6.1 – Turnover & Tax Audit
In the previous chapter, we discussed briefly on tax audit, and when it is required if you are declaring trading as a business income. To determine if an audit is required or not, we need to first determine the turnover of your trading business.
Reiterating – the requirement of calculating turnover arises only when treating trading P&L as a business income (An audit is not required if you only have capital gains income irrespective of the turnover). Turnover is only to determine if a tax audit is required or not. Your tax liability does not get affected by your turnover.
An audit is required if –
- Rs 5 Crores mark – Turnover for the year crosses the Rs 5 crores. Note, the Rs.5 Crore limit is applicable from the next financial year i.e. 2019 – 2020. This is in the case of digital transactions, and stock market trading is 100% digital.
- Section 44AD – If the turnover is less than Rs 2 crore, and if profit less than 6% of turnover and total income exceeds basic exemption limit (this section applies only if person’s taxable income other than the loss from trading is more than the taxation slab) An audit is not required if turnover is less than Rs 5 crores but your total income is within the taxable limit of Rs 2.5lks. (This limit was extended to Rs 5 crores for FY 2019 – 20).
Note: The turnover value has been changed to 5 crores after the introduction of the Finance Bill 2020, effective from the FY 2019-2020 an audit is only required to be conducted if the turnover crosses the 5 crores limit.
I am sure the first thing that came to your mind after reading turnover is contract turnover, i.e
- Nifty is at 8000, you buy 100 Nifty
- Buy-side value = 8000 * 100 = Rs.800,000/-
- Nifty goes to 8100, you square off the 100 Nifty
- Sell-side value = 8100 * 100 = Rs,810,000/-
- Turnover = Buy-side value + Sell-side value = 800,000 + 810,000 = 1,610,000/-
But it is not the contract turnover the IT department is interested in; they are interested in your business turnover.
Read below on how business turnover can be calculated –
The method of calculating turnover is a debatable issue and what makes it a grey area is that there is no guideline as such from the IT department. One article of great help though is the guidance note on tax audit under Section 44AB by ICAI (Institute of chartered accountants of India, the governing body for CA’s). The article on Page 23, Section 5.12 of this guidance note has a guideline on how turnover can be calculated. It says:
- Delivery based transactions
For all delivery based transactions, where you buy stocks and hold it more than 1 day and sell them, the total value of the sales is to be considered as turnover. So if you bought 100 Reliance shares at Rs 800 and sold them at Rs 820, the selling value of Rs 82000 (820 x 100) can be considered as turnover.
But remember that the above calculation of turnover for delivery trades is only applicable if you are declaring equity delivery based trades also as a business income. If you are declaring them as capital gains or investments, there is no need to calculate turnover on such transactions. Also, there is no need for an audit if you have only capital gains irrespective of turnover or profitability.
- Speculative transactions (intraday equity trading)
For all speculative transactions, aggregate or absolute sum of both positive and negative differences from trades is to be considered as a turnover. So if you buy 100 shares of Reliance at 800 in the morning and sell at 820 by afternoon, you make a profit or positive difference of Rs 2000, this Rs.2000 can be considered as turnover for this trade.
- Non-speculative transactions (Futures and options)
For all non-speculative transactions, the article says that turnover to be determined as follows –
- The total of favourable and unfavourable differences shall be taken as turnover
- Premium received on sale of options is also to be included in turnover. On Aug 19th 2022, ICAI clarified that however where the premium received is included for determining net profit for transactions, the same should not be separately included.
- In respect of any reverse trades entered, the difference thereon should also form part of the turnover.
So if you buy 25 units or 1 lot of Nifty futures at 8000 and sell at 7900, Rs.2500 (25 x 100) the negative difference or loss on the trade is turnover.
In options, if you buy 100 or 4 lots of Nifty 8200 calls at Rs.20 and sell at Rs.30. Firstly, the favourable difference or profit of Rs 1000 (10 x 100) is the turnover. So total turnover on this option trade = Rs 1000.
The above calculations (points 1 to 3) are fairly straight forward; the next important thing to decide though is if you want to calculate turnover scrip wise or trade wise.
Scrip wise is when you calculate the turnover by collating all trades on the particular contract/scrip for the financial year, find average buy/sell value, and then determine the turnover using the above 3 rules with the total profit/loss or favourable/unfavourable difference on this average price.
Trade wise is when you calculate the turnover by summing up the absolute value of profit and loss of every trade done during the year and following the above rules.
Let me explain both with some examples –
- 100 Nifty Jan future bought at 8000 and sold at 8100 on 1st Another 100 Nifty Jan future bought at 8100 and sold at 8050 on 10th Jan. Determine turnover
Using scrip wise:
Average Nifty Jan Fut buy: 200 Nifty Buy at 8050
Average Nifty Jan Fut sell: 200 Nifty Sell at 8075
Total profit/loss = 200 x Rs 25 = Profit of Rs 5000 = Turnover of Nifty Jan Futures
Using trade wise:
100 Nifty Buy at 8000, Sell at 8100, Profit = Rs 10,000
100 Nifty Buy at 8100, Sell at 8050, Loss = Rs 5000
Turnover of Nifty Jan futures = Rs 10,000 + Rs 5000 (absolute sum of the loss) = Rs 15000
- 100 Nifty Dec 8000 puts bought at 100 and sold at 50 on Dec 3rd. Another 100 Nifty Dec 8000 puts bought at 50 and sold at 30. Determine turnover
Using scrip wise:
Average of Nifty Dec 8000 puts buy: 200 puts at 75
Average of Nifty Dec 8000 puts sell: 200 puts at 40
Total profit/loss = 200 x Rs 35 = Loss of Rs 7000
Total Turnover for Dec 8000 puts = Rs 7000
Using trade wise:
Trade 1
100 Nifty Dec puts bought at 100 and sold at 50, Loss = Rs 5000
Turnover = Rs 5000
Trade 2
100 Nifty Dec puts bought at 50 and sold at 30, Loss = Rs 2000
Turnover = Rs 2000
Total turnover = turnover of (trade 1+trade2) = Rs 7000
Which of the methods scrip wise or trade wise should I follow?
Calculating turnover trade wise is the most compliant way of determining turnover. The tricky bit calculating trade wise turnover though is that no broker (other than us at Zerodha) currently offers trade wise turnover reports. All brokers provide a P&L with an average buy/sell price, which can be used to calculate scrip wise turnover. If you are not trading at Zerodha and are looking at calculating turnover trades, you will have to download all trades done during the year on an excel sheet and calculate turnover manually.
Here are the scrip wise and trade wise turnover reports on Console
Once you determine the turnover, you will know if you need an audit or not, that is if a visit to a CA and have him verify your balance sheet and P&L statements is compulsory or not.
6.2 – Section 44AD
An audit is also required as discussed above if your profit is less than 6% of the turnover. By turnover, I am referring to all business turnover (speculative, non-speculative, and any other business you have), and by profit, I am referring to only your net business profits (not including, salary, capital gains, and others). This means that if you are trading as a business and incur a loss, you will most likely have to get the books audited.
But an important thing to remember is that if your turnover is less than Rs 5 crore (was Rs 2 crore until FY 19/20) and if your profit is less than 6% of turnover an audit is not required if your total tax liability for the year is zero. That means if your total income (Salary + Business income + capital gain) is less than Rs 2.5lks (minimum tax slab), you have no tax liability, and hence audit not required. But it is advisable if losses are substantial to file the return with an audit.
Applying section 44AD for trading as a business income is causing a huge inconvenience for the retail trading community. Turnover in an ordinary business to turnover while trading on the markets is hugely different. Unlike an ordinary business where there is a fixed margin every time there is a transaction, in the business of trading there is no such guarantee. This section is an unnecessary burden that indirectly gets most small retail traders to have their books audited. We at Zerodha have petitioned to the government through this campaign on Change.org, make sure to support it and also get your trading friends to do the same.
When you show trading as a business income, you will have to file using ITR3, which would mean that like any other business you are required to create and maintain –
- Balance Sheet
- P&L statement
- Books of Accounts
As discussed above, these will need to be audited based on your turnover (either turnover crosses the 5 Crore mark or in case the turnover is less than 5 Crore and your profits are less than 6% of the total turnover). Creating a balance sheet, P&L, and maintaining books of account is quite simple for individuals with just trading as a business income, it is explained below in brief.
6.3 – Balance sheet, P&L, Book of accounts
Balance sheet
A personal balance sheet provides an overall snapshot of your wealth at a specific period in time. It is a summary of your assets (what you own), your liabilities (what you owe), and your net worth (assets minus liabilities).
Creating a personal balance sheet is fairly simple first pull together all of this information:
- Your latest bank statements
- Loan statement,
- House loan statement
- Personal loan statements
- Principal balance of any outstanding loans
- Demat holding statement
Once you have all of that information available, start developing your balance sheet by listing all of your assets (financial and tangible assets) with its respective values. Typical examples of the assets could be –
- Cash (in the bank, in hand, deposits with Bank)
- All investments (mutual funds, Shares, Debt investment )
- Property value ( Cost of Purchase + Duty any paid + Interiors etc)
- Automobile value ( Motor Car + Two-wheeler )
- Personal Property Value ( jewelry, household items, etc)
- Other assets ( Computers, Loans to friends, a plot of land, etc)
The sum of all of those values is the total value of your assets.
Next, you can look at your liabilities, which should be everything you owe. Here are some common liability categories:
- Remaining mortgage balance (Loan Statement)
- Car loans
- Student loans
- Any other personal loans
- Credit card balances
The sum of all of the money you owe is your liabilities.
The difference between your assets and your liabilities is your net worth.
That’s it; this is your balance sheet. Instead of creating one at the end of every financial year, it probably makes sense to update once every few months.
Profit & Loss statement
Profit and loss will summarize your revenue streams and your expenses for the financial year.
To create your P&L for the given Financial Year, you will have to list down all revenues and expenses.
Revenue –
- Realized sale value from your stock holdings (Capital gains)
- The Income from F&O, Intraday, or Commodity Trades. (Speculative and non-speculative business income)
Remember that you can’t add your salary income (if you are working elsewhere) into your revenue stream on the P&L.
Expenses –
- Salaries, if you have people helping you trade.
- Rent, if you are using an office or any space for the trading activity for which you are paying a rental income
- Brokerage charges, taxes, and all other trade-related expenses.
- Advisory fees, consultancy, depreciation of computer, and etc (read the expenses section in the chapter on taxation-traders)
Revenue minus the Expense equals profit.
A Balance sheet helps you understand your networth between two dates and the P&L will give you the reasons why your networth went up or down in that period. Maintaining financial discipline is the key to long term personal wealth creation. A personal balance sheet and P&L will ensure that you are constantly in touch with reality – your assets and liabilities.
Book of accounts/Book-keeping
Maintaining a book of accounts and Book-keeping seem like very complex tasks, and typical reactions I have seen from traders is to get scared of the word and try postponing the decision to learn more on the topic. Again for an individual with only trading as a business income and/or salary, it is super simple- you just need to maintain two books.
Bank book: Take an excel download of all your bank statements, and make a note next to every entry to identify the nature of the transaction. It is also best to keep a copy of all the bills in case of expenses.
Trading book: This should be automatically getting maintained for you by the broker where you trade. The broker should be able to give you a P&L statement including all expenses for the year, ledger statement, and an online repository of contract notes if required. Unlike what many people think, contract notes aren’t really required unless scrutiny by the IT department, and even then if only asked for the same.
As a person who has traded with over 10 online brokers in India, the ledger and P&L statements with all expenses on it will show up any hidden charges by the broker.
At Zerodha, we take great pride in the transparency we bring in as a business. Every charge other than brokerage is captured on the other credits/debits section on the tax P&L on Console. We also give you a summary with value of all your open option positions starting April 1st and closing March 31st. This is extremely useful when you are trying to tally your ledger with your P&L statement.
We are almost done with the taxation module. The last chapter will have an explanation of what kind of ITR forms to use, and also an excel download of a sample ITR 4 form with all details as an easy reference.
Key takeaways from this chapter –
- Audit of the books is required if turnover is more than Rs 5 Crore mark
- Audit of the books is required if turnover is less than Rs 5 Crore but if the profits are less than 6% and total income more than the basic exemption limit (was 2 cr until FY 2019/20)
- Audit of the books is NOT required if turnover is less than INR 5 Crore and profits higher than 6% of the turnover (was 2 cr until FY 2019/20)
- Turnover does not take into consideration the regular contract turnover
- Turnover refers to the business turnover
- Business turnover (for trading as a business) can be calculated scrip wise or trade wise
- Trade wise turnover is the most compliant way of declaring turnover.
- If you are declaring trading as a business then one needs to use the ITR3 (ITR 4 until 2016) form to file tax returns
- ITR3 requires you to have Balance Sheet and Profit and Loss statement along with books of account
- Balance sheet equation states that Net worth = Assets – Liabilities
- P&L statement details the revenues and expenses
- If trading as a business maintaining 2 books of accounts becomes mandatory – Bank Book and Trade book
- It is advisable to maintain and update the Balance Sheet, P&L, and books of accounts once in every quarter.
Disclaimer – Do consult a chartered accountant (CA) before filing your returns. The content above is in the context of taxation for retail individual investors/traders only.
After reading these chapters I as a CA student, feeling more fascinated and excited by the complex world of Taxation and related matters.
I am a bit baffled by the concept of adding in the selling value – especially when you have bought a options contract. Taxation philosophy is based on making sure that any income earned must be offered for taxation.
When dealing in options, the trade may end up in one of the 3 states:-
1. Trader squares off the options contract prior to expiry.
2. If the option is in money, the exchange squares off the options contract and issues a credit to buyer or debit to seller.
3. The option expires out-of-money – in which case, there is no square off of the contract done by the exchange.
Only in case 3), the seller of the option has earned the premium (as there is no squaring off of the out-of-money contract) – in cases, 1) and 2).
Hari, turnover requirement is only to determine if audit is needed or not. It doesn’t affect taxation in any way. Also like I have mentioned earlier, the way I have explained, is probably the most conservative way. You can adopt for any method that you think is right.
Hi,
Please advise how I can check p&l for a specific period like last year or a month?
Where I can check same in kite?
If their any link for easy access, please send me ASAP.
When you login to Kite, click on your client ID on top right of the page, you will link to Q backoffice. You can see the P&L there. Q.zerodha.com is the direct link.
NIthin Sir,
my intraday turn over is 1,56,412 and short term turn over is 46959 and and my profit on intraday is -27754 and my profit on short term is -2681 showing on Q-office.plz confirm wether audit is required or not is any tax will be applicable for me.
can you read the chapter on audit. Since your profit is less than 8% of turnover you will need audit. But I guess since your turnover is so little, you can show profit as 8% and you can avoid audit.
Hey! The turnover calculation is very clear (which is to be credited to profit and loss account) however how to calculate the purchase value that is to be debited to profit and loss account?
Dear Nithin wonderful explanation and response .we deeply appreciate your effort and help in educating small investors especially employees.I have some queries and hope your help in this regard.
1. if you have profits from longterm capital gains i.e selling equities around 12000 rs and loss of 2 lakhs in speculative and non speculative and as per your chapters taking all positives and negatives in F&O plus selling price of options plus positve and negatives in equity intraday our turn over is around 30 lakhs .so you said as turn over is less than 2 crore and loss (profit less than 6%) ) i need to submit itr3 and get my books audited or declare 6% profit and avoid audit so my query is
where i need to declare this profit and can i carry forward my losses can declare 6% profit in itr3 in speculative and carryforward non speculative losses or do i need to declare overall loss 6% and use only itr4 without caryyforwarding losses
suppose next year if i got profits then do i need to use same itr4 and declare presumtive profit of 6% or do i need to pay tax for full profit as per slab rate
if i get audited this year and carryforward my losses and i got my profit morethan the 6% of turnover and less than 2 crores then do i need to get audited again as i got audited this year and every year do i need to get audited irrespective of turnover and profit
if i stop trading next year like to do trading after 2 years and my income is only salary then can i submit itr1 because i can carryforward theselosses to next 8years nonspeculative or do i need to submit itr3 and carryforward the same losses every year
finally its really confusing what to keep in the sales of good column in itr3 and what to keep in purchases column of itr3 and other expenses column because one of my collegue get it done from a CA and he put contract value of buy price of shares in purchases and contract value of selling in sales column then turn over would be contract turnover but not business turnover.based on your informatio i presume all positives of futures and option s (intraday) in sales of goods and negatives in purchases and where do sales of options premium price to be included and which column speculative positive and negatives to be included
which column longterm capitalgain included (realized this year before April so i guess no tax ) it would be helpful if you can give a sample with these examples and salary an example of latest itr3 including hra and chapter via because my employee does not included hra and my house owner didnt give his PAN card,
thanks alot for your help
If you have losses of 2lks, I think it is best to get a CA to audit your ITR3 and you carry forward. IF next year you stop trading, you can still use ITR3, but without need of an audit.
I have an acc with you but not traded here as am doing the same at Kodak and fear that audit will be difficult clubbing two.
Could you help with kotak acc too?
For FY 2018_19 return filed and the turnover was less than the limit and in fact the total income was less than 2lakh with no capital gains!
I want to file revised return showing trades as business mainly for experience as this year o wards I want to do f&o trades which would call for audit
hmmm.. I don’t know if it is smart to now revise and show it as business. When you start trading F&O etc from this year, you can start showing it as business. It is anyways not smart to show it as business income, if you don’t have too many equity delivery trades in the year.
Btw, audit won’t be difficult clubbing two accounts. 🙂
Hello NItin Sir,
I have a gross intraday net profit of Rs 26000 for the year. Now is this amount the same as intraday turnover. As far as I understand from this chapter, intraday turnover should be the same as intraday net profit/loss. Am I correct in my understanding? If not how do I calculate the intraday turnover.
Thanks
Aditya
Intraday turnover is gross sum of all P&L by individual scrips. So if you made 10k profit in one stock and 10k loss in another, net P&L is 0, but turnover is 20k.
Illustration given here are more practical and illustrative than those given on our ICAI books. Keep up the good work.
Good that you have deciphered the ambiguous content of Taxation. What about over 95% of traders associated with other Brokerage Houses? I am sure they will have their own interpretation of Taxation and would proceed accordingly. Why can’t CBDT come up with simple and clear sections which would be helpful to layman as well….
I don’t think any brokerage out there has taken the effort till now to decipher taxation for their clients. So what 95% of traders need to know are general guidelines around taxation, which is covered in this module. This is meant for everyone trading and investing and not just for Zerodha clients. For people investing/trading with us we give a bunch of reports that is very helpful to be compliant while filing income tax returns.
Hi, Thanks for all the information.
You have shown with example how turnover is calculated both for trade wise and scrip wise. Can you please explain similarly how the Gain / Loss would be computed ? I am planning to show STCG and F&O has business income. So I understand that I should be able to reduce my profits scrip wise by the deducting the cost of transactions i.e Brokerage, STT incurred on those transactions. Is that assumption correct ?
Yep, that is correct Nilesh.
can we deduct the AMC charges from th eshort term profit Nithin sir ?
Yeah
Nithin Hi,
Thanks for the wonderful initiative.
While trading Options –
For all non-speculative transactions, the article says that “Premium received on sale of options is also to be included in turnover…”
However, when I Square off a Long position, I need to Sell the existing Long Position. I am not Writing an Option. Since in this case I am not really taking in the Premium but just Squaring off the trade, is the Sell value also considered as Premium received, to be added to the Turnover as shown in your example ? Or is Premium received, only when I Short Sell / Write an Option ?
Is the no difference between Writing an Option and Selling to Square Off as far as Turnover is concerned ?
I am a bit confused.
Thanks in advance for your reply.
Prabhu
Prabhu, it is upto you on what inference you make out of it. But I think the most compliant way to decipher would be to look at both the points:
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.
So yes, consider sell value of all options (either long exit of fresh short) for calculating turnover. If you are trading at Zerodha, your turnover statement will have this calculation.
But like I have said, turnover is to only determine if you need an audit or not. It is best to have books audited in any case.
Nithin,
Thanks for your clarification..
Yes, I do trade with Zerodha and its been a good experience..
Rgds
Hi Nithin,
Appreciate the work you are doing and how patiently you have answered all questions.
My issue is that in the zerodha tax p&l statement total charges (which include Brokerage, Turnover etc) are not given separately for Equity Intraday and Equity Short Term Transactions. For last FY I have traded for like 85% in equity intraday and remaining equity short term delivery based.
As zerodha doesn’t give total charges separately for equity intraday and equity delivery based hence my CA is considering turnover ratio to split the total charges between equity intraday and equity delivery based. However as the turnover calculation logic is different for equity intraday and equity delivery based its not giving correct picture of the total charges incurred for the two. For example though I have traded 85% in equity intraday, intraday turnover is 120660 and short term turnover is 109716.
So my question is whats the best way to identify the actual total charges incurred for equity intraday and equity short term delivery based with out going through each contract note as that would be cumbersome.
Many Thanks
Lucky
For now, take delivery trade volume overall and apply these %s https://zerodha.com/charges. Since brokerage for delivery is 0, The rest will be intraday charges. I know this is not the best way, we will have something on this soon.
Hi Nithin, I also have same problem in understanding how the squaring off an option is considered as premium. Two questions:
1- I believe squaring off of options is considered premium in Zerodha and is taken into turnover calculation, pls confirm?
2- If I trade futures, Square off of future position will not be taken as premium in Zerodha calculation? In case of futures, sum of profits and losses will define the turnover, pls confirm.
Bye
Vishal
Vishal,
1. Yes the turnover reports (tradewise or scripwise) both consider squared off premium value as part of turnover. This is the most conservative approach. It is upto you though on how you want to declare the turnover.
2. Yes, in case of futures only sum of profits and losses is considered as turnover the reason being in futures the margin gets blocked and not debited.
Hi Nitin, Thx for the detailed explanation. However, I don’t think you should encourage the most conservative approach to calculating turnover by adding option sales premium even in case of squared off option trades. Revenue + Profit can not be turnover.
Sumit, like I have mentioned earlier, when advising I have to be as conservative as possible. Don’t want people to come back if tomorrow a notice comes up.
Nitin, I’d advise people to file appeal if they get any notice. But it’ll be very wrong to propagate a practice which is conceptually wrong, especially by prominent industry representatives like you. Many tax laws in india are ambiguous or conceptual fallacies. We need to oppose those.
Hi Nithin
My querry is if i add the difference of option buy & sell & after this i add the sell value of he option wont it be double calculation of turnover
since the value of diff is already incorporated in sale value of option if its a profit trade
thx in advance
Ashish, the way I have explained is the most conservative way. It is upto you on how you want to declare turnover. This is quite a grey area.
Hi Nithin,
Regading options we have to take positive and negitive values( profit/loss) to calculate Turnover.
Premium received on sale of options is to be included in turnover. i.e. writing (selling of put and call options for premium)
In my opinion Premium received on writing put and call options is included in TO, not for buying and sqareoff of options.
Like I said in the post, this is all up for debate. You can take the definition whatever suits you.
Hi nitin
I also trading in future and option , and turnover of these exceed by one core which is calculated as per icai guidelines , but in this trading I got loss , but while making of profit and loss , how can I claim my loss because indirect expenses regarding this is so less, can u please explain or send any p& l format future and option related as soon as possible.
Ankit, why don’t you go through all the chapters in this module, explained in detail.
A BIG thanks for the elaborate details given.
Hi Nithin,
I am planning to show Speculative and Non Speculative Business Income for my trading activities. I have noted that per transaction I am incurring following cost :
Brokerage SerTax Stamp TO Charge IPF DHC DpChrg STT Amount Edu Cess Higher Educ Cess
Can i simply say that Total cost per transaction = Brokerage + Service Tax + Stamp + TO Charge + IPF + DHC + DpCharge + STT Amount + Edu Cess + Higher Educ Cess + (Cost per share * No of shares)
And deduct the Total cost from my Selling Price of Equity to calculate the Net Profit / Loss per euity script ? Are all components elgible to be considered for arriving at the Total cost ?
If you are declaring spec/non-spec business income, yes all components eligible to be treated as an expense. Yes you can calculate the way you have mentioned.
Hi Nithin,
For the equity based transactions while filing returns we need to mention Purchases of P & L Schedule in ITR 4, in our Zerodha trading account I see those scripts as well for whom I have not sold in financial year 2014-15. So do I need to consider for purchases or not?
Accordingly my profit/loss is calculated in ITR 4. (Sale of goods – Purchases).
Please advise.
Regards,
Ganesh Keer
If you are considering this as an investment, then you need to show the capital gains only on what is booked profits. If you are showing them as trades, you can MTM the closing price of the stock in trade.
From reading this article, it seems to me that for all practical purposes, anyone reporting their trading activity as a business will need to necessarily get an audit done….After all, we know that many (most) people will struggle to make that 8% return on capital on an annual basis unless you are very good. Also turnover of 1 crore would be significant. Therefore i think most retail traders fall in the bracket of “require audit”. Is that a fair statement?
Yes, you could say that. Btw, turnover of 1 crore for active F&O traders is not significant. We had taken a petition against this, you can support it to.
Petition closed? So no hope now?
🙁
Hmm.. hopefully someone at the govt wakes up.
I am showing trading as speculative & non-speculative income, prepare P&L account & Balance sheet. Do I need to send these along with ITR V ?
No need of sending anything (btw it is ITR 4 and not 5), everything can be done online today. You will be asked for the physical copies if you are called by the ITO for scrutiny.
I am very much delighted to read your commentary on tax implications while trading in the markets. From the reading, i can understand that no audit U/s. 44AB is required if the turnover is less than 1crore , the profits lesser than 8% and income not exceeding taxable limits. Income means, is it after including the profit/loss from trading in F&O which is treated as business profit/loss. One example is: Income from other sources is 3 lakhs and income from trading in F&O is Loss of 1 Lakhs and hence the total taxable income becomes Rs. 2 lakhs, after setting off the business loss against the income from other sources. My doubt is, is audit U/s. 44AB required in such case as the income other than business income is taxable. Since the loss is set off, which can be done, the ultimate income resulting in to Less than Taxable Limits. Kindly clarify.
Yes you are right, if income from other sources is 3lks and you have 1 lk loss, then total income is 2lks and less than the taxable limit. Hence no audit required. But if your 3lks was salary income, you will not be able to offset trading loss with salary income, hence you will be in the tax bracket and hence audit will be required.
Sir I am a salaried person and do equity trading .
I would like to know which form I would fill for filing return itr 1 and itr 4 or only itr 4
Thanks
If you are doing intraday equity, it is speculative business income, so ITR4. If you are trading only delivery equity, then ITR2.
sir , thanks for your reply , i am currently doing intraday along with delivery based trading , in this case also i have to fill itr 4?
Yep, if you are doing intraday equity trading, it is speculative business income, and you will need to use ITR4 to declare this.
can i show intraday equity trading (Speculative BI) as a STCG @15% tax in ITR-2
plz reply
No
Hi nithin i saw various reports on zerodha q i have to give the report to the to help me file returns which report shd i dwnload i deal only in options shd i use tax p&l or absolute or indicative p&l pls advise
Use Tax P&L, and also download the turnover report that you see.
Thanks Nitin, for all the efforts u done for understanding how to Deal with the TAX (EVIL) complications..
and i have also filed ur Petition
https://www.change.org/p/minister-of-finance-exclude-business-of-trading-in-securities-and-derivatives-from-section-44ad
i m 80% clear about the Taxation after reading all this…
just need to confirm with U some Doubts…
i m attaching one pic plz refer..
