General Trading Chat
- Thread starter timepass
- Start date
- Tags idle thoughts trading talk only
ST sir, when this time I went to my CA to file my income tax returns, he informed me that from next year onwards, one can show up to 50% of his professional income as lump-sum expenses (for tax deductions), and there won't be any need to distribute them under various expense heads. There won't be any scrutiny of the ITR up to this (50%) limit.
However if one shows expenses of more than 50% for the purpose of deductions, he will have to get them audited and its open to scrutiny also.
This simplifies the tax jargon to great extent and should increase compliance also.
Off course there is some ceiling of income per annum where it will be applicable, I think its 50lac per annum.
However if one shows expenses of more than 50% for the purpose of deductions, he will have to get them audited and its open to scrutiny also.
This simplifies the tax jargon to great extent and should increase compliance also.
Off course there is some ceiling of income per annum where it will be applicable, I think its 50lac per annum.
Intraday Stock-trading alone considered as speculative income not the FNO.
source:
http://zerodha.com/varsity/chapter/taxation-for-traders/
source:
http://zerodha.com/varsity/chapter/taxation-for-traders/
source:
http://taxguru.in/income-tax/income-tax-return-filing-case-futures-trading.html
From your source also its clear, "ultimately settled otherwise than by the actual delivery", Which says that settled with out delivery. Delivery the term only applicalble to stocks(stocks are assets) not for FNO contracts.
http://taxguru.in/income-tax/income-tax-return-filing-case-futures-trading.html
From your source also its clear, "ultimately settled otherwise than by the actual delivery", Which says that settled with out delivery. Delivery the term only applicalble to stocks(stocks are assets) not for FNO contracts.
Xray bro
One more query
suppose we earn Some profit from F& O trading..suppose X LACS..so IT Considered bUSINESS INCOME..
Suppose I have another business(but no relation to finance or trading..suppose making films).& In that Business I have A big loss ..suppose in that buiness I loss Y lacs Loss..
SO can I deduct that another business loss from my trading Profit & reduce my taxes..or buisness operation should be same?If I can, My tax problem will be solved
thanks
P.S- I have read that article somewhere..please go through it see if that law can help
Introduction
The Indian cinematographic film (“film”) industry was granted the status of an
“industry” in 2000 and ever since several initiatives to liberalize the regulations in film
production and financing was mooted by the government. The entertainment sector1
has
witnessed rapid changes in recent times with large investments in film production.2
Currently, the film industry contributes approximately 27% to the entire entertainment pie
and is on a high growth trajectory with a year-to-year estimated annual growth of 16.75%,
speculated to reach INR 143 billion by 2010 from INR 68 billion in 2005.3
The film industry
now has a more organized corporate structure where most producers are corporate entities
rather than individuals and this has helped banks to feel more comfortable in sanctioning
loans and insurance companies in providing cover to films against any loss during its
shooting.
Now the film producers have the necessary cover and impetus to invest more in
anticipation of greater returns. The influx of more money has increased tax liabilities for the
producers of the film. The present bulletin discusses the provisions under the income tax
laws of India that allow the film producers to make certain deductions while calculating their
taxable income.
1. Submissions to be made by producers
The producer(s) of any film in India is required to furnish a statement to the income
tax (“IT”) authorities, in accordance with section 285B of the Income Tax Act, 1961
(“Act”), with details of all payments in excess of INR 50,0004
made or due from him, to any
person engaged by him in the production of the film. Per Rule 121A of the Income tax
Rules, 1962 (“Rule”), the producer is entirely responsible to furnish this statement to the IT
authorities within 30 days from the end of the financial year, during which the production of
the film was carried on, or within 30 days from the date of completion of the film,
whichever is earlier. Any non-compliance of the said provision attracts a penalty of INR 100
for each day of default.5
1
In India, the entertainment sector can broadly be classified into television, films, print media, radio, music,
animation, gaming, and advertising.
2
George Soros invested INR 4 billion in Reliance Entertainment Ltd., an internet, film and television
broadcasting company; South Asia Entertainment invested INR 7 billion in Sun Direct TV, which is a DTH
service provider. See http://www.bollywood.com/foreign-investment-media-sector-rises for details (as viewed
on September 08, 2009).
