for the wrong turnover can be 1/2% of turnover with a maximum limit of 1.5 lakh.. I probably saved already saved 50,000 in 3 years..
A risky trade is going..

Or maybe my CA knew it all, thre is gray area.. he can handle the case. Maybe very rare case that IT slap a big penalty on a F&O trader, just for trading options when no tax is due.

He said most of the cases a scrutiny notices will come quickly, that a full audit is required.
Another important thing he always filed earliest. So difficult to impose a direct penalty as there is time to resend. Now a delayed scrutiny notice is a rare case.
I think he took the calculated risk. But this is not advisable, probably... unless CA is good and confident that he can handle the consequences easily..

 

[aja]

If your turnover is over 2 cr you need audit even if your income is below taxable limit.So for turnover above Rs 2 cr there is NO escape from audit....audit karna hi padega .

ST

From this turnover I understand that,IT knows only our turnover via AIR.
But they cant tell that we are in loss or profit trading,right?
So here manipulation can be done and that's the reason ITD ask for audit.

 

[headstrong007]

I must say one thing,

Don't Harass Honest Tax Payers, Says Prime Minister Narendra Modi..

I don't remember anyone I know got a direct big penalty from IT. They got notices for audit only in such cases.
Probably they don't want to harass an honest tax payer with max 1.5 lakh fine when I already paid much more tax than that. Cases may vary person to person CA to CA..

If they see no tax is given and a wrong turn over, they can slap direct 1.5 Lakh notice.. just to harass..

 

[wisp]

F&O Calculation example:

For example:

If 3000 units (2 lots; Lot size1500 units) of futures of Tata Motors are bought at Rs. 400 and sold at Rs. 410, the positive difference of Rs.30,000 (10*3000) will be the turnover for tax purposes.

In case of options trade, suppose call of 2 lots or 3000 units of Tata Motors are bought at Rs. 140 and sold at Rs. 135 the turnover will be calculated in two parts.

Firstly the loss (140-135=5) of Rs.15,000 (5*3000) will be negative difference and added to total turnover.
Secondly the premium received on sale ie. Rs. 135*3000 = 40500 being premium received on option will also be added to turnover.

So in this example of F&O trading total turnover will be:

Profit in Futures trade Rs. 30,000
Loss in Options trade Rs. 15,000
Premium received on sale of Options Rs. 40,500
Total Turnover
Rs. 85,500

http://tdsmaster.com/how-to-calculate-derivative-futures-options-turnover.html

 

[aja]

I must say one thing,

Don't Harass Honest Tax Payers, Says Prime Minister Narendra Modi..

I don't remember anyone I know got a direct big penalty from IT. They got notices for audit only in such cases.
Probably they don't want to harass an honest tax payer with max 1.5 lakh fine when I already paid much more tax than that. Cases may vary person to person CA to CA..

If they see no tax is given and a wrong turn over, they can slap direct 1.5 Lakh notice.. just to harass..

You know there a penalty for not maintaining books of account for a small businessman?
Penalty is 25k,they make money or dont make money.There's a lot of harassment by ITD to these small retailers.

It varies from AO(ITO) to AO(ITO).If the person is corrupt,he'd harass you anyway.If someone is poor soul and the deal is very cheap then instead of going for appeal etc,many settle the matter on the spot.

 

[headstrong007]

Only this is true.. as published in many Tax related web sites..

Calculation of turnover of derivatives and F&O trade is a debatable issue and there comes conflicting views many a times. The interesting part is; there is no clarification by Income Tax department about the calculation of derivatives turnover till now. So there can be some differences in reaching the final turnover of derivatives for Income Tax purposes.

Now I know, what is the gray area my CA is talking about..

 

[Smart_trade]

Only this is true.. as published in many Tax related web sites..

Calculation of turnover of derivatives and F&O trade is a debatable issue and there comes conflicting views many a times. The interesting part is; there is no clarification by Income Tax department about the calculation of derivatives turnover till now. So there can be some differences in reaching the final turnover of derivatives for Income Tax purposes.

Now I know, what is the gray area my CA is talking about..

Your CA is clearly misleading you and you are keeping a blind faith on him.It is you who will face the music in scrutiny, not your CA. Your CA is going to charge you extra 15-20 K for handling scrutiny case and it is extra business for him. If you are paying taxes in Lakhs of rupees then why avoid audit and save 10-15 K more and depend on good intention of your CA,IT department and Narendra Modi ?In case of conflicting views we should err on the safer side.

The first question my CA asks when I go to him is whether my Turnover is above Rs 2 cr...

Smart_trade

 

[aja]

Only this is true.. as published in many Tax related web sites..

Calculation of turnover of derivatives and F&O trade is a debatable issue and there comes conflicting views many a times. The interesting part is; there is no clarification by Income Tax department about the calculation of derivatives turnover till now. So there can be some differences in reaching the final turnover of derivatives for Income Tax purposes.

Now I know, what is the gray area my CA is talking about..

Yes,even Nithin Kamath.CEO Zerodha said the same thing in his Taxation Blog.
But its better to go for audit.
Audit is a burden for a traders like me who are loosing all the time.So undergoing audit and paying extra 20k is like "Yaar ek Lenova ka laptop aa gaya hota isme.."

When you are making big money,skipping audit is a wrong impression.

 

[headstrong007]

This is what you think. You will charged under filing wrong information, submitting wrong turnover and concealment of income.

FYI, TO has nothing to do with intraday trading

You said that by adding only profit and loss values as TO, your TO will hit above 2 CR, then think and assume of your TO, if option sell value is added to it.

No I never said that.
It goes above 2 Cr only if Premium received on sale of Options also added. In that case my max fine 1.1 lakh or so. I have already saved 3 audit cost.. 50,000+. Maybe another two is on the way..

But I know many caught with wrong turnover.. who slapped by audit notices only but not a single honest taxpayer with such big fine in lakhs. Fair chance it will be a token amount much less than 3 audit cost. aja already said it is 25lakh for small business..

May be honest tax payer don't to worry too much... as the most interesting part is; there is no clarification by Income Tax department about the calculation of derivatives turnover till now.

 

[headstrong007]

Yes,even Nithin Kamath.CEO Zerodha said the same thing in his Taxation Blog.
But its better to go for audit.
Audit is a burden for a traders like me who are loosing all the time.So undergoing audit and paying extra 20k is like "Yaar ek Lenova ka laptop aa gaya hota isme.."

When you are making big money,skipping audit is a wrong impression.

U r right in ur view..

but I have calculated differently RR, 3 or 5 audit cost vs one fine.

My CA said as an honest taxpayer I'll serve only an audit notice maximum with Rs 5000 fine after settlement. No need to worry. He faced many such cases.. I just trusted him bcoz he is good enough.