As i had Loss of Rs.1,66,305
and Total Turnover is less than Crore Rs.88,16,878
and total charges is Rs.18,852
and i want to include my Internet bills of near about 11-12K..
i m only a Trader and trades in F&O only..
no other source of income is there..
so as i m in Loss..i do not require Audit .. right.?? and i have to fill ITR4 right??
one more query i want to know about..
suppose i have invested Rs 4 Lac in the Market.. and Withdrawn 2 lacs Partially and had a Loss of 1,50,000 in same FY year.. rest Rs 50 K is in my trading account…
will IT will ask me about my Withdrawal??
coz i have to show it as my Business , as i only trades in F&O..
Thanks Alot…
and also Thanks For Creating Zerodha and Helping us to Trade and Learn how to trade..
🙂
Yes ITR4 and no need of an audit.
ITO will not ask for the withdrawal (the chances of a scrutiny is very very very small if you have filed your returns correctly, so no one will most likely never ask) but anyways I guess you will be showing some expenses against it right? As in that 1.5lks was taken out to spend or to invest somewhere else.
Thanks 🙂
Thank You so much for Ur Reply Sir,
after Reading and Research of my Trading..
i found that i was trading with some other Broker before Zerodha came to my Life… 🙂
and after adding Both the turnover from Zerodha and Other Broker.. my Turnover become above 1Cr. and loss of 1.5 Lac.
one request to you their are sevral tabs under ITR-4 Form..
and after seeing all this in ITR4 .. all my motivation got vanish..
plz spare 10-15 min and make video from a point of view of a trader so all we can know how to handle this form..
or screen shots also works as u have busy schedule..
Thanks Again
Hi Nithin, It is really a very good information you have so very well presented.
One query on the Turnover – The sample M7C6_Excel1 (snap shot attached) that is available in the link provided in the Chapter 6 on Turnover does not seem to be covering turnover on delivery based transaction. It shows only FnO and Speculative. However in the assumptions section of the same spread sheet, STCL has been recorded. Chapter 6 specifies calculation of turn over should include: Delivery based transaction + FnO + Speculative. As a trader for ITR4, if I have to show STCG / STCL as business income / loss, should the selling value in respect of delivery based transaction be included while arriving at the total turnover which decides the requirement of audit?
Yes as a trader, if you have to show STCG/STCL as business income/loss, you will have to use the selling value of your delivery based trades to arrive at total turnover.
Hi Nithin,
My turnover is more than 1 crore but I a having a net loss of 2 lakhs. I need a clarification whether I need to get it audited or not.
Also do you have any CA reference
Thanks & Regards
Gnanamoorthi
IF your total income for the year is less than 2.5lks (trading loss + all your other income) then no audit is required, but otherwise yes.
Hi Nithin,
First of all Thanks for making taxation looks simpler for a common man.
I have few queries:
1. I am a home maker and do frequent trading (F&O, intra-day, delivery based equity). I have overall losses in last financial year from trading and had small income less than 1lac from profession (working part-time from home for a company). Do I need to file ITR?
2. I should use form ITR4 or ITR4s?
3. My turnover is less than 1 crore and I made net loss in FY14-15. Do I need to prepare Balance sheet, P&L and Books of account?
4. Do I need to get my account audited?
5. My husband is a salaried person and do trading very frequently (short term and intraday but no F&O). Which form he is required to use ITR2 or ITR4 or ITR4s?
6. Since he made profit of less than 8% from trading and have turnover of less than 1 crore, is he required to get the account audited?
Kind regards,
Priyanka
Hi Nithin,
“the requirement of calculating turnover arises only when treating trading P&L as a business income (An audit is not required if you only have capital gains income irrespective of the turnover)” In this statement of yours, I have a query:
Say Mr. A, apart from its other incomes like salary and rent etc., is having income (profit or loss) from delivery based trading and also speculative business income.
1. Can Mr. A show delivery based trading income as STCG and at the same time speculative business income as business income?
2. To calculate turnover for audit requirement in the case of Mr. A, does he need to include turnover from equity based trading which he wants to show as STCG, as well as turnover from intraday trading?
3. My understanding from this module is, P&L and Balance sheet is required to be maintained by any one who is doing intra-day or F&O trading irrespective of audit requirement?
4. Now my specific query:
My Husband is salaried (30% income tax bracket), he did intra-day trading for turnover Rs. 1742.5 and also the profit is same as Rs. 1742.5. He did delivery based trading for turnover of Rs. 267589.3 and made profit of Rs. 59875.34. Now he wants to show Rs. 59875.34 as STCG and Rs. 1742.5 as speculative business income. Is it possible?
Now, turnover for business income shall be only Rs. 1742.5 or Rs. 269331.8 (i.e. Rs. 267589.3+1742.5). What shall be the business profit = Rs 1742.5 or Rs. 61617.84(i.e. Rs. 59875.34+1742.5).
Because if turnover is 1742.5 and profit is 1742.5 i.e. he had transaction of less than 1 crore and profit of 100% then no audit is required.
But if the turnover is 269331.8 and profit is 1742.5 then turnover is less than 1 crore and profit is less than 8% and he needs to get the account audited.
Further if he shows all kinds of trading as business income then the turnover is 269331.8 and profit is 61617.84 then he falls into category of profit of more than 8% of turnover of less than 1 crore. And thus audit is not required. But he has to pay more tax (because taxed @ 30% of delivery based trading instead of showing STCG and taxed at 15%).
I hope I have not made the calculations complicated. Really a headache and seems strictly intraday and F&O should be avoided by a common person as lot of hassle of maintaining books of accounts, audit and calculations.
Hi Nithin
In one of the earlier modules, you had mentioned that possibly the reason many traders got notices from IT was because the algorithm just checked if profit is less than 8% of turnover and then automatically sent mails. From the q&a you have made it amply clear that if net income is less than 2.5 lacs, there is no need for audit. I assume that obviously stands true for losses also. For me this year its a loss (Trading as a business and no other source of income). So have there been instances or what is the probability (there goes the trader mindset!) that IT department would send a notice if I don’t get it audited. And btw, CAs are way too busy to handle small fish.
Thanks, Nithin for your feedback.
One further query to above and also in line with the query dated 22/08/15 from Priyanka reg non clubbing of delivery based trading turnover from Speculative and FnO while arriving at audit requirement.
My case:
– FnO – Turnover 21 lakh and profit 50 k
– Speculative – Turnover 2 lakh and profit 1.6 lakh
– Delivery based (Short term) – Turnover 12 cores and profit 1.9 lakh after paying STT, etc.
– Long term loss – 1 lakh
– No salary or other income except SB/FD interest.
Summary:
– FnO + speculative – Turnover 23 lakh and profit = 0.5 + 1.6 = 2.1 lakh, i.e. approx 9% of turnover
– FnO + speculative + Delivery based – Turnover 12.2 crores and profit 0.50 + 1.6 + 1.9 lakh = 4 lakh, which is less than 1% of turnover
My query:
1. Can I exclude delivery based trade from total turnover and show STCG/STCL separately by allowing tax at 15%?
2. If so, then the total turnover would be 23 lakh, which is less than 1 crore and profit would be 9% so I need not go for an audit. Is this permissible?
3. The tax payable in either case would be nominal and would not be significant different. Main advantage, if it is permissible, I can avoid the hassles of audit and submit return before 31/08/15.
The above situation is not at all a sign of healthy trading. This was as a result of very heavy short term trading by my broker for 4 to 5 months during the last financial year. I have since stopped this when I realised that the portfolio was getting eroded at the cost of short term profits he was showing me on daily basis. Initially I was sort of happy at the daily results over my emails, and was late in realising of the erosion of total portfolio value.
Had I been on Zerodha, I am sure this would not have been the case, as I see you have very good reporting and support system.
Thanks in advance
Shashidhar
Thanks Shashidhar, I can’t give you the perfect answer as this topic is a grey area. But yes, you could show STCG/STCL for your short term delivery trades instead of showing it as a business if you think that the activity was not as if it was a full time business. But F&O has to be compulsorily shown as non-spec business income.
Best,
I have done few F&O transactions during the year. And i am a salaried person.I have shown the profits as short term capital gain and filed ITR 2. Can i be in any trouble from IT dept
No trouble as such, but showing F&O on ITR2 is not correct. You have to use ITR4. If by doing ITR2, your tax payable is reducing, suggest you to refile the returns. Any tax which is not paid can lead to a monetary penalty tomorrow.
Cleartax called me and said even though my turnover is less than a cr and there is a loss they can file itr 4 without tax audit they will do this by show balance sheet and p&l statement i am confused how they can do this, is there a way out like dis instead of an audit?
Have less than one crore turnover via f&o and less than 8percent profit and less than 250k profit..it is clear that audit is not needed..my question is will the losses get carry forward to next year..do i need to take some specialcare to ensure it happens..thanks..munish
To carry forward the losses, you just have to file your returns on time.
a) I just today recvd ITR-4 defective love letter from I.T for AY 2014-15 ( last year) under 139(9) asking me to give P&L after getting audited .. my turnover was < 1Cr and profit < 8 % of gross ( i was in loss) and my total income was < taxable limit and Audit was not done.
Not sure if turnover is < 1Cr and you have loss and no other source of income ( if some Fixed deposit then total of losses from F&O + FD interest < taxable) will get ur ITR4 processed and closed. Does not appear its that easy to evade audit ( read as audit fees). All response are welcome ..munish —9717898925
CA is good for nothing..can u guide
since last 2 years i have filed ITR2 and shown my F&O loss there.
Is it possible to carry forward that loss in ITR4 this year.
If not possible, can i re-file ITR-4 form for last 2 years ?
No you cannot carry forward that loss into ITR4, as on ITR2 you would have shown it as short term capital loss (applicable only for equity trading). Yes you can refile ITR4 for last 2 years.
Hello Nithin,
I’m showing all my trading activity as business income in ITR 4. But total income for the year is below 2.5 l & no tax liability. Is it ok to select “No A/c case” for both balance sheet & P&L sections and file accordingly ?
Thanks
yes u can
thanks for the super-quick reply…
Where can I select No A/C case in ITR4
full value consideration Rs 6001200/-
expenditure wholly and exclusively in connection with transfer Rs5938507/-
net profit 62693/-
upto 15sep = 53240/-
16 sep to 15 dec = 19139/-
16 dec to 15 mar = 11835/-
15 mar to 31 mar = (21521)/- (negative)
how to fill these figure in capital gain in itr 4 (enter value from item 5vi of schedule BFLA
please suggest me.
Regards
Go to schedule CG, row number 282, Section f, point 1. You can mention the above figures there (after expenses, and after carry forward losses).
From the backoffice, what I understand about calculating turnover for intraday is this:
Each individual SCRIP’s profit/loss added as an absolute sum.
I would like a clarification whether the turnover formula should also applied to all the trades carried out for a scrip. That is, instead of a profit/loss, each individual scrip too will have an absolute sum.
The reason I’m asking is that on the backoffice you say it’s calculated scrip wise, while the ICAI PDF document about 44AB you refer to says this:
“In the case of an assessee undertaking speculative transactions there can be both positive and negative differences arising by settlement of various such contracts during the year. Each transaction resulting into whether a positive or negative difference is an independent transaction.”
From this, I’m not sure whether each scrip should contribute its net profit/loss to the overall turnover or it should contribute its own turnover as well.
I’ve seen my backoffice P&L statement & each scrip has contributed its profit/loss to the overall turnover.
Never mind, I understood the scripwise/tradewise methods.
We at Zerodha have petitioned to the government through this campaign on Change.org, make sure to support it and also get your trading friends to do the same.Please let me know as how to do it.I shall do the need ful along with other traders at jammu.
https://www.change.org/p/minister-of-finance-exclude-business-of-trading-in-securities-and-derivatives-from-section-44ad
Showing 8% profit to avoid audit.Shall it not be questionable ? Are we safe from income tax department?
Thanks
It is possible right now. It is best to use this route only if you are a very small trader.
sir,
my income is from pension,interest ,rent +trading.ihave already filled ITRV during August 2015.I have not shown my trading activities.I have a turnover of about 3 lakhs and loss of 24000.00 I want to revise my return.Shall i be able to deduct my income8%x3lakhs =24000 +trading loss of 24000 from my rent & interest .Rent and intrest is Rs 100,000. please guide so that i can revise my return in ITR-4.
Regards
Since you are trading, I’d advise you to revise the return and declare the trading activity. You can setoff only the loss of Rs 24000 (I didn’t get what was this 8% of3lks u did) with your other business income. But since you don’t fall under any tax slab, u don’t get any benefit of it.
Sir, i could very well receive your reply . I thank you very much. I did not get clear reply on my Turn over of Rs 3 lakhs. Since i do not like to get my books audited. therefore i liked to add Rs 24000 ( 8% of my turn over of 3 lakhs) in my income.By doing this again i have not to pay any tax
Ah.. u mean u want to use ITR 4S and show 8% of turnover as ur presumptive income. Yes you can do it. But since your total income is less than 2.5lks and no tax liability, u don’t have to get audit done in any case.
Hi Nithin,
I am a new trader. And even more new to taxation. I have no other income of any type and fall below Rs2.5lakh/annum bracket.
I have been receiving money from my husband and father-in-law as gifts using which i traded F&O. Overall, i closed the year in loss.
Could you please explain in detail or else point me to income tax official resources using which i can prove that i need not get Audited my Balance Sheet, P&L and Books of A/Cs .
Many thanks for your wonderful support.
You can read section 44AD and 44AB. You can also go visit the help center which is usually present at every Income tax office.
Hi, In the case when I opt for the audit of F & O, I made P/L showing profits on settlement as turnover and Losses on settlement as purchases (As absolute some of profit and losses is applicable just to determine whether Tax audit is applicable or not or to declare profit u/s 44AD) . Then shown some additional exp like internet,mobile etc.Is this P/L account is in correct format for audit? Do I need to compulsorily prepare Balance Sheet including all personal assets and liabilities or should it include only assets and liabilities related to F& O business? If it is only F & O related Balance Sheet what are the items should form part of it?. Kindly suggest.My sincere thanks to you for giving such descriptive information which is very rarely available elsewhere.
1. Format for showing expenses can be anything, CA’s follow different formats.
2. It is best to prepare balance sheet mentioning all assets and liabilities. (mandatory if income is more than 25lks).
3. yes possible to create a balance sheet only related to F&O. If you do, I guess you will have to show all financial assets and liabilities (FD’s, Bank deposits, loans, etc).
Cheers,
Thanks a lot!
Quoting from the article:
Speculative transactions (intraday equity trading)
For all speculative transactions, aggregate or absolute sum of both positive and negative differences from trades is to be considered as a turnover. So if you buy 100 share of Reliance at 800 in the morning and sell at 820 by afternoon, you make a profit or positive difference of Rs 2000, this Rs.2000 can be considered as turnover for this trade.
In my case, I have done intraday trading and am planning to declare it as speculative income (business income) . My intraday profit was Rs21,000. As per the above quote, turnover for my intraday trading is essentially the profit I make. So in this case the profit is Rs 21,000 is indeed the turnover. Am I right? I am asking this question because I am trying to find out whether I will be liable to get tax audit as a result of Ssec 44AD.
It is gross sum of all P&L of all your trades. Not overall P&L on your account. So if one trade was 10k profit other trade was -5k loss, then turnover 15k.
which figure taken from trade wise report for determine negative settlement & positive settlement (P& L ) in F&O TRADING
If you are trading at Zerodha, the tradewise turnover summary has all calculations already done. You just have to use that sum total.
Yes i am tradding with zerodha Can u pls explan with an example
For p&l
Everything is given here already: http://zerodha.com/z-connect/traders-zone/taxation-for-traders/zerodha-tax-aide-while-you-trade.
Thanks for reponding
Just need to know which amount be taken in possitive settlement and negative settlement
Becouse in our tradewise report turnover shows total sales +profit + loss is this turnover only for audit purpose?
In p&l taking only pure buying value in dr and sale value in cr side
If you are looking at the turnover statement, all calculations are already done. Yes this is required only to determine audit. Everything is explained on the blogpost link or on the post above.
Umm thank u
Hi,
For tax audit report in case of FNO trades, my CA is calculating Purchases and Sales and difference gives the P&L for one of the reports (income and expense sheet). Note: this is not question for turnover, but only purchase and sales
Now for options, purchase and sales is taken as sum of all premium paid during buy and premium received during sales respectively. Premium paid is price of contract x contract quantity
How do we calculate the same for futures? Price of contract X contract quantity is going to be HUGE. Eg. 1000 QTY @ 8000 Nifty Fut will be 80 lakhs and 100 such contracts gives 80 crore purchase– you get the point… So, again, how is the purchase and sale value of futures to be calculated? I think Purchase could be negative differences and Sale as sum of all positive differences (and then turnover will be higher than sale and purchase individually). Other way is to actually sum all the initial margin paid as purchase and Purchase+MTM as sales – but I don’t find such a report from Zerodha.
Please let me know your thoughts on this.
How to consider trade for turnover when its carry over to next financial year?
You can MTM the trade to 31st March, and then consider the closing price of one FY as the opening price for the next year. Whatever the profit/loss until 31st march can be part of previous year, and from 31st march till end of next FY as the P&L.
i have total pension 2 lac per annum. in year i did trading and incurred loss of 1 lac. now IT department sent notice stating they have noticed PAN base transaction in stock market and why not ITR filled. I replied I have no taxable income. It was ok or I need to reply something else. please guide
Yep that should be good enough
The nitin. Could u please guide on one thing.
I have recd lic and icici prudential maturity last year for Rs 40000 each. my pension is 2 lac per year. now in which column of itr1 should I show this amount to get exemption.
How do I fill balance sheet and P&L if I only have intraday losses / gains in business activity
Siddharth, how to fill a balance sheet, it is best you consult a CA for that. You can show all positive turnover as gross receipts and negative turnover as Gross sales, and put this under speculative business (if intraday equity trading).
Hi,
I have STCG and salary income and intraday losses. But I want to go for 8% profit for intraday. DO I need to put this in no accounts case in P&L and balance sheet. Also do i need to put anything in the section 44AD in Schedule BP
Check this chapter. If you have speculative gains/losses (intraday equity), you can’t use ITR4S (section 44AD).
Iam a nifty futures full time scalper from Tamilnadu.
For Eg: If iam buying 75Lot of nifty futures @8000 and selling @8010, my profit will be 539rupees.The costs show below for the reference
Brokerage-40
SEBI Charges-2.44
STT-Only on sell side-61
Turnover Charges-25.61
Service Tax-9.19
Stamp Duty-73.17(0.006%)
Total Cost-211.41
If iam declaring as the Non-speculative Business with proper balance sheet & the FY15-16 gross profit crosses above 2.5Lakhs
If so, can I rebate this paid 211.41 rupees/Lot.. Which mean if I done 75000Lots for the entire FY & the tax can be claimed max upto the level of 2.11Lakhs.
Kindly clarify.
I am incurring losses on intraday trading and some short term capital losses which I want to show in capital gains , now since I am getting intra day losses I come under audit us 44ad and if yyes can I prevent ii by showing any other income as losses are of around 15000 and I have no other income ( I am within slab rate) . please help very tensed.Also please tell where to show intraday loss in ItR 4 (p/L schedule) weather in sales column. Or other income column.
If your net income for the year is less than 2.5lks, there is no need of an audit. You can show all positive turnover as gross receipts and negative turnover as Gross sales, and put this under speculative business in ITR4.
Respected Sir,
First of all I would like to thank you for helping and giving instant and accurate replies to queries of so many people.
Sir my query is that I have (FnO) loss of rs 138000 and (intraday equity) profit of rs 8000 for the financial year 2014-2015, and my tax preparer has shown the overall carried forward loss of Rs. 130000.
If I make profit in FnO in this current financial year, then my carried forward loss for Fno is rs 130000 OR rs 138000 ?
Thank You.
Your carried forward business loss is 138000, upto this can be setoff this year against busines (F&O) profit. Hopefully you had declared Rs 8000 as speculative business last year, and paid taxes on it. You can’t setoff or combine Equity and F&O profit/losses.
Thank u Sir for your quick reply. Sir this year i will be filing my itr-4 form on my own. i am a trader and i trade from home. i have a doubt regarding the P&L in itr-4 form. I have used java utility to fill details in P&L in itr-4 form. i have attached pictures. Can you please tell me if this will be rejected or not ? Thank You.
this is 2nd pic
i have only mentioned my gross profit in F&O and then all the brokerage charges, will it be accepted like this.. Thank You.
hello, I am doing business of textile articles having turnover of about 50 laks and paying I tax on nett 8% of of TO less 80C deductions and mentaining sales purchase accounts and Bank Accounts only Is fine or I have to prepare P/L account and balance sheet also which is dificult for me Kindly adviser
Ramesh, we are keeping this module only in the context of trading/investing on the stock markets. Suggest you to consult a CA.
Hi Sir
I have a net loss of 175000 in F &O (equity, currency & commodity) . But my other net income is less than 250000 for Bank FD interest. No other income. My turnover is less than 1 crore. Do i need to get the accounts audited? THanks in advance
Since no tax you have to pay, hence technically no audit required. It will best to get one though.
thank you so much sir
Hi Nitin, request you to explain the taxation of Gold ETF and Liquid BEES ETF trading. Can I calculate turnover for these like Equity trading or only capital gains tax applicable for these.
ETF’s are treated just like stocks for taxation, so same rule applies. If you are showing equity investments, only capital gains apply.
Sorry, am more confused. I read here (http://www.goodreturns.in/personal-finance/taxes/2015/05/what-are-the-taxes-that-you-pay-on-etf-investment-india-361461.html) that STT is not payable on non-equity ETFs and the capital gains rates and terms are different from equity.
Also, can trading turnover be calculated as sale value (same as equity) in case I want to show non-equity ETF gains as business income ?
Ah my bad, I forgot about Gold ETF’s and liquid bees. Index ETF’s (anything based on stocks), taxation works just like stocks. Gold and Liquid bees, taxation works like for debt funds. What that article says is right. Yes you can consider turnover as sales value for non equity ETF’s.
Thank you for the explanation.
Please support Nithin’s campaign https://www.change.org/p/minister-of-finance-exclude-business-of-trading-in-securities-and-derivatives-from-section-44ad. I really want it to succeed. It is really such a pain in the ass.
Hi Nithin,
I take notes about turnover concept in excel sheet. I uphold the screenshot here. is this correct or not? If not correct means. Pls correct me.
Thanks in advance.
Image is here.
Looks fine.
As you say turnover for the purpose of section 44AB in case of Intraday Share trading is sum total of absolute value of both positive and negative profit and for section 44AD also we have to consider this so far as turnover is concerned. Now, suppose one has actual loss from intraday share trading of Rs. 5000 and turnover as per above calculation is also 5000, so to avoid audit he had to show profit @8% onf 5000 i.e.Rs. 400 u/s 44Ad. Now question is in case he is maintain proper books of account, how to show this profit of Rs. 400/- (u/s. 44AD) instead of loss of Rs. 5000 (Actual loss) in accounts and balance sheet.
Rajesh, if you are showing presumptive income there is no question of maintaining books. You show a presumptive income because you don’t maintain books. If you are maintaining proper books of account, then you will need to use ITR4.
Hi Mr Kamath,
Really appreciate your efforts in making this thread such an informative read.
Sir my queries:
1.) U/s 44AB if compulsory audit is required if profit is less than 8% of turnover less than 1crore, then is this profit to be considered ‘Gross’ or ‘Net”. For example if my turnover is 50Lacs and my Gross Profit (before reducing business expenses) is 5Lacs, which is 10% of turnover, and my expenses are 1.5Lacs thus resulting in Net Profit of 3.5Lcas which is 7% of turnover. Which profit is the benchmark to find out eligibility of getting an audit.
2.) I am a partner in a profit earning business because of which until now I had been filing ITR3. This year since I have proprietary F&O business I have to use ITR4. Having gone through this form I was overwhelmed seeing the number of schedules. I want to know if there are different schedules to fill in for both types of businesses or do I have to club in income from both these sources and file in a single schedule? Ideally information from my partnership firm should be filed in a separate schedule as it is taxed separately. Maybe I have missed the appropriate schedule. Please can you highlight it for me?
Thanks for you time and effort.
1. Net profit.
2. Yes ITR4 has to be used. You will have to club all income, exemptions can be specified in the respective schedule.
Thanks for responding.
So to include interest received on capital and other remuneration from my partnership firm I add these figures to sale side of the proprietary P&L statement (which is called Positive Settlement in your sample ITR4)?
Secondly, on going through ITR4 form I don’t think the net turnover figure (favorable + unfavorable + sale premium of options) is used anywhere. We just use positive or negative settlement figures. So how would the ITR dept know whether we have audited our accounts or not where it was required or not? Or do these things become important only if the case comes under scrutiny or when the dept has asked for an audit on demand?
Thanks!
1. Interest, remuneration, etc will go under different heads on the ITR4. Suggest you to visit a Chartered accountant for this.
2. The entire filing of returns is like self policing, you have to declare if you are getting the books audited or not. Like you said, these things become important in case of scrutiny.
Hello Nithin,
This question is from my friend.
He has income of 3.5 lacs from private tutoring (not salary). and has put 1.5 lacs under 80 g .
his F&O loss is 16 lacs.
What is his tax liability and is audit required?
Thanks
If you are showing this 3.5lks as a business income, you can netoff the loss with this gain. Essentially he will have 12.5lks worth of loss that can be carry forwarded to setoff against future profits.
>>Your tax liability does not get affected by your turnover.<< if that is the case, buying & selling one lot of Nifty future and squaring off those( profit / loss whatever) on daily basis will not attract attention of Income Tax department?
Exchanges share trading volumes to IT department. What will get attention is you trading the markets but not declaring it while filing your ITR
ok…now how should i declare that? i m housewife and declaring the same till date..only this year i started trading in fno exclusively. To claim refund of TDS, i hv filed return also for AY 2015-16. Now do i need to choose myself between Trader or housewife for AY 2016-2017?
I have received a love letter u/s 139(9) for defective return for FY 2014-15. I would like to know how to prepare the P&L Account. As per Tax P&L Statement from my Zerodha Account – assuming the figures are (a)Futures Turnover 100,000, (b)Futures Realised Loss is (-)10000, (b)Futures Unrealised Profit is (+)3000, (d)Total Charges is 1000 — What figure should be shown on Income side of P&L Account and what figures on Expense side?
It is best to get a CA do this for you. If you haven’t done this before, it is best to get a CA do it.
Is there any change in the Total turn over of ! crore for audit Purpose in the recent budget . Has it been changed to 2 crores for traders also?
Yes, it has been changed to 2 crores. But this will be applicable only from the next FY. http://zerodha.com/varsity/wp-admin/edit-comments.php?paged=2#comments-form
Thanks Nithin for your crystal clear guidance, i have collected all the materials mentioned by you and ready with Balance sheet and P&L. I had mentioned earlier also, varsity and service are the solid pillars of Zerodha.
Turnover in F&O?
Say I bought 100 Nifty Apr future on April 1st @ 7600 and Sold on April 23rd @ 7900.
Means my profit is 7900-7600=300*100= 30000
And for IT calculation my Turnover is also 30,000/-
or I have to take a total of positive and negative MTM on open position between trade opening and closing date?