3
KPMG 2008 study on film financing and television programme.
4
US $1,000 (US $ 1 = INR 50).
5
US $2 under section 272A of the Act.
Issue X | December 2009
Disclaimer – This bulletin is for information purposes and should not be construed as legal advice. © PSA
2. Deductions permissible on production of a film
Ascertaining the taxable income of a film producer can be extremely cumbersome,
especially since revenue only commences once the production of the film is complete. This
completion could take between 6 months to 6 years and most of the revenue generated,
quite often, will be in the initial period of the film’s release. Thus, it is crucial to understand
how production expenses can be written off against revenues. The Act provides for certain
provisions that have been discussed herein.
The cost of production of a feature film can be claimed as a deduction under Rule
9A of the income tax rules. Cost of production, as defined in Rule 9A refers to all
expenditure incurred on the production of the film except that incurred on positive prints of
the film and in connection with the advertisement of a film after it is certified for release by
the Censor Board.6
Remuneration paid in kind to actors or any other member of the
production is also added while computing the cost of production. However, any subsidy
received by the producer from the government is allowed to be deducted at the time of
computation and are taxed as revenue receipts.7
This position was upheld by the Supreme
Court in Sahney Steel & Press Work Ltd v. CIT, Hyderabad8 wherein it was held that subsidy
received to assist in carrying trade or business is “revenue” and taxable as revenue receipts.
If the producer incurs loss due to the film getting abandoned, such loss may be deducted as
a business loss.
Subject to the aforesaid, the entire cost of production can be allowed as a deduction
while computing profits and gains. This is possible in the previous year, if -
(a) The film is exhibited on a commercial basis by the producer(s) in some or all areas;
(b) The producer(s) sells the rights of exhibition in some or all areas; or
(c) The producer(s) does both, and the film is released for exhibition on a commercial
basis 90 days before the end of such previous year.
In case the film is not released for exhibition on a commercial basis 90 days before
the end of the previous year, the cost of production will be allowed as deduction while
computing the profits and gains of the previous year as long as such cost does not exceed
the amount realized by the film producer(s) by exhibiting the film or selling the right to
exhibit the film on a commercial basis. In case there is any balance, it will be carried forward
to the next previous year as deduction in that year. If the film is not exhibited on a
commercial basis by the producer nor sold, no deduction will be allowed and the entire cost
will then be carried forward to the next following previous year and allowed as deduction.
Sale of rights of exhibition also includes the lease of such rights or their transfer on a
minimum guarantee basis.
6
Censor Board is a regulatory body set up by the Government of India and is controlled by the Ministry of
Information and Broadcasting. It reviews, rates and censors movies, television shows, television ads, and
promotional material.
7 B. Nagi Reddy v. CIT (1993) 199 ITR 451.
8
AIR 1997 SC 3968.
Issue X | December 2009
Disclaimer – This bulletin is for information purposes and should not be construed as legal advice. © PSA
It is also pertinent to note that the meaning of “exhibition on a commercial basis”9
has evolved through various judicial pronouncements. The Income Tax Appellate Tribunal
in Vieshesh Films Pvt. Ltd v. Deputy CIT, Mumbai, order dated August 27, 2008, held that since no
mode of exhibition is prescribed under Rule 9A, an exhibition of films on television on a
commercial basis will also fall within the scope of Rule 9A.
3. Precautions to be taken
Rule 9A does not have any overriding effect on other provisions of the Act or Rules.
Expenditures that cannot be deducted under Rule 9A can be deducted under section 3710 of
the Act. Therefore, sections dealing with related party payments11 and deductions allowed on
actual payments12 should be given preference while computing the aforementioned
deductions.
Even the remuneration paid in kind to actors, composers, directors etc must be
accurately accounted for and will be added to the total cost of production. Tax deduction at
source (“TDS”) will accordingly be deducted from such remuneration in kind. TDS will also
be deducted from the expense incurred on the hiring of general and technical equipments
with their operating/professional staff.13
An important issue confronted by the film industry pertains to sale of distribution
rights from one non-resident Indian to another. In April 2008, the income tax department
asked TIFC, Cyprus (a group company of Network 18) and UTV, Mauritius (part of the
UTV group) to pay tax on the income generated from the sale of distribution rights of the
Indian movie “Welcome”. The income tax authority enforced provisions of the Act on the
ground that profits were generated due to a business connection in India and therefore,
rejected the claim of the two companies that their transaction be governed by the applicable
Double Taxation Avoidance Agreement (“DTAA”).14
In August 2009, the Finance Minister of India released the Draft Direct Tax Code,
2009 (“DTC”) that aims to replace the Act. The DTC will be presented in the Winter
Session of the parliament for approval, and once approved, will come into force from April
01, 2011. It will bring some radical changes in India’s taxation laws, such as superseding all
DTAAs entered into by India, introducing the General Anti Avoidance Rules (“GAAR”)
that will get invoked if the taxpayer has entered into an arrangement, the main purpose of
which is to obtain tax benefit. If the IT commissioner is satisfied that the arrangement will
be governed by GAAR, he can declare such arrangement as impermissible and thereafter
9
Paid preview, direct online release and direct exhibition of television, all fall under “exhibition on a
commercial basis.”
10 This section, along with others, incorporates provisions with respect to expenditures that are allowed while
computing taxable income under the head “income from profits and gains of business or profession.”
11 Section 40(A)(2) of the Act.
12 Section 43B of the Act.
13 Section 194 I, 194 C and 194 J of the Act.
14 http://www.cainindia.org/news/6_2008/entertainment_cos_get_tax_call_on_welcome.html as viewed on
September 08, 2009.
Issue X | December 2009
Disclaimer – This bulletin is for information purposes and should not be construed as legal advice. © PSA
determine the tax liability accordingly. Therefore, it is important to be familiar with the DTC
in order to determine the pre and post production strategy of forthcoming films accordingly.
Conclusion
Most producers are careful and keep in mind their tax liability while assessing the
approach to shoot and release their film. Costs are incurred right from the pre-production
stage where there is hardly any immediate scope of revenue. Therefore, the strategy on how
to move forward with the production and post-production of the film assumes great
importance. It is also imperative that all commercial contracts executed by the film producer
are drafted and negotiated well in order to leave little or no room for any possible dispute.
Over the years, the dynamics of film production have undergone a great change in India and
with a tremendous escalation in cost, the tax liability of producers has also significantly gone
up. Therefore, film producers have to be more cautious and vigilant than before to take the
best advantage of the existing and prospective tax laws.
One more query
suppose we earn Some profit from F& O trading..suppose X LACS..so IT Considered bUSINESS INCOME..
Suppose I have another business(but no relation to finance or trading..suppose making films).& In that Business I have A big loss ..suppose in that buiness I loss Y lacs Loss..
SO can I deduct that another business loss from my trading Profit & reduce my taxes..or buisness operation should be same?If I can, My tax problem will be solved
thanks
P.S- I have read that article somewhere..please go through it see if that law can help
Introduction
The Indian cinematographic film (“film”) industry was granted the status of an
“industry” in 2000 and ever since several initiatives to liberalize the regulations in film
production and financing was mooted by the government. The entertainment sector1
has
witnessed rapid changes in recent times with large investments in film production.2
Currently, the film industry contributes approximately 27% to the entire entertainment pie
and is on a high growth trajectory with a year-to-year estimated annual growth of 16.75%,
speculated to reach INR 143 billion by 2010 from INR 68 billion in 2005.3
The film industry
now has a more organized corporate structure where most producers are corporate entities
rather than individuals and this has helped banks to feel more comfortable in sanctioning
loans and insurance companies in providing cover to films against any loss during its
shooting.
Now the film producers have the necessary cover and impetus to invest more in
anticipation of greater returns. The influx of more money has increased tax liabilities for the
producers of the film. The present bulletin discusses the provisions under the income tax
laws of India that allow the film producers to make certain deductions while calculating their
taxable income.