Thanks
You can just take this Rs 30,000 as turnover. Again like explained above, you can either take tradewise turnover or also do contractwise as well.
Hi!
What is trade wise turnover crosses 1 cr but contract wise comes around 75 lakhs… To avoid audit all will prefer contract wise only.?
Thanks…
Hi!
What if* trade wise turnover crosses 1 cr but contract wise comes around 75 lakhs… To avoid audit all will prefer contract wise only.?
Thanks…
You will have to take that call Yogesh, either way is okay to calculate turnover. Btw from this FY, the limit has been increased to Rs 2 crores for audit.
In the sample ITR4 form that you have provided, in the Profit & Loss account in the “Analysis of PL reports” tab – you have split the expenses (i.e. brokerage, STT, etc.) between F&O and Speculative trades by the proportion of each turnover to the total turnover.
Since I want to show my short term trades as a business and not as STCG, how do I split the expenses between speculative & short-term equity trades?
F&O is non speculative. So you can show your short term trades as non-speculative business and mention it the same way on the ITR4.
assume that a person does trades 30 trades in F&O, per month that means average sale at contact value of 5 lacs and buy value of 5 lacs +/-, that makes turnover of 300 lacs ( my assumption) or 150 lacs ( as per zerodha varsity )
which is correct one
whether dealings in F &O is considered as speculative business or non speculative business ,? as only margin money needs to be arranged through broker or even 50 % as collateral from DP is OK,
secondly as STT is paid , in bill of F&O to Govt.its consideration either profit or loss should be as STCG , ( a expiry is either 1 /2 /3 month is below than prescribed holding period of 1 year)
hmm.. your assumption of turnover is wrong. Like I have mentioned in the post, turnover is gross sum of all profit and loss. It is not contract value of turnover.
F&O is non-speculative business.
No, trading from F&O can’t be considered under capital gains. It is to be considered as speculative business.
Hi Nithin,
Before i ask my query i want to say my big thanks to you the way you are proactive and nice to clear all our doubts in this forum.
I am an existing trader on Zerodha and an IT professional and use to do all kind of tradings(Interaday,delivery and FNO) as a trader mostly and dont keep position for too long but it is like a side business for me.
My Tax P&L for FY 2015-2016 is as follows:
Equity
——————
INTRADAY TURNOVER: 38,750.85
INTRADAY GROSS PROFIT: 10,001.85(Profit)
SHORT TERM TURNOVER: 14,43,844.85
SHORT TERM GROSS PROFIT: -33,214.05(LOSS)
TOTAL CHARGES :8,199.97
F&O
———–
TOTAL TURNOVER: 3,99,235.00
TOTAL GROSS PROFIT : -1,25,245.00(LOSS)
TOTAL CHARGES : 23,501.98
So from above it is clear that except interaday trading i have incurred losses in both Delivery and FNO.
if aggregate all my turnover it is way behind 1crore figure but combind losses will be more than 2lac(including taxes,brokerage,etc)
Now my question is which ITR form will be required to fil e my tax return and do i need get my account audited?
My total income is above 2.5L.
Thanks,
Manish
Since you have traded intraday and F&O, use ITR4. You can get your books audited, but since your turnover is so little you can declare 8% of turnover (intraday+F&O) as profits and avoid an audit. So on 4.5lks turnover you can declare around 40k as profits. Even if you are in the 30% tax slab, that would be around 12k in taxes. An audit will probably cost you a little more. So you can opt for either, preferably get an audit.
Hi Nithin – in one of the comments in the next chapter (time stamp August 9, 2015 at 5:06 pm) you have said it is not possible to do presumptive income in ITR4, it can only be done in ITR4S; but here you are suggesting do presumptive income while using ITR4… which one is correct?
Ah my bad, misunderstood your question. Presumptive income only possible on ITR4S.
Thanks for the quick reply Nithin. So just to clarify my understanding: Capital Gains and Income from business are 2 separate topics. IT law does not state anywhere that having or not having CG in anyway changes the way your business income tax calculations work. However, there is no ITR Form to claim both CG and presumptive income. So even though the IT law is fine with it, just because there is NO ITR FORM to do it, we cannot claim both CG and presumptive income ?
Yep you are right. Can’t claim CG and presumptive income on ITR4S.
Hi Nithin,
Thanks for the reply.
just wondering about do i not bother with short term turnover(14 lacs+ here) as well while including it together with intraday+F&O turnovers and pay 8% taxes on all of them to avoid audit or short term turnover is not considered for audit.Please answer it.
Short term trading can be shown under capital gains (and not business). If you decide to show capital gains, question of turnover doesn’t come into place. Turnover only for business.
Actually 8% taxes in above comments should be read as showing 8% profit on (intraday+F&O+ short term) turnovers and pay taxes on them to avoid an audit.
You have said that for intraday & F&O, you show the positive turnover & negative turnover as gross sales & receipts. If short-term trades are also declared as business income, how are they shown up in gross sales/receipts? Since every turnover for short-term trade is positive, how does one show it?
If you are showing short term equity as business, then again buys under receipts and sales under sales.
Hi Nithin,
Thanks so much on behalf of everyone for guiding us.
I have few queries and I would request you to answer all please:
1) If we dont trade in F&O, only trade intraday & delivery of equity, can we merge intraday & delivery turonver & their profits, and show in ITR form 2 instead of ITR form 4? as intraday is speculative… OR can we show intraday in Income from Other sources in ITR 2?
2) My only source of Income is F&o, intraday & delivery of equity, and hence filled ITR 4, ……… Below is my example figures
F&O turnover 60 lacs with -10,000 loss, Intraday turnover 20 lacs with 20,000 profit & equity delivery turnover 90 lacs with 2,00,000 profit
—can I show equity delivery turnover & its profit in STCG?
—if yes, total business turnover will be (F&O + intraday) and including equity delivery or excluding equity delivery?
—should I need to fill Balance sheet and P&L both?
—do I need to just fill ‘No account case’ for Balance sheet and P&L?
—If yes, for Balance sheet, what details exactly needs to be filled in Amt of sundry debtors,creditors,stock-in-trade & cash balance?
—If yes, for P&L, what details exactly needs to be filled in Gross receipts, Gross Profit, Expenses? (as per example figures)
3) As per my above case, will audit be liable and if yes, please let me know the reason?
4) Suppose, I am not liable for audit and still income tax dept gives notice because of computer algorithm issue or whatever (turover is less than crore & profit is less than 8% and total income is below 2.5 lacs)?
5) In the above case, we need to show Yes or No for below question asked i.e
Are you liable to maintain accounts as per section 44AA? (Select)
Thankssss in advance.
1. IF you do intraday equity trading, it is speculative business. You will have to use ITR4 to declare this. You can use ITR2, only if you have capital gains (short term equity trading) income.
2. Yes you can show equity delivery as short term capital gain. There is no concept called turnover for capital gains, only if you show it is a business income.
Excluding
Yes, best to fill in BS and P&L
Since in your case, even though turnover is less than 1 cr and profit <8%, u have no taxable income. Hence no audit required. So you can fill No account case, but like I said best to fill it.
Exactly what needs to be filled, I have explained in the chapter on turnover/audit. You can look at the sample ITR4 form as well.
3. No, as explained above
4. If you still get a notice, you have to meet the ITO and explain. If you were to ask me, it is best for everyone to get an audit done.
5. No
Thankyou….
To be precise, my salary income is 225000, bank interest is 2600, dividend on equity is 2500, STCG is 20000 & intraday turnover is 58100 with 25000 profit. 80C is 11000 & 80TTA is 2600
Filling ITR4
1)Is tax audit applicable in this case? –(I dont want tax audit and its fees is too expensive)
2) And in this case can i ignore filling Balance sheet ? and just fill P&L (no account case) i.e Gross receipt – 58100 & gross profit as 25000
1. No audit since turnover less than Rs 1 crore and profit > 8% of turnover
2. Yep, no need to fill B&S
1)As you mentioned, I will just fill P&L (no account case) i.e Gross receipt – 58100 (intraday turonver?) & gross profit as 25000
Correct? and what can be filled in Expenses? Can I fill monthly internet charges of Rs. 500 p.m under expenses?
So as I understand, please let me know if I am correct on all the below points:
2) Short Term capital turnover is not to be considered while calculating total business turnover.
3) Tax audit is required when turnover of business income(F&O+equity intraday) is more than 2 crore.
4) Tax audit is required when turnover of business income(F&O+equity intraday) is less than 2 crore and profit is less than 8%.
5) Tax audit is NOT required when turnover of business income(F&O+equity intraday) is less than 2 crore and profit is less than 8% and total income(incl. business profit,salary,short term gain etc. minus 80C, 80TTA etc.) is less than 2.50 lacs (minimum tax slab).
6) Tax audit is NOT required when turnover of business income(F&O+equity intraday) is less than 2 crore but profit is more than 8% irrespective of whether total income is less than or more than 2.50 lacs (minimum tax slab).
7)And MY Last question:-
Now considering a scenario where is business turnover is less than 2 crore but profit is more than 8%, under which circumstances should we have to fill the complete Balance sheet and P&L statement.
In which condition a person is required to fill just P&L (no account case).
1. Can’t help you on all details on what you have to file. Yes you can show all expenses that you incur towards trading like internet, maybe the books related to trading you buy, depreciation of your computer, etc.
2. It is short term capital gains, and hence no turnover need to be calculated.
3. From FY16/17 it is Rs 2 crores. For FY 15/16 it is still Rs 1 crore.
4. Less than 1 crore and profit less than 8% for FY15/16
5. Yep if turnover less than 1 crore and if not in tax slab, no audit requried.
6. 1 crore and yes.
7. It is mandatory only if turnover is more than 1 crore (Rs 2crore from FY16/17) or if less than Rs 1 crore and profit less than 8% of turnover. Not required if you don’t fall in tax slab in this case (less than Rs 1crore case)
Thankyou for the response.
While I was filling ITR 4, STCG is 20000. And under CG sheet, (column F. Information about accrual/receipt of capital gain), upto 15/9- my STCG was negative -30000, 16/9 to 15/12- it was positive +60000, 16/12 to 15/03- it was negative -10000, 16/03 to 31/03- it was 0………….. As in the excel sheet, we cannot enter negative figures, so in this case, can I leave upto 15/9, 16/9 to 15/12 as 0 ….. and 16/12 to 15/03 as 20000 ?
Yep, u can.
Dear Nithin Sir
I was wondering if you have any idea how much a CA charge (approx. range) for auditing my accounts? I just want to be mentally prepared to know beforehand about this? I searched on net but no satisfactory answer. Can you please provide some range based on your experience?
If you are an individual, you should get someone for around 10k.
Dear Nitin Sir.
I have a doubt, I am a salried person and in tax slab of 20%.
I do trading in fno and my annual turnover is less than 1crore and running lossesof 2lac in annum. Should i get my tax audited or not. And should I use ITR4 for filing, as I want to carry forwardmy losses
Yes, you will have to use ITR 4 and get it audited also.
And sir what if I dont want to carry forward my losses
Even then Sheeraz, it is best to declare all trading activity and file your returns.
I will declare the trading activity but sir I dont want to get it audited , already in loss n less than 1cr turnover. Again audit going to cost 10k. Is it possibe to file return and declare trading activity without audit in my case..
Without audit you will not be able to carry forward the loss. When you are filling the ITR4, it will not allow you to file without an audit in your case.
F&O is non-speculative business income. ITR 4 for tax audit/ ITR 4S for non tax audit is applicable.
Non speculative business income will be taxed as per your slab rate.
Non speculative business loss can be carried forward and set off in the future years against speculative/ non-speculative gains.
To carry forward loss, you need to file ITR by July 31 for non tax audit and Sept 30 for tax audit cases.
First, calculate your turnover from F&O trading. It is the sum of all profits and sum of all losses, both added. (Profit Rs.30000, Loss Rs.50000 implies Turnover Rs.80000).
If this turnover is more than 1 crore, you need to get tax audit done.
If turnover is less than one crore, you may show profit @ 8% of turnover(No tax audit required)
If turnover is less than 1 crore AND actual profit made is less than 8%, any of the following options may be used:-
1. in case of profit, to show the actual profit, tax audit is to be done.
2. if loss is made, to claim loss in the IT Return and carry it forward for set off against gains of future years, tax audit is to be done
3. you may still use benefit of Sec 44AD and compute profit @ 8% of turnover and pay tax according to your slab(No tax audit required) Also, you can’t carry forward loss under this option.
Hi, Last year I made a loss of Rs 10,000 in options trading, where the turnover is calculated on premium paid and received, which was nearly around Rs 20,000 only. But the CA asked me to go for an Audit. IS it necessary in this case or not? please help!
If your option turnover is only Rs 20,000, declare 8% of this as profits. This way you can avoid an audit. It is best you speak to your CA and do this only if he gives a green signal.
Sir, My last year loss is arount 1,90,000 and my turnover is around Rs 53,00,000…do I require to conduct an audit or filing ITR-4 is enough…??
Because This was the only source of my income and I do not have any other source of income (except annual stipend Rs 22000)
whatever trading I did was from my savings ( Rs 2,00,000)
Since there is no tax liability, no need of an audit.
I trade only fno I am trading from March 2016 my turnover is 40 lakh and loss of 11500 broker charges 8000-do I need to file for it return I am considering to file from next financial year
It is best to file IT returns, if you don’t there are higher chances of getting a scrutiny notice from IT department. Exchanges share trading data with IT department.
I have around 1.1lac income from pension. I have loss in commodity markets Rs 8000 Turnover around 3.0 lac. Intrady Equity Loss Rs 1400 turn over Rs 50000. Loss in Forex Currency Market Rs 1950 Turover around 5.0 Lac. Which ITR form I need to fill and whether I need to get my accounts audited
ITR4, and since you have no taxable income, no need of audit. But if your turnover is over Rs 1 crore, you will need an audit (from 2016/17 this limit is over Rs 2 crore)
Dear Nirin
Thanks for reply.Tell me weather I can forward my losses also in ITR-4
Yes you can.
Thanks for the the information. Now its clear that since I have no taxable income and I do not need tax audit but kindly tell me whether I have maintain books of accounts , P/L and Balance sheet
I have an tution income of 1.4 lakh/year I have no other income what it form I can fill
hi, I have an delivery nse volume of 98.3 lakhs and a loss of 60K only, can I fil in itr4 only as a short term capital loss as60k instade of putting full turnover figure of 98.3 lakhs,can -figure r enterd by me in excel sheet or not,any chance of it query if I don’t put full delivery volume of 98.3 lakh and give only loss figure of 60 thousand.
Hi Nitin
Query on Turnover Calculation on options premium
Case 1: BANKNIFTY Call option of 1 LOT bought @312 and sold @ 330
Buy Amount: 9,360.00 Sell Amount:9,900.00 Profit: 540
Case 2: Put option
Buy amount: 1320 Sell amount 450 Loss of 870
Explain on how is turnover calculated for put and call options , in case of profit and loss
Thanks in advance
Case 1: profit of Rs 540 + Sell amount of Rs 9900 = 10440
Case 2: loss of Rs 870 + sell amount of Rs 450 = 1320
Hi Nithin.
Could you provide a P&L a/c for Income Tax purpose for the following details.
Equity: Buy 800000 , Sell 830000
F&O:Futures- Buy 10Cr Sell 8.6 Cr Options- Buy 9 Cr Sell: 7cr
Commodities: Buy 2.5 Cr Sell 1.2 Cr
Your P&L will be available on our reporting tool (if you are trading at Zerodha). Check for tax P&L by logging into Q.zerodha.com
My friend is trading at Zerodha. Iam filing his IT retun. I need your guidance what are the debits and credits to P&L incase of F&O.
If -ves and +ves total is Turnover , then what is to be debited to show the Net Loss on F&O Transactions.
You can show all positive turnover as gross receipts and negative turnover as Gross sales.
Even i also have same query
If we show all -ves as Gross sales it will take it as profits but those are losses
Dear Sir,
I am sorry I didn’t understand your turnover sheet for Option.
Can you please explain the turnover for the following transaction.
Nifty 15Jan8800Pe Bought @ 9.45 on 20/01/15
and sold @ 12 on 24/01/15.
thanks
Vishal
Two ways to do this
1. Just use the profitability of the trade for calculating turnover. In ur case profit of Rs 2.55 x lot size as the turnover.
2. If you want to be extra careful, (2.55xlot size)+ (12xlot size)(selling value of options)
Anybody got IT notice for not summing premium received by option selling ?
great help.
thanks a ton
Govt has made a modification in “Presumptive taxation scheme” for Section 44AD. Is it applicable for 2015-16 financial year…i.e. for the IT returns we are about to file now in this month? Can a Futures positional trader who made much more than 8% profit on turnover take advantage of this scheme and file ITR4S instead of ITR4….Or it is only applicable from FY2016-17 only.?
This year (from FY 16/17) the limit for 44AD has been increased to Rs 2crores, but this presumptive income option upto Rs 1crore of turnover exists. It is a grey area – a loophole of sorts, if you are saving a lot of taxes by taking this benefit of 8% of profit, I’d say it is probably best not to use this. Do discuss this with your CA.
Thank you Nithin,
I am unable to find out, where can I add the details of “Income from LTCG”, ‘Interest on Savings account’, Interest on Fixed Deposit’, ‘Dividend income from equities’ in the ITR 4S….I am confused…
Sir
can you suggest CA in Mangalore ?
I want to declare Internet expenses, but i don’t have a payment receipt for that, so can i declare it without receipt?
Yeah you can. Atleast keep a copy of the bill for your records.
Please give some guidelines on depreciation, i.e. how to calculate it, and how to declare ?
Check this: http://tradingqna.com/41265/show-depreciation-rates-for-conputer-mobile-while-filing-itr
Dear sir, earlier I trading in f & o through other broker. Now I m with Zerodha. When I see my trading statement given by that broker, I see credits and debits on that statement. My question is total of debits and total of credits my total turn over? Is the difference between total credit and total debit my profit/loss?
Do go through the explanation on turnover above. Yeah total of credit/debit will be ur gross P&L
thank you sir for your quick reply. but my question : total of credits is five lacs and total of debits is for lac ninety thousand so my turn over will come to nine lac ninety thousand. am i correct? ( this is for f & o trading ).
Yes, correct.
thank you sir.
dear sir, can we show f & o trading’s profits as short term capital gain? (to avoid an audit).
thank you in advance.
No D.
OK… thank you very much sir.
Sold nifty 7900 put at Rs. 30 on 1-June-2016. Option expired worth less on 30-June-2016. Now (1) What is the turnover for this?
Sold Nifty 7800 Put@ Rs. 30 on 1-06-2016. Option expired worthless on 30-06-2016. Total premium received= (75*30) =2250. (1) What is the turnover for this trans? Is it 2250+2250 or only 2250? (2) Does ZERODHA charge on expired leg of the trans. ?
(2) Does ZERODHA charge for expired tranaction?
1. Two ways you can determine, which one to choose is on you as explained above.
Selling value of option + profit from trade or just profit from trade. So either 2250+2250 or 2250.
2. NO charges on expired transaction which is worthless.
Hi,
1. is networth calculated the same that we need to enter in the “Proprietor’s capital” in the BS section of the ITR4. Thanks.
2. for Fixed assets – should we include only assets purchased during the FY in consideration for tax? thanks.
3. What is “drawing ” under the section “schedule A Capital account” in the sample ITR4 attached by you in this tutorial. thanks.
1. Networth and propreitor capital is the same.
2. Opening fixed assets + addition – sold – depreciation
3. Money drawn from income for personal purpose (like household expenses)
query 1
on turnover of more than 1 crore in F &O trancaction and loss of 5 lakhs with other interst income at 3 lakhs , Whether tax audit is required and which itr form is to be filled
query 2
in case of itr 4 ,will Balance sheet will cover all personal assets including residential house etc. etc. ?
in case of itr4 , where the net loss to be shown ? , whether under other expenses with description or positive MTM as sales and negative MTM as purchases . There are zero expenses. Should it be shown as no accounts needed case
query2
In
1. Yes, ITR4
2. Yes
3. Losses can be shown as purchases and profits as sales.
Request u to answer four questions.
1.I have purchased Nifty50 on 01.07.16 300 units at Premium of Rs. 150 per unit and sold same 300 units by squaring off on the same day at Rs. 160- per unit. I think my turnover value is difference of Rs. 10- x 300 units.
2. I have purchased Nifty50 on 01.07.16 300 units at Premium of Rs. 150 per unit and sold same 300 units by squaring off on the 2.7.16 at Rs. 160- per unit. I think my turnover value is difference of Rs. 10- x 300 units.
3. I have purchased Nifty50 on 01.06.16 300 units at Premium of Rs. 150 per unit. The contract expired on 30.6.2016 at a sale (premium) price of Rs. 160 per unit. Here, I think my turnover value is Rs. 160×300 which is premium received.
4. All above calculation is for determination whether TAX Audit provisions are attracted or not?
However for Profit and loss Account, Purchase Cost of premium wiill be debited and Premium received on Sale will be credited alongwith additional impact of brokerage, STT etc.
Would u kindly comment ?
1. yep
2. yep
3. No, same Rs 10 x 300 units
4. Yep, turnover is to just determine audit requirement. Yes P&L etc is done including all costs, and etc.
My speculative gains are Rs 2.9 Lakhs and Short term capital loss Rs 2.5 lakhs. And,my Short term trading turn over[total sell value of all short term trades] is around Rs. 2.55 Crores. The trading is my major source of income other than interests., as I am retired. In previous FY 2014-2015, I filled in ITR4 ,my speculative gains under Speculative Business income and STCG under head Capital Gains and paid 15% over it. After new CBDT circular, I am confused whether I should fill my losses under head Capital gains and carry them forward or fill them under business losses, as frequency of trade was high. Please suggest
The new circular is actually quite good. It now gives you the tax payee to decide how you want to show this, capital gain or business income. Whatever way you show it, ideally you have to continue the same way in the future. If you are doing very actively, i’d suggest to show as business income.
Thanks for replying. My Net tax liability is zero but short term trading turnover is 2.55 crore , Do I still need an audit ?
Yep, if it is more than 1 crore for FY15/16.
Ok. I was going through all the articles and you have mentioned in some comments that If Net Tax liability is zero or no taxes are need to be paid, then there is no need for audit. Please clarify,
If turnover is more than Rs 2 crores (Rs 1 crore until last year), audit is mandatory. If turnover lesser, and there are no taxes under any head to be paid, then no need of audit.
Hello Nithin,
This is the nice article i have seen till now
But still i have some queries
1. I have salary income of 4 lakh and i have loss in F&O nearly 1.17L is tax audit applicable to me..?
2. How should i do my P&L
should i enter sales 224716
(-) puchases 342020
Loss 117303
(or) should i show -117303 as my turnover as well as loss in my P&L..?
Thanks in advance
1. Yeah, you would need an audit.
2. Sales as 224716 and purchases as 342020
sir, I am actively trading in nsecash and fno my question to u sir,
1)I have an btst del vol of 1.9cr and loss of 3.45lakh can i fill this detail in itr4 as a capital loss and not audited for my books
2)if simply file the itr4 without audit and only filed the colume by losse figure of 3.45 lakh and not giving full detail of turnover
and filled the itr then what will happened ?
thanks
1. Yes. Only for business loss audit required.
2. IT department gets trade files from exchanges. So it is best to not hide any turnover or other details.
Sir, I have losses of Rs.4 lakhs in F&O and turnover of Rs.26 lakhs. No other income.
Can I file ITR-4 and carry forward the losses without an audit?
Thank you.
Yes.
Hello,
I am doing trading (MCX Non-Agri Commodity) since September 2015.
Earlier it was through other brooking company’s account from September 2015 to December 2015.
After that I’m doing trading (MCX Non-Agri Commodity) through Zerodha account and very happy with the service 🙂 since December 2015.
My query is that during trading through previous company’s and present account I’ve incurred losses. So do I have to submit ITR even I’m incurring losses in MCX Non-Agri Commodity trading.
Loss of almost 2+ Lacs and Profit of almost 50+ Thousand INR. (Approx Figures)
Both MCX Non-Agri Commodity trading accounts were opened with same PAN no.
Also I’ve opened an Equity, Dmat account with Zerodha in previous month but not Started trading as I’m learning the basics right now.
Please provide me some info in this issue, Info is much needed.
Best to declare the losses on ITR. Do go through all the chapters on this module, you have all info that you need to know of.
Hello,
If the non speculative income for the year is 4lacs and i am taking 80c deductions of 1.5lacs, so my taxable income becomes nil. Also the turnover is below 1cr, will the audit be required ?
Not required.
While it’s great otherwise, your turnover statement doesn’t provide dates for short-term tradewise turnover. Why is this? The CA said that it was necessary.
Hmm.. don’t think turnover statement can have dates, as in which date do we put, entry or exit?
Well, the other segments within the turnover statement have dates, except for the short-term turnover, so I guess that’s what he was talking about.
Hi,
I am salaried person with annual income more than 10 lakhs. in last financial year I was involved only in F&O trading with turnover around 22 lakhs and loss of 26 thousand rupees.
My question is do I required to be audited or I can simply file ITR4 before 31july ?
thanks.
You will need to get it audited.
Thanks Nithin for your prompt reply. I am using Zerodha since January 2016. And I am very happy with the UI, service you guys are providing !!
You have opined that gold etf could be treated as equity for turnover calculation. In that case gains for etf held more than one year is tax exempt
Ganga, I have corrected my comment on the above post. “Ah my bad, I forgot about Gold ETF’s and liquid bees. Index ETF’s (anything based on stocks), taxation works just like stocks. Gold and Liquid bees, taxation works like for debt funds. What that article says is right. Yes you can consider turnover as sales value for non equity ETF’s.”
I got my account audited because turnover calculated based on full value for commodity trading. However,turnover will be below one crore ,based on sum of positive and negative difference for ay 2014-15 and 2015-16. Can I get my accounts audited in revised manner.presently account for ay 2014-15 is under scrutiny.
AY 2015/16 you can revise the return if filed within time. AY 14/15, until the case is presented to the assessing officer, you cannot revise. IF the AO agrees you can revise.
ganga , how much it costs you to get your account audited? because i am also thinking about it. thanx
Anywhere upwards of around Rs 6000 and can go much higher based on the size.
Hi Nithin,
I have an intraday loss of Rs. 1.6 lakhs in the FY 2016-17. The charges calculated and shown in the Q backoffice application is around 1.3 lakhs. Can I carry forward the loss of 1.6 + 1.3 lakhs for the next 4 years? To carry forward the loss, should I need to get an audit done? My turnover(calculating the profit and loss) is less than 1 crore.
Thanks,
Ragavendran
Yes you can carry forward. Yes, you will need an audit.
Hi Sir,
If one is trading in USDINR will they have to check for audit based on turnover (sorry if its an off topic ques :))
In P&L Account Statement can the total of Gain/Loss Column at the bottom considered as Turnover for Future and for Option respectively or we have to caluate for each trade separetly
Turnover calculation is to determine if you need an audit or not, that you can do separately outside the ITR form.
Thank you for your reply.
I am not using ITR P&L sheet.
What I meant was I received P& L Statement from my broker in which there is a Column header Gain/Loss at the bottom is Total of this column.
This total can be considered as Turnover or not
You have to take the absolute sum of all the individual rows. So if one row has -1000 and another 1000, turnover has to be 2000.
hi Nithin,
Very informative article. I have a few queries.
1)If one cladssfies himself as an investor, does he has the audit obligation if he trades only in long term buy/sells if his turnover crosses 2 cr or his profit is less than 8% of turnover.
2)If a person classifies himself as investor, and if he is having income from F&O, he still need to fill ITR4 right ?. In this case can he carry forward his F&O losses to next year.
3)If a person is classifed as an investor and he does 1.5 crore turnover (including delivery F&O and Intraday). He makes 20 lakh profit in LTCG and 2 lakh in F&O. Does he qualify for a audit as technically he made more than 8% profit but tax liability is only for 2 lakh profit .
1. If classifying your investment as capital gains, no need of audit/turnover and all.
2. yes
3. LTCG doesn’t play any part in turnover or profit or determining 8%. If turnover more than 1 crore, then audit required. This 1crore limit is increased to Rs 2 crores from this financial year.
Thanks for the quick reply Nithin. There is still confusion with query 3, which I’ll rephrase.
An investor has a turnover of Rs 1 cr for LTCG (where his profit is just 1 lakh) and 2 lakh turnover in F&O (with Rs 20,000 profit). So for arrving at this presumptive income, total turnover is considered ? Meaning in this case his total turnover is 1.02 Cr and total profit is 1.2 Lakh (which is below the 8% mark) so what should be his presumptive income in case he fills 4S.
In case he settles for ITR4, Does he has the audit obligation? Note-his profit in just F&O is exceeding 8% of F&O turnover limit (20000/2 lakh). But if we take overall turnover (LTCG+F&O) his profit of Rs 1.2 Lakhs is below the total turnover of 1.02 crores)
If you are using ITR4S, you have to show all income as one. So yeah, turnover will be 1.02cr. In case of ITR4S, you have to minimum show 8% of turnover as profits. So I guess it would not make any sense .
If you use ITR4, capital gains can be shown separately and it is not considered as part of turnover. Turnover is only for business income. So no, you would not need audit for Rs 2lk turnover with 20k profit.
sir my wife is doing f&o trading she is a housewife she has no other income she made loss in trading.she is below eximt tax llimit.sir for her is itcompulsurry to fill it return.she didnot want to carryforward the loss.
2.my primary income is salary i want to trade in F&O .i want to pay 30% tax if i get any profit from trading .sir want to show this in other inome in itr form.
3 sir is it compulsurry for me to declare as bussiness income.
1. It is advisable to file ITR, even if in loss.
2. Not possible, you have to show this as business income.
3. yes
My taxable salary income after all deduction =9,19110.00.
Full tax paid by employer from my salary = 112090.00
Profit and turnover breakdown
Futures realized profit 165372.00
Options realized profit 37715.00
Total realized profit 203087.00
Futures unrealized profit -4511.25
Options unrealized profit 0.00
Total unrealized profit -4511.25
Futures turnover 687209.50
Options turnover 10663188.75
Total turnover 11350398.25
Total charges
Brokerage 21998.69
Turnover charges 45831.86
STT 85006.74
Service tax 9483.45
Stamp duty 7442.88
SEBI charges 3379.62
Total charges 173421.77
Profit and turnover breakdown
Intra-day / Speculative profit 2520.90
Intra-day / Speculative turnover 32702.90
Short-term profit 12461.35
Short-term turnover 92737.85
Long-term profit 0.00
Long-term turnover 0.00
Total charges
Brokerage 1476.81
Turnover charges 460.01
STT 1920.61
Service tax 264.98
Stamp duty 678.00
SEBI charges 28.32
Total charges 4831.76
Nithin Sir, my auditor is asking me to pay more than 13,000 as tax for F&O + intraday trading + shortterm capital gain tax. But as per ur method tax should be much less. Can u just go through the above numbers ?.
Above 10lks income means tax of 30% and from 5 to 10lks is 20%. So if your net profit is around 60k to 70k, yeah u will have that much liability.
I have salary more than 250000 for the year FY2014-15 but having speculative loss 44000 short term loss 122000. My total turnover is (spec profit+spec loss+short term sale) is rs.82lakh. I have filled only itr1 for FY2014-15. I recieved notice for limited scrutiny for Securities Transaction. Please give guidlines. Should they panalise me on turnover becasue of not get audited?
you don’t have to worry of any penalty. You just have to explain that you didn’t file because there was a loss, and that you will do it in future.
Thank god for your reply. I was in heavy tension because of not auditing and filling itr1 insted of itr4s and i have to give penalty 0.5% on turnover of Rs.82lakh i.e. Rs.41,000/- + auditing charges. Please confirm the same. They called me for scrutiny on 10 aug 16.
As long as you can convince them that you haven’t evaded paying taxes, there is nothing to worry. You just have to explain that when you meet.
I am salaried person having rs. 320000 per year. One years ago I have intraday and delivery based trading in stock market. But having losses in both speculative and short term. I have turnover more than 70 lakhs. But I have filed Itr1. I got notice from IT for scrutiny for subject speculative transaction. What to do and what will be final result.
You will have to go explain to the AO why you didn’t show this stock market activity in your ITR returns. Show them that you had a loss, show them the source of the money you lost, as long as you haven’t evaded paying taxes, it is okay.
Thank you.
nitin sir
i am full time trader trade in f&o , cash,(dilivery & intraday) commodities ,currancy yearly gross turnover rs.1000 caror
last year i trade at two broker (3+9month) so both broker issued seprate global report for full year
i also trade in demerger shares (adani enterp. max , crompton) and ipo so global report not show clear picture
can i file return on base of my banking payment or reccipts (means total payment less total recipts from broker)
if no, please explain how can i keep my books (currently i keep only broker ledger and bank ledger)
please guide
thanks in advance
ankur
Yeah you could file your returns based on the banking/ledger entries. You will still have to show intraday/speculative, delivery/capital gains, F&O/non-speculative separately on the ITR.
thanks sir for your prompt reply
i have global report for f&o and commodities but eq .cash have confusion due to (ipo demerger bonus split previus stock balance ).please help how seprate dilivery and intraday trades (while broker issue global report include all trades)
however i show business income (business head) capital gain apply ??
please guide
hi
every stock/currency trader liable to maintain book of accounts ? ( irrespective of income slab, turnover , profit etc ?)
. i mean pure trader . ( no income from salary etc )
Not every trader, but best to maintain
Dear sir, I have issued a notice from it dept under sec 143(2) , for a,y, 15/16query rearding
1) derivative transection
2)securities transection
sir, what is the meaning of 2 one and I have filled 4s at that time I have put a profit in that return of 2.6lakh but if I
include my fo and delivery trade I have an loss of 5.5lakh , what can I do
Best to do this using a CA. As long as you haven’t evaded any taxes, nothing to worry.
Hi Nithin,
Good day,
I’ve one doubt about the speculative and non-speculative in F&O section. If i do F&O on intraday basis (MIS, BO, CO in F&O Instrument), it’s consider as sepculative or non-speculative?!!!
Thanks in advance.
I’m still waiting for your reply nithin. Please clear my doubt.
Non-speculative
Sir I got notice from I.T. Department stating that my turnover is very high and according to their calculations suppose nifty is 8600 and call
price of the 8600 is Rs. 50 and my bought qty is 1000. Now they have calculated 8600*1000 = 8600000 (they are calculating index plus qty) instead of multiplying 1000*50=50000 (qty plus price ) so please tell me who is right.
thanks
They might have told you turnover is high, but I don’t think IT notice would have a turnover calculation. If you have any, do email me on [email protected]. Turnover the way I have explained above is the most conservative way to calculate.
Sir,
I am a housewife but trade in F&O segment of markets. For FY2015-16, unknowingly I filed ITR-2 showing the losses of around 50000 (Excluding STT) under CG schedule. Now (i.e. 20/08/2016), I want to file revised returns under ITR-4 showing this losses plus STT & other expenses (being business income) , wherein my losses under this computation works out to be Rs. 1.3 lakhs. Will I be able carry-forward the newly computed loss of 1.3 lakhs to the next year or only 50000/- as declared in original ITR-2 return ?
Hmm.. you have to file your returns in time to be able to carry forward your losses, so yeah only 50k can be carried forward. Also, F&O has to be shown as business income ideally.
sir,
Futures realized profit -1887702.50
Options realized profit 0.00
Total realized profit -1887702.50
Futures unrealized profit 0.00
Options unrealized profit 0.00
Total unrealized profit 0.00
Futures turnover 2737977.50
Options turnover 0.00
Total turnover 2737977.50
no taxable income other than stcg loss of equtity
do i get tax audit
Hi Nithin,
I modified your statement corresponding to the Short position (option writing) and turnover below calculation is correct or not? Please clarify me.
In options, if you Sell (Short Position) 100 or 4 lots of Nifty 8200 calls at Rs.50 and buy at Rs.30. Firstly, the unfavorable difference or loss of Rs 2000 (20 x 100) is the turnover. But premium received on sale also has to be considered turnover, which is Rs 50 x 100 = Rs 5000. So total turnover on this option trade = 2000 + 5000 = Rs 7000.
Thanks in advance.
Saravana, Rs 7000 is the most conservative approach of declaring turnover. A lot of people also show only Rs 2000. It is upto you, maybe ask your CA.
Sir,
I filed my F&O losses under CG for AY2015-16. Received a notice for IT for limited scrutiny of Derivative transactions in this month. Can I revise my returns by filing ITR-4 now.
Now it is late Sailaja.
sir,
but unknowingly I submitted revised ITR-4 for my original filed ITR-2 for AY2015-16 after receiving limited scrutiny notice u/s 143(2) after realising the mistake regarding FNO transactions. What may be the impact. Can you please advise?
Sir,
I trade in fno where my turnover was 18lakhs and incurred a loss of 40000/-. I don’t have any other income. Am I liable to maintain accounts as per section 44AA for ITR-4 . Can I file ITR-4 under “No ACCOUNT CASE”. Please clarify.
Yeah you can file under no account case.
BUT SIR, SEC-44AA SAYS BUSINESS TURNOVER>10LACKS IS LIABLE TO MAINTAIN ACCOUNT. SO, IS IT POSSIBLE TO FILE ITR-4 UNDER “NO ACCOUNTS CASE” WHEN MY FNO TURNOVER IS 18LACKS?
Yes you can choose no account case. But you have to still maintain account if more than 10lk turnover,P&L, bank statement (with details of credits/debits) etc is enough for that.
Sir,
I am looking for nifty chart of last 20 years, line chart, but it is difficult to find. Can you please tell me any website for the same?
Also can you upload excel file with formula for fundamental analysis, that you have mentioned in your modeule? Or may I request a small module for excel, how to use it for calculation? I tried to Google but it is not as simple as your modules. Your modules are very simple and easy to understand.
sorry for posting at wrong place.
If my turnover is less that INR 2 Crore, and if my profits are more than 8%, can I presume profits to be 8% as per provisions of Sec 44AD?
Hmmm.. 🙂 tricky that is.. I don’t think you should do anything that can cause losses to the exchequer.
If somebody makes 5000 rupees profit in intraday Commodity trading daily for one year, is tax audit is compulsory for him. Also give one example of tax auditing for intraday commodity trading
Pradeep, audit requirement is based on turnover, do go through all the chapters on taxation, have explained with examples.
My total income is more than 2.6 lacs but my taxable income is less than 2.4 lacs because of deductions for my Pf and health insurance . I have made loss in intraday trade. Do I need to get my audit done ?. I am already in big loss ..Auditor will ask for 20-30 k.
If your turnover is not over 1 crore, not needed. Audit shouldn’t cost that much.
Dear Nithinji, I am entry level investor. I applied L&T IPO and allotted 20 shared @ rate of 700/Share so average cost become 14000/-
But in Holding, it shows N/A. so P&L gives wrong value. Same happen with allotted Sovereign Gold Bond. Why don’t you pick IPO allotment value there to calculate P&L correctly or How we can update avg. cost for IPO/Bonds? screenshot at http://imgur.com/a/bSHBE
awaiting your guideline to solve this with aim to show/calculate actual correct P&L
IPO and Gold bonds price won’t pick up on Q. If you click on discrepant quantity button https://q.zerodha.com/report/discrepant/, you can enter the buying price for both your LT and Gold bonds. Automatically everything else will get fixed.
Profit less than 8% of turnover-means 8% of 1Cr=8Lakhs?OR The actual profit I’m earning from F&O??
I’m confused here.My CA filed ITR under 44AD without audit case.
After deduction tax is nil.
Income from Business/Profession is 220000+FD Interest 80000=3Lakhs
Gross Receipt=240000
Actual Profit 220000
Deemed Profit %=90
Profit against Turnover (8%)=17600
So,here turnover he showed on Profit and declared it abv 8%,but after deduction the is Nil.
it it a wrong way Sir?Few friends saying that its wrong,I fall under audit case(44AB)
Akash, it is 8% of turnover and not profits. Turnover can be calculated in different ways, it is a grey area, so it is upto you on how you calculate. Two ways are mentioned in the above chapter. As long as you haven’t avoided paying taxes, you are okay.
What code for Trading F&O and Equity Cash?
Code: 0204 for trading F&O. If you are showing equity cash delivery trades as capital gains, you can fill that under capital gains. If intraday equity, there is a separate section for speculative income.
Sir,under which section do we file a return if audit is not applicable?
if it is before due date 139(1) First Option in Drop Down of ITR and if it is late 139(4) Second Option. Sl No “11” 139(1) or SL No. “12” for 139(4).
sir, i was a salaried person in year 2013- 2014. my annual salary was 4 lakhs and income taxable after deduction was 218000. since i that year there was a tax credit of 2000. i had no tax to pat. i also did intraday trading i financial year, 2013-2014. my turnover was 250000, and profit was 180000. my business expense in trading was around the same as breakup is here-
laptop depreciation- 15000
inernet charges- 15000
electricity charges- 6000
fees of jobber, as i had hired a jobber who was doing jobbing in my account- 150000
so in net i have loss of one thousand.
i have received notice unnder 142/1
my query is –
do i need a audit
i have not kept document of expense, so can they be accepted,
i also paid jobber i cash, so will it be accepted?
what i need to do?
if i dont show expenses, then i will have to tax on 180000 income
so please advice me. what to do ?
No audit since profit >8% of turnover and your turnover less than 1crore.
Yes cash can be shown (it is only 1.5lks for 1 year).
Show all your expenses and file return correctly. Yeah, if you don’t show expenses, you will have to pay taxes on 1.8lks
hi nithin. i made a turnover of 1.9cr in 2015/16. i had a loss of about 150000. my tax liability s zero.1. should i get my ac audited compulsarily as my profesion s dentistry.
2. if i dont get it audited is that a penalising fault.
3.can i still carry forward my losses if i get it audited.
1. If you show your turnover as 1.9cr on the ITR4, it won’t allow you to file. It will ask for audit.
2. Not really a penalizing fault, as long as you haven’t avoided paying taxes.
3. Yeah you can carry forward, they have extended the last dates to file IT returns with audit is Oct 17th.
thank you so much..
sir, i was a salaried person in year 2013- 2014. my annual salary was 4 lakhs and income taxable after deduction was 218000. since i that year there was a tax credit of 2000. i had no tax to pat. i also did intraday trading i financial year, 2013-2014. my turnover was 250000, and profit was 180000. my business expense in trading was around the same as breakup is here-
laptop depreciation- 15000
inernet charges- 15000
electricity charges- 6000
fees of jobber, as i had hired a jobber who was doing jobbing in my account- 150000for showing cash expense, do we need to produce reciept. i dot have receipt of cash payment. so will it work ? income tax will not ask for producing documet to prove my point ?
Expenses that are paid through your bank account, as long as there is an entry on your statement should be okay. Paying salary in cash is okay, but you will need to have details of who it is paid (maybe corresponding entries in bank statement as well)
Hi nithin /zerodha
can i request you to show turnover report in Q By using bothe 2 methods currently it show 1 method
It has both the methods, download the tax P&L only, it has the other method.
thanks for the quick response
Dear sir
1)is it necessary to show expenses (stt,turnover tax,etc) in profit & loss a/c or we can directly deduct from f&o income & only give the net figure.
2)if one is getting accounts audited,anywhere in audit report he has to give turnover(derived from plus & minus of future ,sale of options,+- of options)
1. You need to show expenses separately.
2. No, there is no specific column for reporting turnover. Turnover you have to determine separately to decide if you need an audit or not.
Dear Nithinji,
Net Salary Income Rs.515K.
Short Term /Loss – Shares Rs. 38K
Bank Interest Rs.24K
I also have Intra day Loss Rs.15k. (Profit Rs.24K and Loss Rs.39K)
How can I make P&L A/c & Balance Sheet for filing Income Tax return in Form4?
i have a profit of 5.5 lakhs in intraday nse and a loss of Rs 3.25 lakh in nse delivery what is my liability my turnover is 80 lakhs
aarif, you can’t adjust your intraday profits with delivery trades. You will have to add 5.5lks to your other income and pay tax according to the IT slab you fall in.
thanks for valuable advise but my c.a. has submitted the speculative profit and setoff business loss and senn in this return now what can I do
Hmmm.. best to ask your CA itself.
Why is loss added to selling value of options to determine options turnover? What is the logic behind it?
moreover why is computation of turnover different for futures and options? Why not apply the same method for both in arriving at the turnover?
Income tax does not provide any rule on how to compute the turnover? So would they accept any method prescribed by say ICAI? Arethey bound to accept?
Rajesh, the ICAI guideline is the only thing out there. Again people decipher the meaning of this differently. I have suggested the two most conservative way to calculate turnover. Turnover is only to determine audit, so as long as you stick to the way you determine it, you should be alright.
Hello Sir .. I am intraday trader from june 2016 . my turnover for intraday till date its showing on Q Tax P&L is 9000 ..I am in Loss of 4000. ..I a Salaried with 1,50,000 per annum .. Do i need to filr incomr tax in March 2017..
Not mandatory, but it is best to file.
Hello , I am a senior citizen with salaried income pension 312000 fixed deposit interest 60000 section 80c 150000 plus 80d 5000 i had short term capital gains of 200000 i.e intradaY AND DELIVERY BASEDequity (not f&o) within turnover less than 1cr .whether i have paid @15%specified tax rate for this gain as investor or as traders amt to be added with my income .kindly reply which one is correct.FORM ITR4 IS OK YA
Ravindran, intraday equity trading is not short term capital gain, it is speculative business income. So you will have to show that and capital gains separately and use ITR4.
Irrespective of turnover (over the prescribed limit) if one trades on delivery based transaction and other wise, can the loss be put under capital loss and avoid tax audit.
Dear Nithin
Is it possible to download these chapters as pdf for offline reading ? I find these extremely insightful and would want to have a soft copy handy.
Yes they are, landing page of every module. Check this: http://zerodha.com/varsity/module/markets-and-taxation/
Thanks Nithin for the great job you guys are doing.
Hi Nithin,
I found the Download PDF button only for some Modules (1, 4, 6,7,8) and not available for 2,3,5 and 9. Could you please provide the PDF for these missed modules.
Thanks & Regards,
R C Vamsi Vardhan
We are preparing the PDFs for these modules, Vamsi. We will put this up soon.
Dear Nithinji,
I am salary person and trading in cash equity inter day & delivery basis and cross turnover more than 2 crore net loss 2 lac in short term and net profit in inter day trading 0.40 lac please suggest audit required
Yeah, best to get an audit done. Like I have explained in another chapter, quite simple it is.
Dear Nithinji,
In inter day equity trading both side buy and sell value include in my turnover or only difference amount add in my turnover please suggest
If it is delivery based equity trading, sell side value gets added as turnover. Btw, if you are showing equity delivery trading as capital gains, there is no need to calculate turnover.
Ah.. you meant intraday trading. For intraday, difference amount (gross sum of profit and losses) adds to turnover.
Dear Mr. Kamat
I do delivery based trading and my turn over is more than Rs 4 crore. I show capital gain / loss. Is it okay and do I need to do tax audit. Also can in this case show brokerage as expenses while calculating capital gain/loss.
If you are showing this as capital loss, then no question of audit. Yes you can add this expense as cost of your holdings.
Hi,
From the above module I have understood that declaring turnover trade-wise is a more compliant way. But I have a few queries:
1. While I was going through the Tradebook, I noted that though I put only 2 order numbers that got executed, there more than a 100 trade numbers. So just wanted to clarify If the above definition of turnover is for every order that I put or for every trade number that the system throws/executes?
2. Also needed clarity as to how to disclose turnover when there is part-purchase and part sale.
Ex: Buy 4000 shares of Idea at 80
Sell 1000 shares at 79
Buy another 2000 shares at 78
And final square of 5000 shares at 81
So, in the above example, my net profit for the day is = (79-80)*1000 + (81-80)*3000 + (81-78)*2000 = Rs. 8000 (this will also be considered as turnover(scrip-wise))
But, if I take order-wise, my turnover would be = (80-79)*1000 + (81-80)*3000 + (81-78)*2000 = Rs. 9000 (this will be turnover trade-wise).
Hence, there is a huge difference. Kindly clarify.
1. Order or trade doesn’t matter. If you combine them or look at it individually, the turnover number will still be the same.
2. Firstly, if you are doing equity delivery trades and showing them as capital gains, there is no need to calculate turnover etc. You have calculated both correctly. You have done a mistake in calculating value, but logic is correct. Both cases it is Rs 8000 only.
Hi Nithin,
Thank You so much for the reply. But please note, in the 1st case I took (79-80)*1000 because I am calculating at a SCRIP LEVEL. Therefore, If I have also traded for any other stock, I will take the absolute favourable/unfavourable differences of the two scrips as my net profit/loss.
But, when I take at a TRADE LEVEL I am taking the favourable/unfavourable differences at a “TRADE LEVEL” and not at a “SCRIP LEVEL”. Hence, there comes a difference of Rs. 1000 in the above two cases.
To simplyfy the above,
Idea stock trades: Buy 1000 shares at 79
Sold the above at 80
Again Buy 1000 shares at 81
Square off loss at 80
So net profit (at scrip level) = 0
But, net profit (at trade level) = 2000
Like I have explained before Aditya, you can either look at scrip level or trade level to calculate turnover. The most compliant way is trade level.
Hi Nithin,
Just to give a background, I was trying to see that difference (between scrip level and trade level) in the Zerodha P/L Report or the Tradebook. So I tried putting pivot tables and all. But I concluded that only scrip level is possible.
So in my 1st example above, I noted that there is a difference of Rs 1000 in the turnover (Rs. 8000 at scrip-level and Rs. 9000 at trade level) and was trying to compute turnover at “Trade level” as you mentioned, but failed. I had to manually do it in excel to identify the difference. So is it possible to compute turnover at “Trade level” using the Zerodha Reports?
*(As per my understanding, the difference of Rs. 1000 is arising only because of the fact that in one case we are calculating the absolute favourable and unfavourable differences at a scrip level and in the other case at a trade level).
Go to q.zerodha.com and tax P&L, we have give a tradewise turnover report there. Check this post.
How to tally our ledger with our P&L statement.total of obligatio-net opening balance +net closing balance. Kindly clarify. How you calculate p&l in q back office.
Download the tax P&L report on Q. Download your ledger. So starting balance of year + fund deposit-withdrawal+sale of shares held from before-purchases of shares this year = starting balance of the year + P&L for year. P&L on Q is calculate based on trades and on First in first out principle.
Kindly clarify you have mentioned starting balance of year + fund deposit-withdrawal+sale of shares held from before-purchases of shares this year = starting balance of the year + P&L for year. P&L on Q is calculate based on trades and on First in first out principle.Both side it is starting balance of year.Ithink one side shold be closing balance.
ah yeah, typo, closing balance on the right hand side.
Above formula is not working. I have requested several times and called at support, but still awaiting answer. Kindly send me my computation for current year or last year applying above formula to understand and deposit tax if any at my mail address.
ds1292
Shobha, you will have to do the reconciliation yourself, we don’t have a tool/utility yet for this. You can pull the tax P&L yourself from Q. When doing recon, some things to remember. IF you have open option positions on starting or ending date, you have to add premium value if long options and reduce if short options on both the dates.
Hi Sir,I had a total income from f&o and other source is only Rs 3lakhs.My turnover was very low as I never traded option.(10Lakhs turnover)
After deduction,I have NIL tax.I filed ITR4 under section 44AD.
But I got a notice of Defective Return.The message was-Please upload Balance Sheet and P&L statement.
I wonder,as I dont fall under audit case,why IT dept want me to upload BS&PL statement.
It could be because you haven’t filled your forms correctly. Best to show it to a CA.
Hi Nithin,
Can one file ITR4 under No Accounts option if one is eligible for Sec 44AD (presumptive income), or does one compulsorily have to file ITR4S for 44AD cases? ITR4s does not have provisions for capital gains declaration.
Thanks and Regards
Yes, you can file using ITR4
In TAX P&L report under short term equity turnover, LiquidBees (Liquid ETF) is getting included. For the purpose of turnover calculation to find the audit requirement – Is it correct?
If you are showing these as capital gains, no need to bother about turnover. This is showing in turnover report for those who want to show this as a business income. You can disregard it.
sir,little confusion,we are filing return under 44ad means we have to upload balance sheet,P&L??
No need, if you are using ITR4S
Need Kind Help … I received “Limited Scrutiny” Notice under section 143 (2) of income tax, for AY 2015-16. Notice asked me to present any evidence related to Securities transaction & Derivative transaction done by me. I did few delivery based share transactions (resulting in ST Capital Gain of Re 32,000/-) and mostly Futures & Options Transactions (resulting in net Loss of Re 4,80,000/-, from total per scrip based Turnover of Re 80,00,000/-). I am salaried person with net income of Re 10,00,000/- and complete TDS for salary is deducted by employee. So zero refund tax return was files by me, without showing any Securities transaction. My queries are –
1. As my Turnover is less than 1 crore, and there is no Tax liability, Tax Audit under Sec 44AB was not required, Right ?
2. What all documents should i present to the tax officer ? I do not any any books of account. I can get P&L statement and Ledger statement from my broker, and my linked bank account statement. Will it suffice or any other document might be required ?
3. Will there be any Penalty on me ?
Kindly reply all 3 queries urgently. Thanks
1. Since your salary is 10lks, you would have had tax liability, which I guess your employer has paid on your behalf. Theoretically, audit would have been required.
2. Yeah get those statements, put it all up in such a way that you can show that you are not evading any taxes. Essentially these statements itself are books of account.
3. No penalty since you haven’t evaded any taxes.
I trade in futures,STCG, equity turnover is less than 1 cr and margin is PROFIT margin is 8%
Can use ITR-4S 0R need ITR-4 Want to show as business income
You can use ITR 4 itself. You will not be able to show intraday equity on ITR4S.
Hi Nithin,
For business income, I have a query regarding the transaction charges, STT etc. Kindly help me to understand.
—
1) Let us say, I bought an option of 1000 lot size at Rs 5. So my buy value is Rs 5000. The transaction charge including brokerage, SST etc. everything is X. Then I sold it at 6, so my sell value is 1000 X 6 = Rs 6000. The transaction charge (all inclusive) is Y on the sell side. So, my profit is (6000 – 5000 – X – Y). Is this correct ? Or should I only take (6000 – 5000) as my profit ? I am asking this from Income Tax perspective.
2) In the above example, what is the Turnover value ? Let us say the profit is P (whatever value is comes from above calculation, let us call it P). So my turnover will be (P + 6000 – Y) or just (P + 6000) ? Please clarify.