1. Submissions to be made by producers
The producer(s) of any film in India is required to furnish a statement to the income
tax (“IT”) authorities, in accordance with section 285B of the Income Tax Act, 1961
(“Act”), with details of all payments in excess of INR 50,0004
made or due from him, to any
person engaged by him in the production of the film. Per Rule 121A of the Income tax
Rules, 1962 (“Rule”), the producer is entirely responsible to furnish this statement to the IT
authorities within 30 days from the end of the financial year, during which the production of
the film was carried on, or within 30 days from the date of completion of the film,
whichever is earlier. Any non-compliance of the said provision attracts a penalty of INR 100
for each day of default.5
1
In India, the entertainment sector can broadly be classified into television, films, print media, radio, music,
animation, gaming, and advertising.
2
George Soros invested INR 4 billion in Reliance Entertainment Ltd., an internet, film and television
broadcasting company; South Asia Entertainment invested INR 7 billion in Sun Direct TV, which is a DTH
service provider. See http://www.bollywood.com/foreign-investment-media-sector-rises for details (as viewed
on September 08, 2009).
3
KPMG 2008 study on film financing and television programme.
4
US $1,000 (US $ 1 = INR 50).
5
US $2 under section 272A of the Act.
Issue X | December 2009
Disclaimer – This bulletin is for information purposes and should not be construed as legal advice. © PSA
2. Deductions permissible on production of a film
Ascertaining the taxable income of a film producer can be extremely cumbersome,
especially since revenue only commences once the production of the film is complete. This
completion could take between 6 months to 6 years and most of the revenue generated,
quite often, will be in the initial period of the film’s release. Thus, it is crucial to understand
how production expenses can be written off against revenues. The Act provides for certain
provisions that have been discussed herein.
The cost of production of a feature film can be claimed as a deduction under Rule
9A of the income tax rules. Cost of production, as defined in Rule 9A refers to all
expenditure incurred on the production of the film except that incurred on positive prints of
the film and in connection with the advertisement of a film after it is certified for release by
the Censor Board.6
Remuneration paid in kind to actors or any other member of the
production is also added while computing the cost of production. However, any subsidy
received by the producer from the government is allowed to be deducted at the time of
computation and are taxed as revenue receipts.7
This position was upheld by the Supreme
Court in Sahney Steel & Press Work Ltd v. CIT, Hyderabad8 wherein it was held that subsidy
received to assist in carrying trade or business is “revenue” and taxable as revenue receipts.
If the producer incurs loss due to the film getting abandoned, such loss may be deducted as
a business loss.
Subject to the aforesaid, the entire cost of production can be allowed as a deduction
while computing profits and gains. This is possible in the previous year, if -
(a) The film is exhibited on a commercial basis by the producer(s) in some or all areas;
(b) The producer(s) sells the rights of exhibition in some or all areas; or
(c) The producer(s) does both, and the film is released for exhibition on a commercial
basis 90 days before the end of such previous year.
In case the film is not released for exhibition on a commercial basis 90 days before
the end of the previous year, the cost of production will be allowed as deduction while
computing the profits and gains of the previous year as long as such cost does not exceed
the amount realized by the film producer(s) by exhibiting the film or selling the right to
exhibit the film on a commercial basis. In case there is any balance, it will be carried forward
to the next previous year as deduction in that year. If the film is not exhibited on a
commercial basis by the producer nor sold, no deduction will be allowed and the entire cost
will then be carried forward to the next following previous year and allowed as deduction.
Sale of rights of exhibition also includes the lease of such rights or their transfer on a
minimum guarantee basis.
6
Censor Board is a regulatory body set up by the Government of India and is controlled by the Ministry of
Information and Broadcasting. It reviews, rates and censors movies, television shows, television ads, and
promotional material.
7 B. Nagi Reddy v. CIT (1993) 199 ITR 451.
8
AIR 1997 SC 3968.