3) I have included the Brokerage, STT, Education cess bla bla everything in the “transaction charge”. Hope all these components are equally eligible for deduction wherever applicable & no difference among these individual components from Income Tax perspective. Kindly confirm if this understanding is correct.
—
Thanks a lot in advance for your help !
1. Income side you need to show (6000-5000), expense side show all charges including transaction charges. Taxes only on net profit
2. Turnover will be your profit/loss, in this case 1000.
3. Yes, as business income, all of them can be shown as expense.
Thanks Nithin for your kind reply. I could not get the answer to Qs 2 and it now raises 2 sub-questions based on your reply. Please help:
2a) You said Turnover is only the profit (6K – 5K). But in this article it is mentioned that the option premium which we receive is also to be included into the Turnover. In fact you have given an example – QUOTE “In options, if you buy 100 or 4 lots of Nifty 8200 calls at Rs.20 and sell at Rs.30. Firstly, the favorable difference or profit of Rs 1000 (10 x 100) is the turnover. But premium received on sale also has to be considered turnover, which is Rs 30 x 100 = Rs 3000. So total turnover on this option trade = 1000 +3000 = Rs 4000.” UNQUOTE. So in my case, it will be (6000 – 5000) + the premium received on the sale side (6000) i.e. Rs 7000 is my Turnover. Is that not correct ?
2b) While calculating the Turnover, we cannot consider the transaction charges, STT, brokerage etc. is it ? Do we need to only consider the script prices excluding all transaction charges ? In the example I have given, do we need to completely ignore X and Y amounts (transaction charges) while calculating Turnover ?
2 a. I didn’t realize you were asking for options. Yes, in case of options, the most conservative way of calculating turnover will be the way I have mentioned (Rs 7000). But many people out there use only Rs 1000. Best to consult your CA for this.
b. Yeah you can exclude all charges when calculating turnover, gross profits and losses. Your charges will anyways add up on your expense side on your ITR form.
Sir,
I am an employee and trade in F&O segment keeping my equity holdings as security. Due to higher tax problems, I wish to transfer my entire equity holdings (~ 10 lakhs under current rate) to my wife’s (housewife) DP account and trade in her account. Can I transfer my shares under heading ‘Gift transfer’ to her account ? If so, will it attract any tax? Please clarify.
Yes you can, and no tax.
Hi Nithin,
I understood the calculation for the intraday (speculative) and delivery based (non-speculative) equity transactions. But what about BTST or STBT situations ? In BTST, we actually sell the shares before they are credited to our demat account. So will it be considered as Speculative trade or Non-speculative trade ? Hope the same logic would follow for STBT, otherwise please clarify that part as well.
—
Thanks in advance.
Hmm.. this is tricky.
When you do BTST, Shares bought on the 1st day gets credited on T+2 day to you, Shares sold on the 2nd day then gets debited from what was credited. So even though for u it seems there is no exchange of delivery happening, but there is. Similarly with STBT. This is debatable, but can be shown as non-speculative or capital gain. Best to consult a CA.
Thanks Nithin for your reply.
—
I think in such case, it is actually beneficial to show the BTST or STBT as Speculative trade. The reason is, in speculative (intra-day), we calculate the turnover as the absolute value of the profit or loss. Hence the turnover will be less. The chance of requiring an audit is less. But if we show it as delivery-based trade, we need to show the sell-value as the turnover – which is obviously much high. So the profit % may become less than 8% after adding all such trades. So showing them as speculative trade makes more sense. What do you think, please suggest.
—
Yes, by showing the BTST or STBT as speculative, we also lose the chance of offsetting the loss against non-speculative trades, but at least in my case I am always in net profit. So that part is not worrisome to me. The 8% funda for audit is really driving me crazy. Although I am making good profit, I am having a tough time to maintain that 8% formula.
Sir?
I have read about BTST trades, since they fall in a grey area I tend to stay away!
But, what is this? STBT?
1. Is STBT a thing?
2. Does Zerodha allow STBT?
3. Scratch that last question, does SEBI, NSE, BSE etc allow STBT?
Sort of shocked.
Thanks.
STBT works only if you have the stocks already in your demat account. So you can sell today and buy tomorrow without stock going away from your demat.
Hello,
Sir according to your answer STBT feels like a regular order. I mean usually we buy and sell demat stocks then next day we buy again. I don’t see why it’s called STBT.
I was under the impression that STBT meant that you had 0 stocks of a specific scrip and shorted. It went negative and could buy next day. I take it this theory is wrong then?
Thanks.
hello Nithin
im intra day trader having loss of rs. 30000 in cash and loss of rs. 36000 in future , turnover is about 9cr. …. and having income from other source is about 3 lac. for FY 2015-16 . IM going to file IT Return now . I know it is not possible for me to carry forward my losses , so what to do now …. to mention my trading details in IT return or just show income of rs. 3 lac.? pls. clarify
Hi Nithin
I have received notice from income tax under section 139(9) mentioning error 14. The error says that: ” tax payer has entered negative number in gross profit or net profit in si no 51b and 51d of part b of profit and loss account”. Probable resolution offered is :Assessee has claimed loss under the head profit and gains of business or profession, however he has to fill Balance sheet and Profit and Loss account. Incase assessee’s falls under section 44AD assessee also has to get his books of account audited if his income is less than 8% of the gross
receipts.”
My turnover was 1,83,000 (which I didnt mention in the return) and loss was -4500 rs which I mentioned in the gross profit section. My total income is less than 2,50,000.
1.Do i need to get audit done? Which I think is no, but still want to check if the rules change after section 139(9) error
2. If i dont need audit what is the resolution in the current situation ? Just submit turnover details or Also submit complae balance sheet and profit loss account.
Thanks in advance.
BEst
Siddharth
1. I am guessing you have filled the ITR form wrong. You don’t need an audit if total income is less than 2.5lks and turnover of 1.8lks.
2. You can just refile your ITR. Consult a CA to do this.
I am consulting one, but you know awareness on these subjects is really scarce.
I filed ITR 4, do you think it should have been 4s?
ITR4 is good, I am guessing the way you have shown gross receipts and sales must be wrong (essentially the turnover).
I bought 2 lots Banknifty 19000PE @ 110
and sold 2 lots @ 135
How much is my turnover in this example sir?
your profit on the trade = 80*25 = 2000 + Selling premium = 80*135=10800
Some people only take the P&L side, so only Rs 2000.
It is upto you on which route you want to take.
Sir,if I take 2000rs as a turnover then I will never fall in a audit case.But If I consider adding selling premium,then I will easily cross that 2Cr mark as I may take 8-10 intra trades.
Ok,my query after reading this whole article by you and a abv reply is that-
If I consider 2000rs as turnover and file a return,dont you think IT dept will cause a trouble for me?A fine for not maintaining books of account and all that?
Ajit, IT department doesn’t care if you get books audited or not, they care if you are paying taxes or not. Also, IT department doesn’t have a guideline on how to calculate turnover, the link I have shared is from ICAI
Hello Sir,
1. If the IT dept. does not give any direction in regards to calculating turnover, then why don’t we just take Rs 2000 (talking about above example) as turnover? Not to evade any taxes but to make calculations simpler? Could it attract a heavy penalty?
Unrelated but please answer,
2. A. Sir, why is all this so complicated? why cannot turnover for all be calculated the same way as it is calculated for equity?
i.e. a method common for all.
B. Why are there different tax slabs for different segments? Why not only one?
Thanks.
1. ICAI has put up a guideline of sort. I have shared the link in the module above. As long as you aren’t evading taxes, I don’t think penalty is of an issue.
2. hmm… 🙂 I hope someday the IT department sits down and tries simplifying all of this. More people will file their returns then.
@ nitin : which is good platform for IPO analysis& discussion? any blog or site or something?
Where do I find the journal entries for equity intraday trades, and F&O for recording the same?
Hmm.. didn’t get what you are asking for. If you login to your trading account, you will get P&L, ledger, this is all you need.
sir,I have a question,suppose
1)speculation income =5.5lk gain
2)non speculation income =6.5kgain
3)stcg =8.86lk loss.
do i need audit done as total turnover crosses 5cr,but overall income is loss as i have no other source of income other than trading or i show intra and fno as business income and delivery based equity as stcg.pl advice me sir
Best to get your account audited. Also if you are trading actively you should show STCG as business also. Unfortunately you will not be able to setoff speculative income (intraday equity) with other non-speculative losses.
dear nithin thanks for prompt reply but here regarding offsetting speculative and non speculative bussiness income you had clearly mentioned that speculative(intraday equity) loss can not be offset with non-speculative gains but speculative gains can be offset with non speculative losses.regarding audit can i have as these figures are of FY 2015-16 and till now i have not filled IT return.thats why asking you how to show this trading activity in IT return either show it as speculation and non speculation(fno) as bussines income and delivery based trading as STCG.As for not able to carry forward this loss i have left trading as i have no money left for trading as this ruined my life.pl help me out to sort this problem.
Hi Dilip, since the last dates for filing returns are over, you cannot carry forward the loss. Best to file ITR even if you are in losses as you seem to have traded actively. You can take an aggressive approach to calculate turnover, if it is less than Rs1 crore, no audit required.
hi nithin,by aggressive way what you want to say.if i show intra +fno as business income then i have to pay taxes on business income and total turnover will be way below 1cr mark as delivery based transaction will not be counted there if i show it STCG but i will escape from audit penalty thats why asking you which way to go so that in future i have not to face any difficultes as i left trading forever.pl help me in deciding with detail.thanks for your prompt reply.
There is no clear guideline on how to calculate turnover, what I have shared is what is shared on ICAI guideline book. Also there is nothing called audit penalty, audit costs you little extra money. I have explained different ways in which we can calculate turnover, you can take a call on this.
if i show turnover over 1cr and as i can not get book audited as time is lapsed then as per rule ito will put penalty for non audit of books under sec 271b though i am in loss
You can get books audited even after last date. You can’t carry forward the losses if not filed within time.
Hi Nithin,
Need your kind help please. I have done several trading in FnO. The net loss is 26K. Turnover is less than 1 cr. But since it is a net loss, I need to get my books audited. The cost of audit and the associated hazards – seem to be relatively high. I am in Kolkata and no reputed firm work here (they are costly also). I have spoken to 2 such firms but both of them denied to work for Kolkata-based client. I can take help from local CA, but unfortunately CAs think themselves as god and they take full advantage of the penal threat system. I want to avoid them as far as possible.
.
So I decided to show a net profit of 8% instead of the loss. The turnover is 4 lakhs. So 8% profit will mean 32K profit. I am in 20% tax category so I have to pay 6.5K which is much lesser than hiring a CA (and associated hazards). Now I need to figure out the technicalities where I need your help.
.
My loss is actually coming out of 3 specific trades. If I remove them, it is a net profit and higher than 8%. However, I will not entirely remove those trades. I will enter them with manipulated sell price so that the turnover remains almost equal but instead of a loss, it will show a profit. So overall my turnover will remain same but the outcome will be net 8% profit. So audit won’t be needed.
.
Question 1. What is your suggestion as a friend ? Does it look ok ? Or do you think I may face a problem later for false reporting ? Please share your thought.
Question 2. Do you know what data is reported by the exchange to the income tax department ? Do they share only turnover or the profit/loss as well ? Any details on this will be helpful because that data will decide whether the manipulation I am doing will be easy to catch or not.
1. hey you don’t have to remove trades or manipulate anything. While filing ITR, you are not asked for trades. You can enter any profit you want, there is no problem if you show more profits. Problem is when you evade tax, if you pay more taxes, no one has a problem 🙂
2. Exchanges share trade details. Like I have said earlier, as long as you file your returns and show this trading income (profit or loss), you are okay.
Nithin,
Thanks for your clarification. 1 more question. While doing the turnover calculation, I have followed your approach (specifically for Options you said it is the profit/loss + the total premium received on sell of option). Since I have incurred net loss and I am showing a net profit of 8% to avoid the audit, it will benefit me if the turnover is less. So, for options, if I only take the profit/loss absolute value as the turnover (not including the option premium), it is better for me. I understand that the IT dept does not have any clear guidance on this. Do you suggest that I can take a chance in this ? Have you personally come across cases where someone showed the turnover for options in this way and the IT dept raise a question ? What is the route most of the people in your circle are following ? Just in case you can suggest something (I know you cannot say anything for sure, but just your idea).
.
Thanks as always !
🙂 hmmm.. tricky to answer on a public forum. What I can tell you is I haven’t come across any case where there was an issue because someone showed lesser turnover.
hi zerodha
I’m a full-time trader.I have the following query regarding taxation and auditing.
Net Profit (Intraday + Short Term trading) = Rs. 2,37,117
Total Turnover (Intraday + Short Term Trading)= Rs. 57,00,162
Recurring Deposit Interest = Rs. 43,000
Therefore total Income = Rs. 2,80,117
Now my queries :
1. tax I have to pay = 30117 x 10/100
= 3011.70
Rebate Rs. 5000 if total income less than Rs 5 Lac. As my income is less than 5 Lac. Therefore tax is Nil.
Or
30 % flat tax on Rs 280117, as one of the CA whom I consulted told me, that I have to pay 30 % flat tax if
I show my income as Business income. Kindly clarify me, if I show my income as business income then
my tax slab will be 10/20/30 or flat 30. Trading is my only source of income.
2. Do I have to go for auditing as my income is more than 2.5 lac and profit is less than 8% of turnover.
1. Of course you can get a benefit of tax slabs. You wouldn’t have to pay any taxes.
2. Hmm.. you could look at a more conservative way of calculating turnover. Make sure to file your ITR even if no taxes have to be paid.
Hi Nitin,
Thanks for this initiative… Keep it up
In your experience how much does a CA charge to Audit tax book for a salaried person who has <500 transactions in F&O and intraday equity and yet in loss 🙁 …. in Mumbai region?
hmm.. it depends, but I am guessing atleast around Rs 6000 to Rs 7000.
hi nithin, can deduction of demat charges,as a expense,claimed against STCG?
Yes, can be shown as cost of improvement.
hi nithin,pl also suggest some other expenses which can be shown for STCG.
hi nithin,can we show as bussiness expense for transaction charges,stamp fee,service taxes paid on stocks while showing intra +fno as bussiness income and STCG(Delivery based trade).if no then how to classified how much amount is for intra and how much amount was for delivery as it is shown as cumulative in contract note or broker report.i mean to say can we show all expenses occured except stt as bussines expenses whether it was on intra or delivery based.i am showing myself as trader(for intra and fno) and investor(for delivery based trade) both.demat charges paid for delivery of shares from my dp a/c can be shown as expenses against STCG.Pl reply sir.
For capital gains, you can only show cost of improvement (brokerage, exchange charges, DP charges etc, all related to purchase on exchange). But for intraday and F&O trading, which are business, you can show all charges (including STT) as expense (ur mobile, newspaper, etc etc aswell).
Hi, It’s a nice article and all the associated concepts are lucidly explained. However, I’ve a query with regards to calculation of turnover in Futures. Sure, I know the difference between trade-wise and scrip-wise turnover calculation. But I think, there is another level of clarity and that is lot wise turnover calculation. So, lets say, you get Long in a stock futures with 10 lots. Now, it’s not necessary that you’d square off all the lots at the same time. There would be things like pyramiding and so on. So lets say I square off 3 lots at some price, 2 at some other price and 5 at some other price. Then how to calculate turnover? Should I now calculate it lot wise or should I take the average of all the 3 sell trades and then calculate the profit/loss for 10 lots? An answer will be well appreciated.
Lot wise is trade wise isn’t it? Every time you are adding or removing lots, you are essentially executing a trade. So it is as good as tradewise.
This is in continuation to my above query. So having said that, as to my understanding, there are 3 ways to calculate turnover:
1.) Scrip Wise (Most broad way)
2.) Trade Wise (Moderately detailed)
3.) Lot Wise (Molecular)
What do you suggest?
Lotwise and tradewise as I said is the same. You could do this anyway you want. Maybe whatever best suits you. But whatever method you use, stick to that in the future as well.
Thanks, you’re right. It’s the same thing. One more thing concerning income booking. The income gets booked in the month of contract settlement (calender) or in expiry month. Lets say, On 28th March, I buy 2 lots of a futures contract of April’s expiry and square 1 lot off the same day and carry 1 lot till April. What will be the modus operandi here?
It is upto you, either consider MTM profits or booked P&L. I’d say consider all positions as closing price of 31st March to determine P&L. Next financial year you can start off with starting point as closing price of 31st march.
Nithin Sir,I got Defective Return notice.My return was filed under 44AD,but the nature of business code was selected different.My CA didn’t notice it and replied to defective return.IT dept wanted BS and PL statement.
I think,my response to Defective Return will be rejected and my return will be treated as invalid.
My query is-will I attract any penalty now for not maintaining of books? I had nil tax after deduction.Income was just 4lakhs.
My CA is not accepting his mistake,so asking you this query.
will I attract any penalty now for not maintaining of books?What will be the next step by IT dept in such cases?
thx
There is no penalty for nonmaintenance of books in your case. As long as you haven’t evaded paying taxes, there is nothing to pay/worry. You might have to go meet an ITO and explain that you haven’t evaded taxes and this a mistake.
Nitin Sir,
In a single Trading Account, can I trade both in F&O and also invest for long term in stocks. Is it allowed to get long term capital gains from investment in Stocks.
Yes.
i am an NRI , I have Mutual fund investment on repatriable basis. Doing trading with Zerodha. How I will show my total income file filing. Nri excepted from tax
Hmm.. you have to show under capital gains on your ITR form.
hi nithin sir
For calcultaing bussiness turnover in intrday case it aggregate of both positive and negative difference.now question arises whether it is derived from gross buy and sell or after adding brokerage charges
When we carry forward the losses, then does these losses also include the charges (like STT, Brokerage) or only the absolute loss?
Including all charges and costs.
Hi Nithin
In the calculation of turnover, first we are calculating profit or loss, and then we are again taking the trade value of the sale. Doesn’t that mean we are accounting the profit/loss twice? I mean if we have to consider the trade value of the sale, then don’t we have to adjust it for the profit or loss already considered?
As I have mentioned, that is the most conservative way of calculating. You can use only the P&L itself.
Is this statement correct that-
If income comes under professional income then you are required to maintain books of accounts(AY 2016-17 onwards)
Stock Trading fall under the head Professional Income,be it Speculative Income or F&O Income?
That means we have to do audit even if the profit is just 2 Lakhs
Pls Confirm.
Stock trading is considered as a business income. Audit required only if turnover more than 1 crore or if profit less than 8% of turnover.
Sir, I have salary income of 2.5 lakhs . I did f&o turnover of 35 lakhs with profit of 1.5 lakhs . So
1) do I have to do tax audit ?
2) if yes , can I get tax audit exemption by investing in NSC for 1.5 lakh to bring net taxable income less than 2.5 lakhs ?
3) or can I get tax audit exemption by showing profit of 8% ( I have not done any equity trading ) ?
4) if no, than can I do some equity trading for 50k till 31 March so that I can get tax audit exemption by showing 8% rule ?
5) if (4) point is applicable than I have to do intra or delivery based equity trading ?
Sir, please guide me .
Thank you.
Sir,if a trader is not liable to maintain accounts as per 44AA or not fall under 44AB to undergo audit,then while filing a return he/she has to upload Balance Sheet and P/L Account details?
Sir,this query pls reply
No need to upload balance sheet, but you have to fill part B of balance sheet which is the no account case.
sir, My turnover is 1.10 crs ( I trade only options). After calculating the brokerages and stt I had a loss of 23,000 and I had no other income. Do I need to get audit for this or I will just file the return.
You will need as your profitability is less than 8% of turnover.
Nithin Ji,pls clear my these 2 doubts-
1)If the profit is less than 8% of the turnover but overall income is in excess of the exempted slab rate (2.5 Lakh at this moment) the audit is required or not?
2)If the profit is greater than 8% of the turnover and overall income is also above 2.5L,do we need audit or not?
Thanks
Pls consider Turnover is 10L in 1) and 2) to clear my doubt
1. Yes
2. No
1. Required
2. Not required. But you will need it mandatorily if your total turnover for the year is more than Rs 1 crore.
Last doubt on this series,pls do reply-
I read above that-“if you declare profit equivalent or more than 8% of turnover, no audit is required…”
Here the word declare means,we dont have actual 8% profit made,We are just making it up to save ourself from audit,am I right?
Say,My Turnover is 20L,8% of 20L=Rs 1.60L
But profit is less 8%
Now,I’m declaring Rs 1.60L as a profit+Rs 90,000 as FD Interest and filling a return.
In such a case do I need to maintain books of account?
Will AO/ITO will trouble me asking ki Rs1.65L profit kaise aaya?
Because in actual legder,P&L statement,you can clearly see my loss.
Thanks Nithin Ji
Aja, there is no issue in declaring more profits. You have if you reduce. So should be alright to do that. But do speak to a CA once.
Hi Nithin,
I am having 2 trading accounts, one with Zerodha and another with ShareKhan. I recently opened account with Zerodha. I have one long turn gain of Rs. 1000, Rs. 10000 gain in short term in ShareKhan and I have Rs. 1000 as both speculative and short term gain.
I am a software professional.
Here my doubt is, which form should I have to fill and can we deduct brokerage charges from gains?
Thanks in advance!!!
Regards
Manohar
ITR4, yes you can deduct brokerage and all other charges. Do go through the entire module.
Wondering why there should be any auditing at all since all transactions go through NSE and everything is tied to PAN. A requirement for auditing in this case, especially in the case of losses (since no expenses, etc. can be claimed) is similar to requiring that the TDS from banks have to be audited.
hmm.. maybe some day.
Sir, The total income should be less than 2.5 lakhs to avoid tax audit. Here the total income is ( all income heads less 80c deductions or only all income heads )
all income less 80c
Sir , if the income ( salary+FD interest+f&o profit) = 3.9 lakhs & 80c deductions = 1.5 lakhs .
F&o turnover < 1 crore & profit < 8 % of turnover .
Tax audit required or not ?
If profit <8% of turnover, you would need an audit.
how to arrive at the assessable turn-over in future trading, in context of income tax
I have explained in the chapter above.
Hi Nithin
You have mentioned that “if your turnover is less than Rs 2 crore (was Rs 1 crore until FY 16/17) and if your profit is less than 8% of turnover an audit is not required if your total tax liability for the year is zero.” If we have only derivatives income and the overall profit is less than 8% of turnover, and also less than 2.5L slab, do we get an exemption from getting the audit done? Is there any clause which states this? Kindly clarify a bit further on this please.
Sai, if turnover is more than 1 crore and profit is less than 8% you need an audit. Check for section 44 AB and 44AD. If profit is>8%and turnover less than 2crores, no audit required.
Sorry forgot to mention, Turnover is LESS than 2 Cr.
Profit also LESS than 8% of Turnover, and LESS than 2.5L slab limit.
But, sir ( salary+FD interest+f&o profit-80c deductions) = 2.4 lakhs . Is audit required ?
Depends on your turnover also. If it is more than 2 crores and F&O profit less than 8% – yes, if more than 8% No.
Hi Nithin,
Thanks for your tutorials. They have been helping me a lot.
Quick query:
Fno Turnover = 25 lakhs
FnO P/L = -5 lakhs (all loss)
Other income = 50 thousands
Total income = -4.5 lakhs (loss)
Is Tax Audit required under ITR4?
Thanks again.
F&o turnover < 1 crore & profit < 8% but ( salary+FD interest+f&o profit-80c deductions) = 2.4 lakhs .
Now audit required ?
Yeah required.
Hi,
I am trying to find my turnover and capital gain from Q back office to pay tax. I do only equity trading, I clicked Tax p&l and for the fy 16-17 it is showing only the total charges, all other fields are displayed as N/A. I have some short term profit and intraday profit but i am not sure about the exact amount. I am not sure why the values as coming as N/A is this a bug in your software? or am i doing something wrong here?
Please help me 🙂
Thank you
Satheesh Kumar
Hi Nithin,
My salary income for the F.Y.16-17 is Rs.2,75,000/-
My F&O turnover during the year was around Rs.30,00,000/- and my loss during the said period was Rs.10,000/-.
Will I need to maintain books of accounts under section 44AA and get my books audited under section 44AB just because of this Rs.10,000 loss?
Hi, I have a query regarding P&L tab in Zerodha… I have traded in MIC daily from last 1 week making a profit somewhere between 250 to 900… When I checked the same in P&L then I found my Realized profit is 3550 but Net Realized profit is 305 only.. Why is such a difference. Please explain.
I am guessing it is because of the charges. Even though our brokerage is extremely less, government taxes etc are in %. So if you do turnover it will add up. Check this charge list: https://zerodha.com/charges
Dear shri NITHIN KAMATH,
PRESENTLY I do ONLY & ONLY…CNC & SELL ONLY when SHARES reach T2 ( DEMAT ).
I show this INCOME as “”SHORT TERM CAPITAL GAIN “” & pay TAXES accordingly.
NOW,,,in ZERDHA UNIVERSITY…CHAPTER 6…..
IN DELIVERY BASED TRANSACTIONS…you have mentioned…this STATEMENT as follows :-
ALSO…there is NO NEED of an AUDIT if you have ONLY CAPITAL GAINS IRRESPECTIVE of TURN -OVER OR PROFITABILITY.
So…does it mean,I can do this sort of TRADING upto even very high turnover like TEN CRORES without the NEED for any AUDIT OR BOOKS OF ACCOUNT.
This SHORT TERM CAPITAL GAINS is …..”” MY ONLY INCOME “”…..I have NO OTHER INCOME.
please clarify whether I will need any AUDIT if I do BIG turnovers like TEN CRORES.
thanks
TUSHAR MODY
As long as you are showing this as capital gains, there is no need of an audit as this is not considered business income. But if you start doing this as if it were your primary business, maybe you should start showing this as business income and not capital gains. In which case you will need an audit. I don’t unfortunately have a concrete answer if you should show it as capital gains or business income if you are doing a lot of turnover. I’d advise to show it as business income and get audit done.
Sir,
First, I want to thank you for this elaborate tutorial. I have certain questions regarding Intraday Equity Turnover calculations, please clarify.
1: I traded Andhra bank multiple times, and getting confused, what is the turnover? example of transactions are given below for single contract note:
a: ANDHRA BANK Buy 100 @ 52.10 = 5210
b: ANDHRA BANK Sell 492 @ 52.55 = 25854.60
c: ANDHRA BANK Buy 400 @ 52.05 = 20820.00
d: ANDHRA BANK Sell 98 @ 52.50 = 5145.00
e: ANDHRA BANK Buy 90 @ 52.40 = 4716.00
For this contract note(Transaction settled other than Delivery): 590
How Should I calculate the turnover here as transactions are overlapping?
Thank You,
Raman.
I am Newbie. Well I tried calculating the difference of sum of amount of all buy transaction sum of amount of all sell transactions once, then once by splitting transactions step by step, The result came to be same as 253.60. So, this 253.60 is turnover for these Intraday transactions. Am I correct?
Yes, different ways you can calculate turnover. But you can use this way too.
hi nithin
thanks for this wonderful module . i have some confusions :
1 . in profit & loss of ITR3 form , should i also include bank interest in other income . and separate it in schedule BP & also show it in schedule OI income from other sources section of ITR ?
2. regarding section 44AD : 6 % profitabilty of turnover means : net profit after taking out all expenses ( telephone , rental , brokerage etc ), depreciation expenses ? if so it would be harmful to include expenses as they may reduce profit & thereby inviting CA audit cost
or its gross profit ( 6 % direct cost of purchase ) ?
Guess you got your reply on tradingqna.
thanks 🙂
sir,
Since the TURN OVER limit is …. NOW…….. 2 CRORES…
the CARTOON at the TOP of the CHAPTER SHOULD BE CHANGED with a GIANT 2 CRORE………???????
REGARDS
TUSHAR
Sir,
I trade in FNO & Cash segments.
My F&O turnover is < 2.0 cr;
My F&O profits are < 8% ;
STCG in equities : 15000
My total income < 2.5 lakhs
From the information provided in the chapters, I understood that I have to file ITR-3 for the AY2017-2018 and there is no need for my books get audited as I have business income along with STCG and as my total income is less than 2.5 lakhs. Request you to confirm.
Yes
Hello Nithin,
1. I have total yearly income < 2.5 lks
2. Loss in FnO 2.8lks
As per my understanding i don't need audit, but a representative from cleartax said if income from business or profession is negative then audit is mandatory.
Is it true? am i need audit?
Depends on your turnover, if it is less than 1 crore and your total income is below 2.5lks, not mandatory.
Hello Sir
I have been trading for 3 years now, recently my CA suggested that I should open a current account since I am doing trading as a business. Also I received notices from income tax department in the past regarding high value transactions. What is your view on that? If I am opening a current account as an individual (sole proprietor) , can you also suggest what business proofs are applicable to me while opening current account since usual proofs like service tax registration or shop act license( gumasta license ) are not applicable to me. I apologise if my question is a little vague but I hope to learn from the traders associated with your firm who may have faced similar problems in the past.
Pranay, if you are only trading and CA is asking you to open current account, i don’t think it makes sense. Btw, we don’t allow individual investors to map their current account to the trading account.
Dear Nithin,
All this is awesome useful Info. To get my trading activity audited, CA is asking for Rs. 17000/- This after I incur a trading loss of Rs. 5 LAKHS. Any suggestion on how do we save this money?
Regards,
hmm.. no real way around this. If your turnover is less, you can declare 8% of turnover as profits and get away from audit. But if turnover is more, this wouldn’t make sense as it would mean paying taxes on those notional profit declared.
Hi Nithin,
If I am salaried person who also do delivery based trading, sometimes short term and sometimes for long term purpose and also indulge in Options and Future. So in that in condition he has file ITR 4 form. Right ? I will consider myself as Investor and is there any field in form which ask if you are a trader or investor ?
Thanks
ITR3 from this year. You can show all investing gains under capital gains, the rest as business income.
Sir, I had got my books audited last year. Do I have to get it done this year also. I have traded in F&O, but my total income is less than 2.5 lacs?
thanks
Vishal
How much turnover?
Turnover is less than 50 lacs
My CA(Taxman.in) is telling that the total turover in Equity intraday trading and equity derivative trading is by summing the sale value which is different as you have mentioned. Does that makes sense to argue with him??
But since incurring losses i have to go for tax audit so its better to go for it(He is charging 8.5k+service tax). Any recommended for CA who specifically handles tax filing cases for share traders like us would be highly appreciable.
Sale value is in case of delivery based trading. You can send the link to the ICAI guideline I have mentioned in the post above. If you mention the sale value, the turnover will get magnified quite a bit.
Dear Nithin, please send the link link to the ICAI guideline again since the link isn’t working. Surely calculating sale value it goes from 14lak to 130 cr… also let me know how the turnover tax is calculated for each contract ..is it 0.0001% of the of pay in and pay out or net total ?
Here is the link: http://resource.cdn.icai.org/34728gn-taxaudit-dtcicai.pdf. Turnover charges by the exchanges is on the traded premium value in case of options and contract value in case of futures. Check this: https://zerodha.com/charges
Sir, I had done trading in F&o in 2014-15 and 2015-16. Very less only 20 transactions in total. Not after that. I my total income was below 1 lac. What to do now. I can still file for 2015-16. But what about 2014-15 pl help
Hmm.. 2014/15 is too late now.
Sir even if income less than 1 lac. One needs to file itr? In case of business income
Yes, best to file ITR even if no taxes to be paid.
Dear Sir
I have no income and no liabilities. All the assets I possess are from my fathers income. Cash in my bank account is my fathers through which I do trading. So in that case what will be my net worth?
If cash in your bank is gifted to you by your father, that is your networth. Similarly any other assets like that.
Nithin Sir,Which ITR form do we use to show presumptive income 44AD?
My Turnover is 6lakhs and I made a loss of 88k.I just want to declare 8% of TO to avoid audit.My overall income is below 2.5L
ITR4
Sir,here ITR4 means ITR3 as its been renamed…
or ITR4 means ITR4(Old ITR Form)
ITR 4 is for presumptive income and ITR3 is for normal business.
One more question Sir-Can we apply for Refund if we are filling under presumptive income scheme?
Yes you can. If you have paid TDS and taxable income is lesser, you can get refund.
Nithin Ji,I think if we are applying for presumptive taxation then we cant opt for a refund.Pls confirm.Thanks.
Yes you can.
Nithin Sir,
My turnover is only 165600.I made a loss of 38000rs.Though I’m in a small loss,I want to declare 8% profit.
Pls tell me-
Gross receipts=165600
Gross profit=13248(8% of TO)
Expenses=0
Net Profit=13248(8% of TO)
is it right?
I’m filling under ITR4(Sugam).
no other income other than this.
Sundry debtors=0
Sundry creditors=0
stock in trade=0
amount of the cash balance=75000
did I put all these main 8 entries correctly?
Yes it is correct. But do consult a CA.
Hi Nithin,
My total turnover is 97 lacs and i am in a big loss of around 6 lacs. Do I need to pay any tax? Please note that i am a NRI and using normal trading a/c which is linked to my SB a/c.
Taxes are only if you make money. Make sure to file your IT returns on time declaring this loss.
Thanks your reply.
Do I need to get it audited or can i file it online? Please let me know which form I have to use it.
Yeah best to get it audited.
Hi Sir
For FY 2016-207, I had a professional income of 690000 & other business turnover of 295000. Also my F&O turnover for the year was 2,40,000 wherein I made a loss of 20K & paid total expenses (as per Zerodha tax P&L) of 69,245K. Can I simply calculate my tax liability as 345000 (50% of professional income)+ income of 23,600 from business (8% of 2,95,000) less loss of 19K from non speculative income less expense of 69K incurred in trading business . This makes my total tax liability as 3,45,000+23,600-20000-69495=2,79,105. Do i need to audit in this case or it is fine to fill ITR 4 without it
If i need a audit then can i simply calculate my tax lib as 345000 (50% on profession income of 694000)+42800(8% profit on other business turnover +8% profit on total turnover of non speculative income)=3,87,800. I hope in this case I surely dont need any tax audit..But let me know if 1st case is also fine so that my net tax liability reduces…
hmm.. you can’t bifurcate it that way.You have to combine all your income (professional+ business) and then calculate audit requirements and/or pay taxes.
Can you explain the positive settlement and negative settlement in detail.
why i go to zerodha and see the report. Options turn over and Gross profit. i do not see any thing called positive or negative settlement.
When you mean settlement, you are referring to EOD Settlement or something else.
Thanks for good article in advance
Profit or loss against each contract is the settlement.
When you mean a Contract. you mean – NIFTY-FUTURE-APR2016 as contract
or
Contract of 14th April Purchased 1 Lot and sold on next day. ( Profit – 5000 )
Contract of 16 th April purchased 1 lot and sold on next day. ( Loss – 1000)
Currently Zerodha shows net amount – 4000
we need to show in tax return – 5000 as gross sales and 1000 as negative settlement.
Zerodha has any plan to give details by contract trade wise.
Regards
Amar
Amarnath, there are different ways to do this. You can follow either of the ways. Make sure whatever method you follow, you stick to it.
Sir,
What is limit for filing ITR4 with ‘no account case’? Till what turnover and profits, I can file ‘No account case’?
For e.g. I have salary income of 15lac and 2lac gain from Options with turnover of 10lac. Can I file ‘No Account case’?
Regards,
JIgnesh
Upto 2 crores turnover. Above that you need to file ITR3.
Hello Nithin
I am great fan of you now. After reading all this information at one place, I feel blessed to have opened account on zerodha.
I read your modules two three four times….I love the way everything is written. Thanks for all your efforts. I wish I can meet you. 🙂
I have small queries:
1. If I show intraday equity as speculative business income and short term delivery trades as capital gains (it happened to me), How then all my expenses including STT can be shown as charges as one have also done short term investments? will be difficult to segregate STT of your intraday equity and short term equity. Also, other expenses, room rent, internet bills (which are not used fully for business only) can be fully shown in the ITR form?
2. Suppose, Income is 2 lakh, Intraday equity loss is 4 lakhs (business) and short term equity loss is 2 lakhs, by showing all respective losses in ITR, this filled ITR can be avoided with Audit reqd as total income is less than min exemption limit. Lets suppose in next year, same income is 2 lakhs, intraday equity profit is 4 lakhs and short term equity profit is 5 lakhs, assuming no other expenses shown. Total income will be 2+3= 5 lakhs which will be above the exemption limit and as intraday equity is done, so audit of accounts will be required (net profit from intraday trades is still zero). Main point is here, Anyways audit has to be done by CA, may be this year or next years once we started showing intraday equity as business income. Also point here is this section 44AD is such a rubbish move made by govt of india, how india can grow if illiterate types of laws are created to burden retail investors.
please reply me on above two points. Thanks Nithin.
1. It isn’t tough to segregate. You will have all the trades on you. Yes all business related expenses can be shown on ITR3.
2. If you are actively trading the market, yeah audit is kind of mandatory. The turnover calculation method, you can be extremely aggressive in terms of calculating it since IT department doesn’t really define set method. Some people even use just all ledger credits+ debits. Speak to a CA for this. I can only post the most conservative approach to calculate.
🙂
Hi Nithin (Our only trustable Tax consultant, I really mean it. Thank you),
I have salaried Income, Professional Income, Short Term Capital Losses, Short Term profits on Buy back of stocks (I donno where to and how to categorize these profits, the stocks were bought back through Zerodha by the respective companies), I have Futures trading profits, Liquid bees dividends as well as Liquidbees trading turnover (SHORT-TERM TURNOVER₹15 Lakhs) on Liquid bees buying and selling.
I am going with ITR 4S. Presumptive income.
My problem is if you include Liquidbees buying and selling total volume turnover as part of my business turnover, I will fall very much short of 8% profit, so I need audit by CA. If you don’t consider Liquid bees turnover I am comfortably above 8% profits on my turnover and I don’t need an audit by a CA.
Other than Liquidbees turnover, my rest of the turnover in F&O and short term capital gains/losses are very small and I can simply show 8-10% profits in my total turnover and avoid audit. Where as if I need to include Liquidbees total volume turnover in my business turnover, then I can’t show 8% profits and so I should face a CA Audit and pay a CA for that.
What do I do? Should I show Liquidbees 15L volume turnover as part of my business turnover? or can I simply show the paltry dividends that I got from Liquidbees as my income some where in ITR 4S (Is it possible to show this way?)
All equity investments including liquid bees can be shown as capital gains. There is no concept of turnover/audit for capital gains. Applicable only for business. Show only F&O turnover as business income. Also you can take an aggressive approach to calculate the turnover and keep it as little as possible
Hi nitin,
My turn over is below 1 cr and I have a loss of 2 lakhs. do I still need a tax audit as my profit is less that 8 percent?
If you have no other income not needed. But if you have other income and you have taxes to pay, then yea.
Sir my turnover in less than 2 crore but i faced net loss of 30 thousand in FY 2016-17 which is less than 8% of my turnover, but i have salary income also which is above 3 lakh but after eligible deduction it fall below 2.5 lakh although i`ve already submitted ITR1 but which form appropriate to me ITR3 or ITR1, . Is there will be any problem ? can i submitted ITR3 later. thanx
If you have filed ITR1, you can revise it now and change it to ITR3.
But sir , i have verified it also via aadhar after submitting can i still revise it . or can i revise it after due date also i.e 31 july
That is okay, you can still revise it.
Thank You Nithin,
I have 3 stocks in my portfolio which constitute more than 91% of portfolio holdings. Highly concentrated portfolio. I hold most of those 3 stocks without doing any trade in them for more than 6 years and they are multi baggers to me.
I have recently started booking profits of less than 10% of total stocks that I hold and bought back when the stocks corrected again. This kind of trading volume all put together does not even cross 30% of my total holdings. Doing like this, will it lead to the income tax department considering my whole Long term capital gains as trading/business income (somebody suggested, if you want to do trade on your long term portfolio, better do it by opening a separate Demat account and not trade in the same demat account which is for long term holding, to avoid litigation with Income tax department).
The second question is, if I trade in Futures of the same stocks where I have very long term holdings with multi bagger profits, using the same trading account (Zerodha) will it lead to Income tax department considering my long term holdings also as business and not as LTCG, as and when I book profits from my long term holdings?
I have given link to a circular in the module where it is clarified that a person can have trading and investing potfolio at same time. So should be okay in both cases.
Sir,
I have a loss of Rs. 40000 in last financial year from trading and I have a business income of Rs 200000. Do i need to audit my accounts? Also, can i set off the losses for next year if i don’t audit my accounts?
Yes if all your income together is above 2.5lks. IF not no.
Hi Nithin
I am in need of a professional Chartered Accountant who understands the nuances of filing ITR for retail traders engaging in F&O segment. Request for suggestions.
Thanks in advance
If you are in Bangalore, you can reach out to taxiq.in
sir,
please explain calculation of BUSINESS TURNOVER for AUDIT PURPOSE………..only for BTST TRADES
thanking you
If you are showing BTST as speculative business then turnover is essentially the sum of profits and losses. If you are showing it as capital gains, there is no need of calculating turnover on it.
Please help. I am salaried person and trade in equity only.
The turnover (absolute value of buy and sell for delivery trades and absolute differential of intraday trades) exceeds 2 crore. The profit before deducting STT 46779 /- and limit charges 27000 /- is 61385/-. The breakup of 61385/- is as under:
Intraday trading 126,631.01
Short term capital gain 162,252.30
Long term capital loss -227,498.36
Total 61,384.94
My query is
1. Which head of income do I show the income and loss for each of the above. I understand I can set off short term and long term. What do I do for long term capital loss balance.
2. Is tax audit mandatory irrespective of the head of income under which the income is treated. (profit is less than 6% of turnover.). And if it is under sec 44AD?
Please help if there is a clarity provided in Income tax act.
Thanks you.
1. Since long term capital gain is exempt, there is nothing you can setoff your long term losses to.
2. Tax audit only for business income. Not for capital gains.
Thank you Nithin for help.
My worry is since turnover has exceeded 2 crore, will the ITO consider it as business and not capital gain (considering the number of trades). And want me to have tax audit done. Also since the profit is less than 6%.
Also request help for speculation income. Thank you.
Also can I carry forward long term capital loss to set off against LTCG in future years.
Please guide.
For delivery trades, there is no concept of turnover if you are showing it as capital gains. It applies only on business income. So for you turnover will be only absolute differential of intraday trades (sum of P&L). Also this turnover is only to determine audit.
Intraday equity has to be shown as speculative business.
No use carry forwarding LTCG losses as the gains are exempt.
Thank you Nithin for the help.
Please let know if there is a guiding rule for treating income under capital gain head / business income head.
If there is a choice for the assessee to treat income under capital gain head / business income head, I understood it will be tax saving if I have the tax audit and treat it as business income. This way I will be able to claim STT and the limit charges which are actually part of cost but not allowable if I treat it as capital income.
My turnove6 is as under:
LTCG 1501950/-
STCG 24578867/-
Speculation 126555/-
Please let know if my understanding would be okay.
Thank you.
But whatever way you consider this income, ideally you have to follow the same in the future. This can’t be used as per your convenience/saving taxes.
As per AY 2017-18, ITR3 should be used for income from f&o trading. Up to what turnover and profit, I can file ‘No account case’? I have profit more than 8% and turnover around 5 lac.
In P&L section 53 for no account case, there are 2 sections added – For Business and another for Profession. For share trading, which one to use?
You can use for business, and you would quality for no-account case.
Nithin,
1. Can you please provide example of ITR3 (FY17-18) with ‘no account case’? I believe most retail traders can file no account case provided they have less turnover and net profit >8%. I can’t file presumptive income ITR 4 (FY17-18) as I have capital gain also.
2. Please confirm my understanding on no account case:
a. Gross Receipts = turnover provided by zerodha (f&o + intraday)
b. Gross Profit = Profit as provided by zerodha excluding Brokerage, STT and taxes
c. Expenses = Brokerage, STT, taxes and other expenses if any
3. What is meaning of this statement in terms of turnover for retailer:
“In respect of any reverse trades entered, the difference thereon should also form part of the turnover.”
Apologies for lot of questions.
Thanks
Nitesh
1. Hmm.. let me find out if our CA can put this out
2. On ITR 3, you can show all positive turnover (profits) as gross receipts and negative turnover (losses) as Gross sales
3. I have explained in detail in the module itself.
There is no coloumn for gross sale.
Only gross receipt and gross profit.
So, can we put our positive turnover in gross receipt and net profit in gross profit?
If we have a net loss, is it okay to put negative value in gross profit?
If you are showing this as presumptive income (ITR4), profit or loss has to be shown as a positive turnover. If not, you can show all positive turnover as gross receipts and negative turnover as Gross sales.
Dear Sir, I am a home maker since last 5 years, Before that have worked in IT for about 15 years. Since Jan 17, I have become a short term investor. I never do intraday trading, but sell stocks if I get more than 10-15%. My income involves F.D interest, STCG and LTCG only. I read your module on taxation and have the following queries for the F.Y 17-18. For this year my F.D interest + STCG is < 2.5L and hence I have no issues. But this year, want to get involved more as short term investor and hence want to clarify about tax/audit requirements.
1. Since my F.D interest is very small amount, can I show part of STCG as my income up to 2.5L ( upto 4L with 1.5L of tax saving investments ) and get exemption ? For the rest of the STCG I need to pay 15% tax and I need not worry about the total trading amount as I am not treating this is business income ? Am I right here ?
2. If I treat F.D + STCG as business income, then if total turnover crosses 2cr OR turnover less than 2cr and profit < 8%, I need an audit ? Am I right ?
3. If I treat it as business income, since all my transactions are delivery based, as per your module, turnover is net sales value for the year ? Pl clarify.
1. My F.D income is very less ( less than 1lk),
1. yeah.
2. yes
3. yes.
I have got a notice under IT 143(2) asking if i disclosed my profit from security transaction during the assessment year 2016-17. I have been doing cash based and delivery based trading and turn over is above 3 crores. Actually I made a loss of 5 lakhs and did not declare this loss in the ITR. Will they ask me to do auditing now.
Hmm.. you will have to meet the ITO and tell him that you didn’t file because you had a loss. See what he says. Every ITO is different.
Do I have to do auditing at this stage
A year back I had profit and has shown the profit as CAPITAL GAIN. Will that help now to avoid auditing angle.
Hmm.. u can you maybe show that you had paid taxes when you had profits. You should be alright, just tell them that since there was loss, you decided not to declare that. You just need to prove that you didnt’ evade any tax.
Hi, I have 2 lac loss on 35lacs turn over for short term F&O trading. Also I have 8 lacs capital gain on long term held equities. Also rental income of 4 lacs. No other source of income. Can you please help me 1) what is the right form to use, is it ITR3?, 2) do I required to do audit? 3) since long term capital gain has exempt from tax, do I need to include it in total income or not?
1. yes ITR3
2. Yes, best to have an audit.
3. Not include. But you need to declare this income on your ITR.
Thanks for replying. However I am not clear about audit. Is it required in my case because my rental income offset with F&O loss and net income is below tax liability.?
Hmm..it is a grey area Mani. Best to consult a CA. I would have net off and avoided audit.
Can I file the ITR showing intraday, short term, long term & FnO trading as investments? I had incurred loss in intraday trading this year. I want to know if its possible to show it as an investments and thus save the extra cost of tax audit?
No you can’t. Intraday equity has to be shown as speculative business, F&O as no-speculative business, investments as capital gains on ITR3.
I want to confirm whether I need to get my audited or not. As per documentation in Zerodha I guess I have to get an audit however I want If it can be avoided becuase in F&O I have incured a loss of 2925 so even I get my account audited it will not cost me more than 5000 believe. Is there a way to avoid an audit in my case.
Following are my turnover and profit details
Profit and turnover breakdown
Intra-day / Speculative profit 12096.35
Intra-day / Speculative turnover 35237.75
Short-term profit -4189.50
Short-term turnover 234000.00
Long-term profit 0.00
Profit and turnover breakdown
Futures realized profit 0.00
Options realized profit -2925.00
Total realized profit -2925.00
Futures unrealized profit 0.00
Options unrealized profit 0.00
Total unrealized profit 0.00
Futures turnover 0.00
Options turnover 47875.00
Total turnover 47875.00
Long-term turnover 0.00
Salary – 600000
Hi Nithin, Need your advise.
My F&0 turnover = 17 laks
My F&o loss =2 laks
Rental income + interest income – 3.5 laks
So total profit = 3.5 laks – 2 laks = 1.5 laks
1.5 laks is greater than 8% of turnover which is .08*17laks =1.36 laks
So i dont need to tax audit
Is the above understanding correct.? please help
Ganesh, you will need to audit it. You can’t look at this 8% profit of turnover by combining all other income of yours. F&O is business income, audit requirement has to be calculated just based on this. Not by combining all other income.
Thanks you so much Nitin, Appreciate your prompt response. Just to clarify. even if I had incurred f&o lossess, which I dont want to carry forward, can I just straightaway declare 8% profit and file IT return without tax audit. I know i will paying more income tax.
Yeah u can. But do consult ur CA.
Today i met to my C.A and he told that bcoz your turnover is below 2 crore and profit less than 6% ( i am in net loss) you have to get audited your account and file only ITR3 , he further add that i cannot show my loss into income and use ITR 4 as a presumptive income because person having speculative business income cant use ITR4, it is mention also in Instruction under ITR4 on income tax site at point (g) under point 3 i.e who cannot use ITR3 here is the link
https://incometaxindiaefiling.gov.in/eFiling/Portal/StaticPDF/ITR4_Sugam.pdf
Yes he is correct.
hi neha , my situation is the same as yours, i too have loss in FNO and turnover below 1 crore, so just wanted to ask that in ITR 3, after getting audit done , will u be showing FNO as business? this will give me an idea as how to proceed furthur, thanks
I have loss of 60000 in options trading and no other income will my account be audited and which form I should file. If not required audit then can I file without CA.
If no other income and turnover not more than a crore, no need of audit. ITR3
Hi Nithin , I m very thankful to you that u created this session, which gives traders like me a great relief regarding return filing , Anyways , Having a loss in FNO around 2lacs and commodities derivatives around 15000, and speculative intraday gross gain of 2000 and after deducting other charges like brokerage and taxes its showing negative 8000, Turnover for the year is below 1 crore , Income is below taxable limit ,I have few questions 1) Is gross loss considered while filing returns? or brokerage and other taxes are added in loss to come up with a bigger figure ? 2)If i use section 44AD, will i be able to use the loss to offset with next years gains?
3) if i use section 44AD , do i need to include equity spot intraday Profit/Loss in that section 44AD? 4) Do I need to get my accounts audited in this case (my turnover less than 1 crore and income less than taxable limit)4) Suppose if i dont need audit in section 44AD then will i be able to carry forward the loss and will i be allowed to use the loss to save taxes on profits in next year? 5) Is there any other option or any other way to carry forward derivatives loss , incase if i dont use section 44AD? 6) Which ITR needs to be filed if i go for section 44AD ?
1.You add all charges up and then come to a bigger loss figure in this case.
2. No. You have to declare loss and carry it forward using ITR3.
3. If you have equity intraday, you can’t use section 44AD.
4. Yes.
5. You can file ITR3, get an audit if required, and then carry forward the losses. Best way to to it right.
6. ITR4S but since you have speculative/intraday loss/gain, you can’t use ITR4S
Suppose i follow 44Ad and declare FNO losses as business loss , will i get to use the loss for next year FNO profits and save my tax, for example in next year i made profit of 8lacs in FNO , so will i be able to deduct 2lacs Fno loss that i declared the prevois year from 8lacs? example 8lacs minus 2 lacs, taxation amount 6lacs, will it be dont this way?
No, if you use ITR4(44AD) you can’t declare loss. You have to show 8% of turnover as profit. So no there is no carry forwarding the loss. You need to use ITR3 to do this.
So if i cannot use the loss for profits in next year , then there is no point in going for 44AD, but then if i dont use 44AD , will i be able to use the loss just by filing ITR 3, i just want to know confirm 100% that by going in which way i will be able to use loss , because amount is 2lacs , and 30% of it is 60000, i cannot leave 60000 discount on taxes, if its not possible to explain here can i contact you? so that i can talk one on one with you and get a clear 100% confirmation,Thanks
If you declare your losses on ITR3 on time, you can carry it forward for 8 years and setoff agains future profits.
In my case i m not sure whether i need audit or not for FNO losses ,, So suppose if i don’t do audit and declare my losses, and suppose if i get a notice from IT that i need audit , and then after paying fine of 0.5% i get the audit done , in this case after getting the audit done and paying the fine, will THE IT department allow me to use the loss to set off against future profits?
As long as losses are declared on ITR and within time, yeah you can carry forward.
Thanks Nithin
my turnover is only 8lacs , so even if i get fined of 0.5% i’ll fined 4000 rs approximately , m i right?
Received an email from IT Department –
subject: File your IT Return to report your income
(It is seen from your 26AS statement that there are TDS deductions on payments received by you during F.Y. 2016-17.)
I’m a self-employed person and doing part time job also, (Truly trading is primary activity)
A) self-employed income – 1.2 lac ₹
B) doing part time job also, as per my FORM 16 Total income 50,000 ₹
my total income = 1.2lac + 50k = 1.7 lac ₹ only
i take some money from family and from my friends too.
My total trading (equity,F&o) turnover is 19,46,590 ₹ There is no capital gains
my trading loss is 95,000 + 70,000 trading charges.
a) some TDS deductions happens with my part time job.
b) i can’t show my self-employed income in documentation (there is no bills or receipts to show this)
NOW,
1) it is compulsory on me to file IT returns or no need.
2) my intention is not to show my trading losses in IT returns. ( fear about banks don’t give me a loan in future )
3) want to show only my form 16 income 50,000 or along with my self-employed income.
4) what happen if i filed my trading losses and form 16 income both+self-employed income.
5) what happen if i’m not disclosed my trading activity in IT returns.
suggest me best solution. ♥ u Zerodha.
1. It is not compulsory, since you have no tax to pay.
2/3/5. You should show your trading income/loss on ITR. Income tax department will know that you have traded, and if you haven’t declared that might mean an automated notice asking why. This can be an inconvenience as you would have to then meet an ITO to explain why.
4. You should file/declare everything properly.
Dear Sir,
I have an Account with Zerodha
I do not have any other source of Income other than Trading in Stocks.
I am using ITR 3 for filing
I have some Quries BS and P & L sheet. I have chosen No Account Case annd No Auditing.
Kindly help:
Case Equity Trade
I had made some trade in Equity and sold it within a weeks time from purchase.