Issue X | December 2009
Disclaimer – This bulletin is for information purposes and should not be construed as legal advice. © PSA
It is also pertinent to note that the meaning of “exhibition on a commercial basis”9
has evolved through various judicial pronouncements. The Income Tax Appellate Tribunal
in Vieshesh Films Pvt. Ltd v. Deputy CIT, Mumbai, order dated August 27, 2008, held that since no
mode of exhibition is prescribed under Rule 9A, an exhibition of films on television on a
commercial basis will also fall within the scope of Rule 9A.
3. Precautions to be taken
Rule 9A does not have any overriding effect on other provisions of the Act or Rules.
Expenditures that cannot be deducted under Rule 9A can be deducted under section 3710 of
the Act. Therefore, sections dealing with related party payments11 and deductions allowed on
actual payments12 should be given preference while computing the aforementioned
deductions.
Even the remuneration paid in kind to actors, composers, directors etc must be
accurately accounted for and will be added to the total cost of production. Tax deduction at
source (“TDS”) will accordingly be deducted from such remuneration in kind. TDS will also
be deducted from the expense incurred on the hiring of general and technical equipments
with their operating/professional staff.13
An important issue confronted by the film industry pertains to sale of distribution
rights from one non-resident Indian to another. In April 2008, the income tax department
asked TIFC, Cyprus (a group company of Network 18) and UTV, Mauritius (part of the
UTV group) to pay tax on the income generated from the sale of distribution rights of the
Indian movie “Welcome”. The income tax authority enforced provisions of the Act on the
ground that profits were generated due to a business connection in India and therefore,
rejected the claim of the two companies that their transaction be governed by the applicable
Double Taxation Avoidance Agreement (“DTAA”).14
In August 2009, the Finance Minister of India released the Draft Direct Tax Code,
2009 (“DTC”) that aims to replace the Act. The DTC will be presented in the Winter
Session of the parliament for approval, and once approved, will come into force from April
01, 2011. It will bring some radical changes in India’s taxation laws, such as superseding all
DTAAs entered into by India, introducing the General Anti Avoidance Rules (“GAAR”)
that will get invoked if the taxpayer has entered into an arrangement, the main purpose of
which is to obtain tax benefit. If the IT commissioner is satisfied that the arrangement will
be governed by GAAR, he can declare such arrangement as impermissible and thereafter
9
Paid preview, direct online release and direct exhibition of television, all fall under “exhibition on a
commercial basis.”
10 This section, along with others, incorporates provisions with respect to expenditures that are allowed while
computing taxable income under the head “income from profits and gains of business or profession.”
11 Section 40(A)(2) of the Act.
12 Section 43B of the Act.
13 Section 194 I, 194 C and 194 J of the Act.
14 http://www.cainindia.org/news/6_2008/entertainment_cos_get_tax_call_on_welcome.html as viewed on
September 08, 2009.
Issue X | December 2009
Disclaimer – This bulletin is for information purposes and should not be construed as legal advice. © PSA
determine the tax liability accordingly. Therefore, it is important to be familiar with the DTC
in order to determine the pre and post production strategy of forthcoming films accordingly.
Conclusion
Most producers are careful and keep in mind their tax liability while assessing the
approach to shoot and release their film. Costs are incurred right from the pre-production
stage where there is hardly any immediate scope of revenue. Therefore, the strategy on how
to move forward with the production and post-production of the film assumes great
importance. It is also imperative that all commercial contracts executed by the film producer
are drafted and negotiated well in order to leave little or no room for any possible dispute.
Over the years, the dynamics of film production have undergone a great change in India and
with a tremendous escalation in cost, the tax liability of producers has also significantly gone
up. Therefore, film producers have to be more cautious and vigilant than before to take the
best advantage of the existing and prospective tax laws.
Last edited:
ST Sir,
Thanks for the interesting advice.
One question: Prior to trading, were you an business man or dabbled in business since you seem to have firm knowledge of taxation matters?
Thanks for the interesting advice.
One question: Prior to trading, were you an business man or dabbled in business since you seem to have firm knowledge of taxation matters?
ST da is from the era of stock certificates
I used to buy Income Tax Ready Reckoner by N M Mehta and study various provisions,even study various case law and court decisions on Income Tax.So I have been filing tax returns and paying taxes for last over 25-30 years.
ST
Last edited:
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