Where is the gain shown, In STCG or just add up with others i.e Amount from F & O trade and Commodity and reflect in Gross Receipt and Gross Profit in P & L Sheet.
BS
a) Amount of total sundry debtors
Who is the debtor Me or Zerodha and which values goes in here. Is it balance Amount in Ledger?
b) Amount of total sundry creditors
Who is the creditors Me or Zerodha and which values goes in here. Is it Amount I owe to Zerodha, if not then what?
c) Amount of total stock-in-trade.
My understanding is the Stock I am holding in my DEMAT Account and the Value is the buy price or the market price as on 31 Mar 2017. Is that correct, if not please help.
d) Amount of the cash balance
Total cash balance in all bank account.
IN P & L sheet.
a) Gross receipt.
My understanding is
Amount = Total Profi plus Total Loss from all segment.
Is this correct, if not kindly help.
Thank you,
Vijay
First task is to classify ourselves as trader ,investor, or trader cum investor.
Trading in Equity Delivery based can be classified under Investment (Capital Gains) or Trading (Business). If you classify as Investor then the turnover wont come under P & L it will to straight to Capital Gain Schedule.
a. Debtor is a person who owes money to you , with Zerodha your money is given as Deposit/ Advance towards your own purchases. There is no Debtor unless you you have any other receivable.
b. You are Correct , If you owe money then Zerodha is creditor.
c. If you classify yourself as trader , the portfolio will be your stock in trade. yes as trader either market price or buy price.
d. yes
a. yes
Dear Sir,
Thank you for your prompt reply.
I am seeking a bit clarification:
Regarding First Task as mentioned by you.
a) In ITR 3 I have chosen 0204 as Nature of Business, does this classify me as Trader or Investor or both ,
Kindly let me know where this classification is shown in ITR 3.
b) Is the positive Balance in the Ledger owed to me by Zerodha, and thus Zerodha becomes debtor as that amount is my receivable
and thus can be reflected in Sundry Debtor.
Please clarify.
Thank you,
Vijay
a. It doesn’t depend on the code. You can show your investments under capital gains and trades under business income.
b. No Debtor is a person who owes money to you , with Zerodha your money is given Deposit/ Advance towards your own purchases. There is no Debtor unless you provide some other service and you have receivable.
Dear Sir,
Again Thank you for the enlightenment on this.
Sorry to bother you again with 2 queries.
1) In this case the Sundry Debtor should be zero amount
2) Where does the Balance Amount shown in the ledger provided by Zerodha goes i.e reflect in the BS.
Thank you,
Vijay
Nice write up.
What would be the turnover in case an option is allowed to lapse being out of money on the day of expiry?
Pl. clarify.
Thanks.
Turnover will be 0 on expired worthless options.
I am afraid it will be premium received in case of short positions. Premium received and difference between sale and purchase is turnover. There is no reverse trade in this case.
Ah I thought what was the turnover for that expired trade. Yes, profit on that trade will be the turnover as per definition. But this turnover is only to determine if you need an audit or not.
So no reverse trade. Reverse trade minus original trade turnover calculation is taken zero? Have I got it correct?
Yes
I want to know where do I mentioned loss from futures and options in no account case. Can you provide column number in schedule BP or schedule P&L
In No Account case there is no option for Negative Amounts . You need to declare your profits as turnover (atleast 6%)
Hi Nithin,
Please help me out. My turnover on adding the absolute values of profits n loss was 45 Lks (F n O), with net loss of 5 lks. I am an NRI with fully exempted Salary income and no other income above exemption limit. Am I still required to go for Tax audit.
In case of Substantial losses its better to file with Audit. In your case its not applicable as turnover is less than a Crore.
Thanks Nithin for your prompt reply. Its a relief not requiring the tax audit. Hope so Tax Authorities as well have the same stance.
Shall I submit my income tax return in Form 4 then.
Hi sir,
I very confused that I can make audit or not-
1. I am state government employee gross income per annum – 6.62 Lakhs
2. My turnover is bellow 1cr.
3. Intraday loss is 40 k and F&O loss is 75 K
4 . Capital gain above 12 month profit rs. 46.
Please sujjest audit required or not and which itr must fillup and for what is last date. Please Reply sir I am in so much depressed mood because I already take shock of IT office.
Yes best to get it audited. ITR3 and last date is sep 30th.
Dear Sir,
Again Thank you for the enlightenment on this.
Sorry to bother you again with 2 queries.
1) In this case the Sundry Debtor should be zero amount
2) Where does the Balance Amount shown in the ledger provided by Zerodha goes i.e reflect in the BS.
Thank you,
Vijay
ITR 4 doesn’t have an option for BS. Yes you can fill 0.
Dear nithin ,
for NRI, if net income in India is less than 25k
STCG profit is rs 70,000 F&O loss is 2.5 lakh so net loss is 1.8 lakh
so while filling ITR3 in balance sheet and Profit & loss statement ,shall i fill only “no account case” column or need to fill all others
Yeah, you can fill no account case.
Hi Nithin,
Can you please clarify me
My Tax P&L
INTRADAY GROSS PROFIT₹-19,404.55
INTRADAY TURNOVER₹31,036.05
SHORT TERM GROSS PROFIT₹-756.25
SHORT TERM TURNOVER₹14,400.00
I am assuming Gross turnover or Gross receipts in 44AD in ITR 4 is (INTRADAY TURNOVER ₹31,036.05 + SHORT TERM TURNOVER ₹14,400.00) = 45436 , is this assumption correct ?
Does Presumptive income calculates to 6 % or 8 % of above Total ?
Since its electronic transactions , i am assuming 6 %,
Could you please clarify
Thanks,
Vijayk
Intraday is speculative business income. Can’t be declared on ITR4. You will need to use ITR3. But ys, that is the turnover.
Thanks for prompt reply Nithin.
I am salaried employee also,
should i be using ITR3 or ITR4 when filing for both income from my employer and speculative business (intraday)
Thanks,
VijayK
ITR3
Hi sir,
1. I am IT employee gross income per annum – 6.35 Lakhs
2. My turnover for Future = 3454, Option = 583025 and Intraday = 2820, hence total = 589299
3. Intraday loss is 1 k and F&O loss is 26 K
4 . Short term profit is 4K
Please suggest audit will be required or not. Can I mention No Account case.
Audit is required. Alternatively you can use ITR4 to skip audit
Yeah you will need to.
Cash balance in demat account to be shown as cash in hand or cash at bank for preparing balance sheet
I have a query regarding taxation. I am a salaried employee with taxable income in the highest slab. I do occasional trading in options and some short term delivery based trades apart from long term investments in stock market. I have been filling ITR 4 for the last 3 years declaring the losses made in options or short term delivery. This year also, I have incurred loss in options. I was not aware of the requirement of audit of the books and have not got any audit done for previous ITR returns. I wish to know whether Audit is required to be done if I have incurred losses in the current year too. Also, if I want to avoid audit, what is the way out for that? If I do not declare losses and do not claim carry forward of earlier year losses, then can I fill ITR 2 from this year onwards. Or do I need to fill ITR 4 only since I traded in options occasionally?
Kindly help me out.
Thanks a lot
Vyom
You have to use ITR3 (it is renamed from ITR3 to ITR4). To carry forward losses, you will need an audit. Otherwise you have to declare 6% of turnover as profit.
I am self employed and my income is around 8 LK , But I suffered losses in FNO and intraday 40K and 70K. Turnover is less than 1 cr. But as you said we need to do audit since gross income is taxable. To avoid audit is it fine if I don’t declare losses I suffered in FNO and intraday ?
If you don’t declare the loss, there is a chance of getting a notice asking why you haven’t filed when you have traded.
Btw,
1: FNO loss is more than 8% of FNO turn over.
2: Intraday loss is more than 8% of Intraday turn over.
3: Gross turn over (FNO bussiness and intraday ) don’t exceed 1 cr.
4: Total income is more than 8% of gross turnover.
Still I will need audit ?
Yeah
Dear Nithin,
I beg for apologies if this question is repeated but would like to be sure before filing the return for my wife who is a dependent and has no other source of income.
1. Done trading in both FNO and Equity – both day trading
2. Total of purchase + sale value equates to about 108Cr (due high volume of trading)
3. There is only loss incurred about Rs. 5 Lakhs
4. There is no other source of income. Want to carry forward the loss.
In the above case, does it attract an audit by CA? Which ITR is applicable (ITR2/3/4)? Please confirm. Your response is highly appreciated.
Regards,
Ram
After ‘re-reading’ the above article and example a bit more closure, I understood that the turnover I believed is wrong (purchase value + sale value) and I need to calculate the business turnover which is totals of positives and negatives which are differences of (purchase and sale of a contract). In my case it is below 1Crore (for FNO + Equity).
Hence I am assuming that no Audit is required. Please correct me if I am wrong.
Note: The 108Cr mentioned earlier is Contract turnover which I got confused. Thank you for a the great article and information.
Thanks,
Ram
Yep, not required if you have no other source of income.
ITR3 and yes best to get it audited. Btw are you calculating turnover the way I have asked in the post above? It is not contract turnover, it is sum of all profits and losses.
Thanks Nithin for the prompt response.
Yes, I have wrongly calculated the turn over.
However, I have been told that there is another clause that make the audit mandatory if F&O outcome is a loss due to following factors,
1. F&O trading is treated as “Business”
2. Per section 44AB any (profitable) income less than 8% of “the turn over” should be tax audited by an auditor
So, in my case both are true, because I have incurred only loss and to carry forward the lass to next FY, it seems tax audit is mandated by IT department.
Audit is not required in case profitable income is 8% or more.
Am I rightly informed? Please let me know.
Regards,
Ram
Yes it is true
hi Nithin
my salary 2.5 lk
f&o loss -1.5 lk
to carry forward loss i should file itr 3 and for this i would need audit through CA ? am i right
or if i dont carry forward loss then itr 4 .
what should i do any suggestions please ?
thankyou
Since you don’t have any taxes overall to pay, assuming your turnover is not much, you don’t need an audit. You can use ITR4, but you’d let go of the benefit of carrying forward the loss.
Dear Sir,
I have a turnover of 6 Lac (as per the calculation of realized profit and loss but have a loss of 25K including speculative equity and FnO. Do I need an audit as the profit is less than 8% of turnover.
Regards,
Anurag .
If you don’t have any other income, not required.
I have a salary income of 3.00 Lacs P.A.
Sir, I have no source of income traded FnO with barrowed money got loss of 8000. as per your earlier reply no need of audit, But does it attracts scrutiny for trading with borrowed money. What are the records required to show borrowing. Thanks in advance.
File your ITR showing this loss. The chances of getting a notice is when you trade and not declare that. Similar to putting money in the bank without filing ITR. Bank statement and trading account statement is all that you need.
Also please clarify is lending for non speculative trading ,futures, is wrong? as my brother who lend me money is worried.T hanks
No nothing wrong.
Sir,
Futures realized profit -1158402.00
Options realized profit 0.00
Total realized profit -1158402.00
Futures unrealized profit 0.00
Options unrealized profit 0.00
Total unrealized profit 0.00
Futures turnover 9762422.50
Options turnover 0.00
Total turnover 9762422.50
Proprietary business income(Apart from share trading) 400,000/-
Do i get tax audit?
Please consider this urgent.
Btw, you can setoff your profit from other income with F&O loss. Since turnover is more advisable to get audit done. But do consult a CA.
Thanks for a speedy reply Nithin.
Consulted 3-4 CAs. Unfortunately none in my contacts is aware of this situation.
If audit is not needed, can i still do it voluntarily? (Googled this but did not find the answer)
Please help.
Regards,
Pankaj.
Yes, anyone can get an audit done.
Hello Nithin,
Now that we have the tax filing deadline I had few questions/doubts after going through multiple sources of information (including varsity).
I am a private salaried individual and I come under 30% slab. But since the last almost three years I have been trading in Options with zerodha. And net-net for this financial year individually and the previous financial years individually I have been on a loss 7 lac + cumulatively summed up 🙁
Now my questions here are as follows:
-> As I am making a loss on Derivatives which is less than 8% of the turnover, do I need an audit from CA for this FY?
-> And I have never filed losses from the previous years as well (my bad). Now I want to file the losses from the previous financial years as well so that I can use it as set-off against any profit in the future for the coming 8 years. Can I do that?
-> Another question which is a bit different from the above ones is that when I was going through q.zerodha.com -> Tax P&L report, I saw that on the page (script wise) it is showing me a turnover of around 20lacs and the respective loss in the F&O segment which is correct. But when I downloaded the excel report (tradewise), it does show me the trades but it shows the summed up turnover as zero “0”. Any thoughts on that as its puzzling me a bit?
Many thanks in advance for looking into my queries 🙂
Thanks,
Jay.
1. yes best to get audit done.
2. You can file for FY15/16, but you won’t get benefit of carrying the loss forward.
3. There are some issues on that tradewise turnover report. You can look at the overall turnover as your turnover.
Hello Nitin,
I am salaried and i have done only one intraday trading at loss of 360. Last three years i have been filing ITR 4 for carrying forward losses with CA’s help.
Do i file ITR3 or ignore this years loss and file ITR 1 considering the fees i need to pay to CA.
Is is possible for you to prepare a video on filing ITR 3 from preparing Balance sheet and PL statement to final submission.
Also what is the update on the petition filed by you.
Regards,
Jay Dhole
Best to still file ITR3. You would not need an audit and all. Video making on ITR3 is little tricky because of how vast it is.
Hi Nithin,
Is it OK to choose to get the accounts tax audited and submit the IT Return before 30th Sep, even though it appears to be not mandated to have audit as per my own calculation? Since I have a trading loss for the year, will I suffer forfeiting the carry forward of the loss if I don’t submit the return today, 31st Jul?
Last date with Audit is sep 30th, so you are okay.
Hi there thank you for this extremely helpful post. i have one query
suppose salary income is 5 lacs turnover (purely f&o) below 1 cr profit above 6% of turnover .
Do we need to get a audit done in above case?
No
Hi Nithin
I have loss from F&O Business Amounting To Rs. 450000/- and turnover Rs. 900000/- [as per trade wise method i.e suming up all the negative and positive figures].Now i want to claim this loss in income tax return.How can i prepare Profit & Loss Account.What will i debit and credit in P& L A/c so as to claim the above loss of Rs.450000/-
Rohit, best to consult a CA to help you fill the ITR if you don’t know how.
Hi Nithin,
Pardon me if it’s a repeat question. it’s regarding turnover calculation for Futures and Options
I understand from the below statement that the turnover calculation for options is,
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
and the same reflects in the turnover calculation sheet provided by zerodha.
However for futures, the turnover is calculated as the total of favorable and unfavorable difference only.
my query is …for futures do we not add the sell value to the difference?
i.e.
I buy 1lot of banknifty aug futures at 25000 and sell it at 25100. What is the turnover for the same? is it…
a. 25100*40-25000*40+sell value=1008000 or
b. 40*100=4000
i would appreciate a quick reply
Regards,
Dev
4000
thanks.
i want to know how exactly is the turnover calculated for FNO , suppose if i buy one lot of reliance 500lot size at 1000 rs and everyday reliance closes one rupee above 1st trading day 1001, next day 1002 , next day 1003, next day 1004, next day 1005 ,next day 1006 ,next day 1007 ,next day 1008, next day 1009, next day 1010, after tha,t next day 1009, next day 1008, next day 1007, next day 1006, next day 1005, and finally i square off at 1005, now in this case my profit will be 500*5 =2500, what will be my turnover, will my turnover be 2500 or will it be the sum of all mtms for the days of my open position (positive mtm plus negative mtm) for all the trading days i.e. 500+500+500+500+500+500+500+500+500+500+500+500+500+500+500 =7500,
So what will be my turnover for this transaction 2500 or 7500
Rs 2500.
Thanks Nithin
sir,
IF I SELL……….ONE LAKH WORTH SHARES from my….. DMAT ( T2 )…… AT NSE at 8 % PROFIT.
Then……. IMMEDIATELY…….. IF I BUY THOSE SAME COMPANY SHARES AT….BSE……at same price.
WILL IT BE CONSIDERED as a REVERSAL OF SALE…….?????? & hence NO 8 % PROFIT ??????
ACTUALLY…. my aim is to book 8 % profit…. &….. ALSO BUY it again for future increase in price of shares on another EXCHANGE…( BSE )
IS THIS ALLOWED ……???????????
The shares purchased on …BSE may increase in price or not…..that is MY RISK…..!!!!!!!!…… OR I may BUY MORE….if PRICE DECLINES…..
Mainly……MY BUYING ON BSE should not be considered as “” REVERSAL OF SALE “”
Your CLEAR ANSWER will HELP ME IN making a PROPER & VALID STRATEGY.
I DO ONLY CASH BUY / SELL at PRESENT.
thank you…..
TUSHAR MODY
It is upto you – this can be considered as a delivery trade or as business income. But if you are treating this trade as business income to capture that 8% profit, you would have to treat all your other equity delivery trades also as business income.
Hi Nithin,
This will be the first time I am declaring myself as trader. I have a query, say, my opening stock value is 1 Lac, purchases 9 lac and sale is 10.1 lac. As I am churning my portfolio, the closing stock will be roughly 1.1 lac. In standard Trading and P&L this translates into 1.1 lac in GP though technically I would have made only 0.1 lac in GP as the initial opening stock was my invt. This is a very layman standard question. Will be helpful if you can give some solution to this.
Regards
Harishkumar
Even in this case, gross profit will be 0.1. You can show the 1lk investment from before also as purchase/investment.
Hi! Nithin,
I just want to know that what will be in a bank book in case of individual. I mean to say maintaining bank book is only excel download of all bank statement or it is only transaction related to share trading. could you please brief explanation on it that which transaction is should be in bank book.
Nithin Ji,few queries,pls reply-
1)There are 2 Tax reports in Q..1st one is Scripwise Turnover and 2nd is Tradewise Turnover.
Which Turnover calculation report should we consider?
Traderwise Turnover Report always shows higher Turnover.
2)I have read many people opt for 8% presumptive scheme inspite of loss or profit trading F&O,so 2 queries-
Mock Example-
If In a Profit-A) my TO is 50L and I’m declaring 8% which is 4 lakhs.I’m paying tax on this amount.But my actual profit is 10 lakhs.So,I’m actually paying less tax.Wont I get a trouble in future?
If In a Loss-B)my TO is 50 and I’m in Loss.But I still declare 8% and after tax rebate+80C,I show NIL Tax.
so in both cases,will I get a Scrutiny notice in a future?Because I’m making more but declaring less.(8%)
thanks
Answer of your quires is-
(1) you can choose either scripwise or tradewise turnover as your business turnover of your choice. However advisable to choose tradewise turnover because it is your exact trunover and choose scripwise turnover only for reduce tax liability. But remember it is only advisable you can choose one of both of your choice no issue.
(2) first of all choose ITR4 (opt for 8% or 6% of turnover presumptive scheme) only for reduce tax liability {if you fill ITR3 in case of loss you need to audit (if your total income is more than 2.5L or total turnover is more than 2 crore) and if CA audit fees is more than 6% of turnover than best to choose ITR4}. Also remember if you choose ITR4, you have to continue with this minimum five years means for next five years you can not fill ITR3. if you fill; you may get under income tax scrutiny.
Now in profit case-
(A) you are in profit of 10L and your turnover is 50L, 8% of 50L is 4L{but for digital transition (all transition is digital transition in share market) it is 6% so 3L}. Remember ITR4 is allow to show you minimum income 6% of your total business turnover. you can show more than 6% but not less than 6% (even you are in loss) income so you can show 10L income in ITR4. So advisable if you fill ITR4 and you have profit more than 6% like here you have to show exact porfit which you get.
(B) if you are in loss assume 10L and you choose to fill ITR4. You have to show minimum 6% income of your total turnover even you are in loss or you have option to fill ITR3 but need to get audited of your book of accounts(not in all cases like explain above). Let assume your 6% income is 3L and after tax rebate you have no tax liability so no issue just fill ITR4 and relax. But remember fill to ITR because your are going to show more income than tax rebate limit 2.5L.
Now some pros & cons of filling ITR4 first pros-
(1) you can get rid of audit and maintaining book of accounts
and than cons-
(1) in case of loss you have to show minimum 6% of income of total turnover which means more tax liability.
(2) you can not carry forward losses.
(3) you can not show capital gain.
Hope i have clear all your doubts.
Deepak Ji,
1)You said we can choose any turnover report.But Tradewise Turmover is always higher,but Scripwise its very much lower.If I select Scripwise and declare 8% according to it then I may be get a notice frm IT dept for mentioning wrong turnover.
I’m wondering which turnover Zerodha updates against my PAN?
2)If we show 6% of 50L which is 3L,then there is no point of declaring real 10L profit,right?
your reply confused me.
Hope Nithin Sir will reply it.
1. We don’t update any turnover report anywhere. IT department gets trades from exchanges directly. I don’t think they really see the turnover, it is more about how much STT paid and if you have declared trading income or not.
2. Like I have said earlier, if by taking 6% or 8% of turnover, you are reducing the tax liability, you shouldn’t be doing that.
Nithin Sir,There are 2 Tax reports in Q..1st one is Scripwise Turnover and 2nd is Tradewise Turnover.
Which Turnover calculation report should we consider?
Traderwise Turnover Report always shows higher Turnover.
thanks
Ajay, it is upto you. You can use any.
I just want to know that what will be in a bank book in case of individual. I mean to say maintaining bank book is only excel download of all bank statement or it is only transaction related to share trading. could you please brief explanation on it that which transaction is should be in bank book.
Bank book is your bank statement on an excel with a description on what debit/credit is related to your business of trading.
Sir I’m new to zerodha. Only 15 days of trading experience. I m doing only equity intraday trading and equity delivery STCG. I m a salaried person government. What I should declare my trading activity as capital gain or business.Which ITR form I will have to fill.If declared as business what about audit because I am sure my turnover for equity intraday will be less than 2crore and in equity intraday trading the business turnover I.e profit so the less than 6% rule doesn’t applies. As profit is equal to turnover in equity intraday. What about the advance tax. Pls guide me sir. Thanks for your knowledge which I have got from zerodha varsity very intutive for me.
Neelkanth, all your queries are already answered in the chapters right?
sir i deoposit cash in the bank several times and withdrawn many times how to consider my total turnover whether receipt of amount in bank account or deposit amount.
nitin sir
i reccived limited scruteny notice for trade in securities transaction for fy 14-15(ay15-16)
my mostly trades are intraday approx 24 lakh as per your turnover guidline (only MTM)
contract turnover 19 cr.in f&o 48 cr.in eq.cash (but as per mtm diffrance 24 lakh )
now my ito claim that non audit panaelty
he says that above guide lines as per institute not as per it act
please help what shuld i do
thanks
ankur garg
Income Tax has not specified any specific Method to record the transactions for Equity trade. ICAI which is apex body in the country in the field of Accounts & audit has issued guidelines for turnover for various trade for Tax Audits. Under Limited scrutiny the focus is on the whether the transactions are part of financials or not. If the same are part of the same and ITO is not ready to listen , you need to maybe approach senior/another officer to explain as many wont understand.
That’s exactly the problem I’m facing in one of limited scrutiny cases. I’m unable to match their value of STT and when I provided the reconciliation statement, they are not willing to accept the same. Also their Turnover criteria differs. Any suggestions ?
You can get the STT statement from all the brokerages you traded with. There could be an issue at their end also, so guess you have to speak to them and clarify. There is no their turnover criteria, the only guideline is what ICAI has put out.
Mine is a similar case. Loss of about Rs 1 lakh in FY 14-15 (AY 15-16) taken under limited scrutiny and closed without any tax liability considering the Broker’s trade report. But they have reopened the case now asking me for books of accounts to be maintained. I am not sure of the penalties for non-conduct of audit, if applicable.
I have opted for presumptive taxation scheme u/s 44AD and thus, Turnover is crucial in my case. Can you please provide a little clarity on reverse trade turnover computation ? Also, in case of options, will the turnover include both the absolute difference amounts and option sale revenue OR just option sales revenue ?
Hmm.. I have explained in the post above in detail right?
Sir,I read many cases regarding non audit penalty where ito and cit not agree with icai guidelines. In that situation u have to appeal at ita.
Nitinji,
My IT written is under scrutiny for FY 2013-14. I had solely traded with Zerodha.
I have P&L sheet downloaded, but in need of ledger report and other tradewise details for FY 2013-14, which is not available at present on Q. (Reports up to FY 2014-15 available) can Zerodha help me. My ID is DJ9270.
Can you email to [email protected].
Already mailed, Request no. #315568 date 5/9/2017 at @ 11:00 hrs., waiting for response from Zerodha end till now.
Normally how much time it takes Nitinji?
Hi Nithin , i m regular trader in Future and options , do i need to compulsorily get registered for GST and get a GST registration number? or if sale value of any future goes more than 20lacs then i have to register for GST? pls help, Thanks Nithin
No, not required.
Thanks Nithin
Sir
I am a trader and I have bit of confusion about turnover calculation for F&O transaction.
As i have traded in future and total purchase of all the scripts is 99.65 crore and total sale of all the scripts is 99.60 crore.
Total loss is is 5 lakh, and turnover calculation for audit purpose as per guidance note of icai i.e. total of all negative and positive profit is 7.50 lakh.
i have some delivery transaction as well and total of sale value of all the scripts of delivery transaction is 2.50 crore and total of purchase of all the scripts of delivery transaction is 2.40 crore.
Now my question are
1.I think i have to get my account audited as my delivery and f&o turnover is more then 2 crore. Plz confirm i am correct or wrong?
2. What will be the sale and purchase amount for return purpose?
plz check is caculation
Sale amount is =Total of Future sale + Total of delivery sale i.e.(99.60 crore + 2.50 crore= 102.10)
Purchase amount is = Total of Future purchase + total of Delivery purchase i.e. ( 99.65 crore + 2.40 crore=102.05 crore )
if this calculation is not correct then plz tell suggest me the correct calculation using these data..
Your suggestions are awaited
Thanks in advance
1. Delivery turnover if you are showing as capital gains, isn’t business income. You have to just look at your F&O turnover of 7.5lks. Yes, best to get it audited.
2. I have explained in the post above how to calculate turnover. In your case it will be just 7.5lks.
Sir what will be my purchase for my profit and loss account purpose?
hmm.. didn’t get what you are trying to ask. Please do go through all the chapters once.
Hi,
You have mentioned at some places that if there is a net loss in intraday trading, then auditing is mandatory. But the rules say that if the loss is less than 6% of the turn over, then only audit is mandatory, right? If my turn over is 125000 (50000 profit and 75000 loss) I have net loss but profit is 40% of turn over. So audit is mandatory in this case?
Please correct me, if I am wrong.
If your total income is not taxable, and if your turnover is less than 2 crores, then there is no need of audit. Otherwise yes. In your example, 50k profitand 75k loss means net loss of 25k. This is less than 6% of turnover.
Hi ,
I am a Zerodha client trading in F & O . Your articles and responses are very helpful.
I am looking for form 10 DB (STT paid) for FY 2016-2017 . I had asked this to Zerodha support a few months back and they sent me the tax P&L spreadsheet but that does not have Stock broker code, client code number and code of transaction ( in my case for STT paid between Options and futures). How can I go about getting this ?.
Thanks ,
Paul
Will get someone to look at this ticket. Best to reply back to that ticket asking it to be escalated.
Hi Nithin, Thanks for having someone look into this . I got the form 10 DB earlier today (25/09) . Really appreciate it !!.
Regards,
Paul
If i want to Show FNO as business income and if i m trading as an individual. do i have to trade FNO from linking trading account with current account with a propreitory name? and if i want to open current account and show FNO as business income , do i have to compulsorily take Shop and establishment licence (even if i m trading from my residence)to open current account and show FNO as business income?
No, your bank account can be savings account itself. No need of any shop and establishment etc. Just use ITR3 while filing your returns. That’s it
Thankyou Nithin
Hello Nithin,
I am a Zerodha customer.
I went through your explanations above. They are too good and clear. Many thanks for the same. It has really helped me.
I have one question where I need help from you. I have professional income (from my profession) and I also have non-speculative business income (F&O) . In the last financial year FY2016-2017, I filed my IT returns based on presumptive taxation Section 44AD for non-speculative business income and Section 44ADA for my professional income – My income was well within the limits for the scheme and I was eligible for the scheme.
This financial year (FY2017-2018), however, I might end up in losses in non-speculative business income, but I will still have my professional income which will be less than 50 lakhs in this financial year. And, I am person whose total income is taxable. So, I understand that I cannot claim presumptive taxation scheme benefits under Section 44AD for my non-speculative business income this year and I need to get that income audited. And, for my professional income for this year, I can still claim presumptive scheme benefits under Section 44ADA. So, no need to get my professional income audited.
Is my understanding correct? I request you to please clarify.
Thanks and regards,
Param
Hi Param, you will have to combine all your income and then determine if you need an audit or not. You cannot categorize income into two parts and decide to selectively get it audited.
Hello Nithin,
Thanks for the response. I request some more clarifications please.
You mean audit for my non-speculative business income (F&O) ? or do you mean audit for my non-speculative business income (F&O) and also for my professional income both? My professional income is less than Rs.50 lakhs.
When you say combine all my income, are you referring to adding up my non-speculative business income (F&O) (the net profits or losses and NOT the turnover), and my professional income, and my long term equity gains and short term equity gains, and bank interest? After that how do I determine if audit is required?
I am a person who has both professional income and non-speculative business income (F&O), so don’t both sections Section 44ADA and Section 44AD apply for me for the respective incomes? How can Section 44ADA and Section 44AD be combined for audits? Please clarify.
Thanks and regards,
Parameswaran
Capital gains has to treated separate (long term and short term). Professional income will need to be added to non-speculative business income. But do consult a CA once on this.
Thanks a lot Nithin. I will check with CA too.
Hi Team Zerodha,
One thing didn’t clear to me about audit required or not. As my income from salary is 10lks & my trading profit is 15k & trading turnover is 12lks. So here my trading turnover is less than 1cr and also my profit margin is also less than 8% of my trading turnover. So do I need an audit..?
Yeah, you would need an audit technically.
Sir,
I am having very little experience in trading.
My father is having closing scrip worth around Rs.2000000 (Buy value) but actual value would be much lesser.
Whether it should be shown in P&L and if so at what value?
What should he show in his balance sheet…Should he show closing stock/ investment on this particular scrip and if so at what value..
If you are a businessman and filing under ITR3 with a balance sheet, yeah show the investment value. But if you are using ITR2 as individual, not required to show anything.
Had FNO loss in FY 2015-16.
Not filed return till yet.
Mainly speculative loss.
Would I be liable to audit?
Can the audit be done for past years also?
Or should i file return without audit?
Or should i file itr 4s as by filing that even if I an auditable or in loss, I am showinf 8% profit and also not reuired to maintain books of account also.
Correction:
Turnover near 15 lac, loss near 5 lac
both F&O and speculative loss.
Salary income near 8 lac.
Liable to audit?
Can the audit be done for past years also?
Or should i file return without audit?
Or should i file itr 4s as by filing that even if I an auditable or in loss, I am showing 8% profit and also not required to maintain books of account also.
Yes, you will need an audit, or else you can show 8% of 15lks as profit and pay taxes on that. Yes you can revise your past 2 year returns.
If I get audited return of fy 2015-16, and file it now, Will i not be liable to 1.5 lac penalty of not getting audited before due date of FY 2015-16, that’s 30th sep 2016?
If i am liable for penalty then it is good to file itr 4s and pay more tax.
What is your opinion?
For FY 2015/16, hmm yeah, better to calculate u/s 44AD i.e 8% of turnover as profits and pay tax. You can be extremely aggressive in approach when calculating turnover, so it is as little as possible.
1.5 lac penalty is maximum . as per rule general penalty is .5% of turnover , in your case it workout around 7500 only
If your total income is below 2.5lks, no need of audit. Otherwise yeah. Yes, you can revise your previous 2 year returns and get audited.
Namastey Sir,
I have incurred Inr 76000 loss on F&O on turnover of 1300000/-, In near future in this F.Y. I will trade F&o again but keeping limit of 2 crores in mind
I have also gain of short term trades Sir..
Will it be mandatory for me to Tax audit or I have to file ITR-3 ONLY Sir…
And Sir My Salary is under 1.8 Lacs Non taxable income except STCG
Plz tell is it mandatory for me to tax Audit
If your total income is not taxable, audit is not mandatory. But always best to get one done if you are active trading.
Hi Nithin,
I am not getting how to determine if an income is business income or capital gain.. please help
Raj, please go through all the chapters. I have explained in detail.
I want to know the applicability for tax audit if i am doing intra day . Say for example i have purchase 100 share at 10 and sale 100 share same day at 11 . so what will be turnover from the audit point of view. further please provide details for maintaining books of accounts as well
Rs 100 the profit is the turnover. Do go through all the chapters in this taxation module, have explained everything.
Dear sir,i am agriculturist and not any income source .1.i do intraday and delivery based trading but my profit not touches 10000 rupees then i have paid income tax ..yes or no..2.intraday trading doing with leverage can calculate total turnover amount.
1. Taxes only if your income falls in the tax bracket (2.5lks and over).
2. Turnover is gross sum of profit and loss.
Hey Nithin
I am FNO trader can I show FNO income at 6% if my turnover is less than 2 crore and file ITR 4
Yes, you can. But do consult a CA.
Hi Sir,
I have a doubt.
Suppose I deposited 3 lacs rupees in my zerodha account and after 3 days i withdraw those 3 lacs back to my SBI Bank account. will there be any income tax deduction for that 3 lacs? do i have to submit any proof how those 3 lacs came in my bank account??
I need urgent help. please reply soon.
Thanks!
Ah no, no deduction. This is just you taking your money back. Income tax is when you earn profits.
Hi,
There is some discrepancy in the %profits mentioned here. At some places it says 6% and at others it says 8%. Most of the other websites mention 8% as the profit cut off for audit. Could you please clarify this?
Also, apart from the tedious nature of getting account audited, is there any other downside of an audit. Does it have any long term implication or an area of concern if you need an audit. Will it affect the salary based income tax liabilities etc.
It used to be 8%, it is 6% now.
Hi Nithin,
Iam trading in ZERODHA.
After reading your topics, I have 2 doubts. Kindly clarify.
During this FY 2017-18, My ONLY INCOME is from Equity Trading ( Both Intraday & Delivery).
I am not doing any Future Options.
As per Zerodha Statements,
My STCG Profit is around 13 Lakhs.
Intraday LOSS is 5 Lakhs.
Net STCG turnover is around 4 Crore.
Intraday turnover is around 6 lakhs.
My doubts are :
1. In the above scenario, Should I declare my income as CAPITAL GAIN Or Business Income. ?
(I am not doing any Future Options. Hence the doubt.)
2. Since turnover is above 2 Crore, I may need Audit.
But in your Chapter 6 “Turnover-Audit” , it is written as ” If you are declaring income as capital gains , there is no need to calculate turnover on such transactions. Also, there is no need of an audit if you have only capital gains irrespective of turnover or profitability “.
Kindly clarify . I do Only Intraday &Delivery.
Regards,
Arun
If you decalre your income as business income than you may need audit if you declare your income as business + STCG than also you may need audit. It will be better to ask your AO (Assessing Officer of incometax department) that your income WILL BE business income or business + STCG.
Hi Rupesh,
Thanks. But, AO is not supposed to entertain any queries in India, other than issuing notices. 🙂 🙂
Dear Nitin,
Can you please give me a practical suggestion, pls?
Kindly give me a rough idea about “Auditng Charge” in My case, If I approach through Tradex&ClearTax.
Regards,
Arun
1. hmm.. your call. But STCG can be shown as STCG itself.
2. Turnover is only if you are declaring STCG as business. Otherwise, your turnover will be only around 6lks – for your intraday trades.
Nithin Sir
Where to show business income (Intraday equity) in ITR3 ?
Under speculative business. Can you see the chapter on ITR forms, explained there.
What will be the nature of revenues in P&L in ITR 3 if I have business income from equity intraday and delivery ?
Equity intraday under speculative business income. Delivery can be shown under capital gains.
What will be the nature of revenue if I decalare Both intraday & delivery as business income in P&L in ITR3 ?
Intraday as speculative business income, Delivery as just normal business income.
Thanks
Nithin Sir,
I am glad to be a customer of zerodha and congrats for achieving success at an early age.
You are an inspiration to young generation.
Sir,
I have discrepency in my P & L statement.
Its showing lakhs of profit, whereas actually my net is loss this FY.
I quoted the issue to your support team and they rectified the issue when i checked it last week.
But, If i check it again now, its same old story. Showing previous values. Please help to find a permanent solution.
And also regarding Tax P & L report, they said
“We apologize as we are migrating to a new In-house back office Tax PnL can not be rectified as of now. Once our new back office is up and live we will make sure it is updated. We request for your cooperation in this regard.”
Is this statement true? If yes, when can i expect to go live and get updated.. Thank you..
Karthik, the P&L issues maybe happening due to corporate actions in some stock that you have traded. Most brokers dont’ handle this at all. But yes, we should have the new Q and new P&L reports in the next few weeks.
my income in this year 2017 -18
1st intraday around rs 2000
2nd delevery around rs 9000
capital 100000
Do I need to file Income Tax?
please help me sir!
Hi Nithin,
i have received message from NSE like tradevalue CM rs 25 Lakhs after doing intraday and also got rs -900 loss on this day.
1. so do i need to declare Audit for this..?
2. do i need to bare any other charges along with this loss…?
3. how Zerodha brokerage calculates for intraday..?
Thank
hmm.. about taxation, please go through all the chapters in this module. These are all the charges: https://zerodha.com/charges
Hi Nithin,
Please let me know tax audit is required or not in below situation that helps great for me.
i have done intraday for two days and transaction done more than 25 Lakhs per day tradevalue , finally i have end-up with the losses in both days.
Also i have received message/mail from NSE saying tradevalue CM rs 25 Lakhs by end of the each days.
So, in this case “audit” declaration is required for my account..? (as per my understanding Audit is required only for Turnover not for tradevalue….can please confirm)
Thanks you,
Turnover is not your trade value, but gross sum of profit and losses of every trade. Do read the post above. If your total turnover for the year is over 2 cores, you need audit. If profit is less than 6% of the turnover, you will need an audit also.
Respected Kamath sir,
I want to know is there any penalty or fine from income tax department if the trade value in case of stock future trading goes above 100cr or 200 cr in a day? is there any limit for trading in stock futures in intra-day or through out year? or there is no restrictions on
stock future trading as long as sufficient funds are available in trading account ? for example if SBIN Jan future sell value 310 buy value 309.80 that is a profit of 20 paise & trade value is Rs.1860000/- & if somebody carries out such 200 trades of 20 paise in a day the trade value becomes around 37 crore & can earn Rs. 100000/- in a day ,& above 1000 crore in a year & can earn Rs.3000000/- in a year & pays Tax & also Tax Audit completion so my question is whether there will be any penalty or fine from income tax department due to this huge trade value or there is no problem at all or there is any limit for a trade value in intra day or a year ?
No penalty on turnover or no restrictions as such. When filing income tax, trading turnover doesn’t matter. What you have to look at is gross sum of P&L, which will be much much lesser. Make sure to get your ITR audited by CA if you are trading actively.
Hey Kamath Sir,
I am very new to the system, after receiving my client id I have started trading. Firstly I have started with delivery trade, later on, I started with intraday trading. In the very first day, I was in a negative profit of ~1.2k and then from the next day, I got a positive profit of ~4k, ~2k, and ~3k. But in my account, the profit is not showing and the amount I had added to Zerodha account from my bank account is also not showing correctly (somewhat less by ~1.5k).
Please need a help, if anything I am missing tell me. I don’t know much about the system and new to it.
You will need to write to [email protected] for this. Btw everytime you trade there are statutory charges you need to keep in mind. You can check all the charges on the contract note that is emailed to you everyday.
1) If my short term capital gain turnover is 85 lakh and Intraday Equity Turnover is 20 lakh then what is my total turnover? is it sum of both turnover? is it require to be audited?
2) is it require to pay taxable amount before 31 march? when to pay income tax, before filling return or after filling return?
3) if my salary is 240000, my total short term profit is 80000, intraday equity profit is 60000 then which form use for filling return?
4) is it possible to show short term profit in short term capital gain tax and intraday profit with my salary as business income?
then 85 lakh turnover of short term can be calulated in total turnover calculation for audit required or not?
1. No, only intraday turnover is turnover. Short term is capital gains, no need to include that in turnover.
2. Taxes has to be paid before filing return. You are required to pay advance tax at end of every quarter.
3. ITR3
4. No, intraday is speculative business income. It can’t be combined with salary.
5. You don’t need an audit for the short term turnover. But you will need for intraday turnover (if profit is less than 8% of intraday turnover, otherwise no), as it is considered as business income.
So where to put my salary income? Intraday Income is in Business Income, Short term gain in short term capital gain tax then where to put my salary income ? ( my salary is 240000 so my employer not deduct any TDS on my salary) But my intraday income is 60000+ then my total income 250000+60000=310000 (not include short term gain tax because it is flat 15%) then how to show this 310000 income on return and how many tax to be paid?
You will have to pay 10% tax on Rs 60000 (first 2.5lks no tax, after that 10% until 5lks (stcg is flat 15% after you exceed 5lks income)). You can use ITR2 and show salary income and capital gains separately.
So, In ITR2 i can show salary income and capital gain, but can i show intraday business income on this ITR2?
Can I fill two ITR form on same return? ITR2 and ITR4!
NO you can’t show intraday business income on ITR2. You will need to use ITR3. NO, you can fill only one ITR.
Hello Nitin Sir ,
Lovely work you are doing. I understood almost 90% of taxation implication. Only one query !
Intraday turnover is 70000. Net intraday losses are 30000. No taxable Income !
So now as turnover less than 2 cr , profits less than 6% and no tax liability , audit is not required !
But can i carry forward intraday losses for 4 years without audit and if so , how !
Yes you can carry forward losses without an audit.
Hi,
Yes, you can carry forward your losses.
How?
By filing an ITR.
Welcome.
Hello Nitin Sir..I am a Zerodha a/c holder.I was doing a job till Nov,2017 and was salaried.Now i have become a regular trader in F&O segment.
For this FY 17-18, how should i file my ITR.
Which are the forms that will be required to file my ITR.
ITR3
I downloaded my trade wise turnover from Q.zerodha.com, but total turnover is shown as 0.00 in FO Turnover sheet. Seems like a minor bug ? i.e. summation is not happening in excel.
Dear Sir..in my previous comment i wanted to know which ITR form to be used for FY-17-18 as i was salaried till Nov’17 and now a days doing regular trading in FnO(Equity options only) and you had confirmed ITR 3…Thank you sir for your guidance.
I believe that IT Return filing is such a tidious process which has lots of complexities in it.Thanks to you for your guidance to people like us.
Sir,i have few more queries for clarity.Kindly help.
1. For a regular FnO trader(Equity Options)and sole source of income from Fno trading for me, if i earn Rs.5-6 lakhs in a financial year,what will be the tax implications for me.
Will it be 15% as per short term capital gain tax or in the 5 lakh above category as per the IT bracket.
2. Can i claim tax deduction under 80C and 80D from the income from Fno Trading.
3.If STGC 15% is applicable, then shall i need to pay advance tax and if yes by when.
Kindly clarify my doubts sir.
I am running a Medical store and have a gross turnover of Rs. 1250000 approx. I prepared P&L and realized the profit of Rs. 100875. I have cash balance of Rs. 137000 on Balance sheet. I want to file the ITR – 4 by for the FY 2016-17. How can I do with these figures? Where to show these figures in ITR?
Please reply me ASAP.
I m regular trader in FNO , my turnover is above 20 lacs , do i need to get register for GST number?
No
Thanks Nithin
Can we get audit report from any CA by giving the reports we have from Back office. I mean if we don’t go through the tedious work of Book Keeping & Accounting???
Firstly accounting for trader is quite simple. But yes, you can go to any CA.
Sir,i have few queries for clarity. Kindly help.
1. For a regular FnO trader(Equity Options)and sole source of income from Fno trading for me, if i earn Rs.5-6 lakhs in a financial year,what will be the tax implications for me.
Will it be 15% as per short term capital gain tax or in the 5 lakh above category as per the IT income bracket.
2. Can i claim tax deduction under 80C and 80D from the income from Fno Trading.
3.If STCG 15% is applicable, then shall i need to pay advance tax and if yes by when.
4.As i was salaried this year till Nov’17, this years FnO income can be shown as trading but next FY can i show this as complete business income.
1. as per IT income slabs.
2. Yes
3. NA
4. F&O income has to be shown as business income. You can have salary + business income.
Go through the entire module once.
In many comments, I read the turnover become more than 1 crore? Is it possible? I think it is impossible. Because we count turnover as sum of profit and loss . If everyday profit or loss is maximum up to 20000(i think one day profit or loss of 20000 is bigger) than 365*20000=73lakh only. Than how it is possible to 1 crore turnover?
It is not daily P&L, it is trade wise P&L.
Hello,
In case of availing Margin Trading Facility in Equities, interest is charged by the Service Provider. How about the interest one pays on the Margin Facility? Is the interest portion an allowable expense for the Investor?
Thanks
Yes it is.
If i use margin on intraday then how many interest we require to pay at zerodha. and what is the charge for margin facility?
No interest for margin for intraday.
Respected Kamath sir,
i am an intra day F&O trader( only trader not investor) since last few months i am receiving email/SMS about ” funds & security balance statement” in that email/SMS nothing is mentioned about its use i.e. what I am supposed to do? since every information is available in Ledger provided by you i.e. Zerodha sir please tell me what is its use while filing IT return & Tax Audit ? am I required to preserve the same for Tax Audit ? OR only for balance verification on that day or any serious issue is related with it?
Thank you.
Ah no, that SMS/email from exchange is part of the investor awareness campaign. They are just ensuring that you know. You can ignore that, not needed for anything.
This FY, I have made a profit of around 17 lacs in F&O apart from my salary income. I would like to get clarity on the following
1. Can I consider my wife as employee/ partner, as I am a salaried employee and trading is done/ monitored by her (she is a well educated housewife). As per my CA, I can allocate 50% of the income to her and she can show the same as her earnings. The amount will be duly transferred to her bank account as well.
2. I bought a TV at a cost of 1.5 lacs, which is needed to run the business efficiently and to gather all kinds of news during trading hours and beyond that. Can I claim it as a business expense?
3. Do I need to ensure that 100% of my probable income tax due to the trading is paid before 15 Mar as advance tax? As the trading will continue till end March, shall I pay somewhat extra and later claim refund in case the profit is lesser than the amount for which I have paid income tax?
. Yes
2. Yes, depreciation benefits can be taken.
3. Yes, you can pay extra and claim refund.
Hi Nitin,
In the ” Tax P&L Statement” , STT charges have been mentioned.
It is an already paid charge , right?
Regards,
Arun
yes, all charges that u see are already paid.
I have invested Rs 100000 in direct stocks and Rs 150000 in Mutual Funds. My unrealized profit for my stock investment is Rs 45000 and for my mutual fund it is Rs 48000?
While preparing my balance sheet under the asset side should I show the cost value of my investments i.e. Rs 250000 or should I include my unrealized profits i.e Rs 250000+Rs93000= Rs 343000?
No need of showing unrealized as you are showing this capital gains and not business income.
Sir, How to calculate turnover for open future position, which is open till 31 March 2018 ?
Shall be thankful, if illustrated with example.
Regards
S Sinha
You can MTM the open position to closing price of the futures on 31st March. THat value can be used for turnover. You can also opt to not show this trade at all.
Thank you very much.
Sir, How to calculate turnover for open future position for income tax return, which is open till 31 March 2018 ?
Shall be thankful, if illustrated with example.
Regards
S Sinha
Hi Nitin,
If a person has made a net loss during FY 18-19, can we file it as presumptive income loss and audit is will not required? Or one has to go through audit in any case?
You can take the presumptive income route if your turnover isn’t much. (less than 2 crores).
Dear Nitin,
You are providing expert guidance to the users, hats off to you. I am unable to figure out how do you do it so often.
I have a suggestion which can ease the life of traders/investors which you may like to forward to concerned authorities if you think it is useful.
Since all the trades of most of the stock traders take place on exchanges, they have all the info about our trades/investments. It will be better if exchanges provide all the info to investors about their complete turnover/profit/loss or whatever and provide us with the exact figures like speculative income/non-speculative income/STCG/LTCG for a FY. If some information is required by a stock exchange then it may be collected. It can’t be applicable for all the traders/investors but can be useful for most of them.
IT dept and stock exchanges can collaborate so that when a person logs in to fill ITR, he can see what is the tax amount which is to be paid/added to other income. This may eliminate the need of audits and ease the life of traders/investors. They can focus more on their trading/investment strategy and worry less about taxes and its rules. Mutual funds investments can also be linked with exchanges and IT dept.
Zerodha is already providing all such reports to their customers :).
my total charges in Tax p&l is Rs 16,752 . Does this mean i have to pay this amount as tax?
Ah no, those charges are what you have already paid. Taxes has to be paid on net profits after paying all charges.
My net profit is 39000 if i consider the whole profit which i had this year.
but if i calculate profit only on short term trades it is 88000.
So would it be 15 % of profit short term trades or from total net profit.
Sir i have one more doubt my total profit in short term trades in less than 2.5 lakh so is it required to fill IT return.
Best to fill ITR, no need to pay taxes.
You have to show intraday as speculative business, F&O as non-specualtive, short term equity as capital gain. You can’t combine these to show net profit. So on 88k you will have to pay taxes separately. I have explained in detail in the module. go through all chapters.
Sir my total profit in p&l is 36,000 after deducting charges but my short term profit is 88,000 because i made huge losses in intraday so do i have to pay 15 % of total profit or my short term profit.
15% of short term profit. You can’t combine intraday equity trading with capital gains.
There are two types of profit gross profit and net profit . So which profit to consider?
Gross profit. Show all the costs separately. You pay taxes on your net in any case.
Dear Sir, I am new, i also reffered three person under me.
Please see my Tax P&L Report and tell me how much tax i have to pay or not. And am i eligble for audit, what type of audit is this.
INTRADAY GROSS PROFIT= 5,421.50 (Profit)
INTRADAY TURNOVER= 16,797.70
SHORT TERM GROSS PROFIT= -14,320.85 (Loss)
SHORT TERM TURNOVER= 10,86,306.85
LONG TERM GROSS PROFIT= N/A
LONG TERM TURNOVER= N/A
TOTAL CHARGES= 6,746.50
Thanks for support us.
You just have to add intraday profit to your total income and pay as per tax slab in. Since intraday profit more than 6% of turnover, no need to audit.
PLEASE GUIDE ME WHICH ITR I SHOULD USE AND AUDIT REQUIREMENT OR NOT F.Y. 2017-18 (A.Y.18-19)
MY SALARY IS RS. 360000.00
BANK INTEREST RS. 60000.00
80C DEDUCTION RS. 125000.00
AND SHARE MARKET DETAILS BELLOW:
Profits INTRADAY/SPECULATIVE PROFIT₹1,736.90
INTRADAY/SPECULATIVE TURNOVER₹2,779.60 (TOTAL OF PROFIT AND LOSS AMOUNT)
SHORT-TERM PROFIT ₹-210.95 SHORT-TERM TURNOVER ₹34,795.30
LONG-TERM PROFIT0 LONG-TERM TURNOVER0
Total charges BROKERAGE₹235.48
TURNOVER CHARGES₹182.33
STT₹418.00
SERVICE TAX₹75.18
STAMP DUTY₹74.33
SEBI CHARGES₹3.74
TOTAL CHARGES₹989.06
ITR3, no need of audit.
This is extremely useful information and I must say, I did not find a single other source online that tells you how to calculate T/O of derivative contracts.
One Question:
How does one determine the turnover in the event of an option assignment? Can I consider this transaction as a regular ‘buy option’ where the buy price is the difference between assignment value and the strike?
Yes, best to consider it as buy option.
Dear Nithin sir,
Please see my Tax P&L Report and should i need to audit from CA
INTRADAY GROSS PROFIT= -13,019.40(Loss)
INTRADAY TURNOVER= 16,781.40
SHORT TERM GROSS PROFIT= -9,018.95 (Loss)
SHORT TERM TURNOVER= 5,74,607.90
LONG TERM GROSS PROFIT= N/A
LONG TERM TURNOVER= N/A
TOTAL CHARGES= 2,167.40
If your total income is over 2.5lks, then yeah. But you can avoid it by paying tax showing 6% of your intraday turnover as profits.
Dear Nithin sir,
“Your Cooperation in this regard will be highly appreciated.”
Please see below details of my Tax P&L Report and should i need to do audit from CA & should i pay tax after 31 mar 2018.
INTRADAY GROSS PROFIT= 10849.70(Profit)
INTRADAY TURNOVER= 25685.90
SHORT TERM GROSS PROFIT= 7458.15 (Profit)
SHORT TERM TURNOVER= 1056019.80
LONG TERM GROSS PROFIT= N/A
LONG TERM TURNOVER= N/A
TOTAL CHARGES= 3648.57
Thank you.
Best regards,
Amol
No need of of audit. Yeah you can pay taxes after march and file ITR before end of July.
Hi Nitin,
Can we have Tax P/L statement tradewise with executed and exit date and STT and brokragr charges?
thanks,
Deepa
In the new version of Q that we will launch soon, will have it.
Hello Nithin,
I just want to know about comodity future trading.
Is that also treat as non speculative income so that we can claim it as business income?
Yes.
Hi Nithin,
Could you tell me if my account needs to be audited by CA, with the below given numbers (provided by Zerodha report)
FUTURES GROSS PROFIT₹-112335.625
OPTIONS GROSS PROFIT₹-159200.625
TOTAL GROSS PROFIT₹-271536.25
FUTURES TURNOVER₹9,81,468.75
OPTIONS TURNOVER₹58,35,829.50
TOTAL TURNOVER₹68,17,298.25
TOTAL CHARGES₹44,071.26
Thanks!
You would if your other income is more than 2.5lks and you fall under a tax slab. If not, no.
Thanks
Hi,
My profit and gain in dmat account says
Purchase value 11700000( One crore seventeenth lakh)and sale value 11500000( One crore 15 lakh) for equity delivery based& some intraday shares..so I have made loss of 2 lkhs…so pkease tell me how i calculate turnover and also please advise if audit required, can i show 2lakh as capital loss to save audit.don’t won’t to carry forward the losses..
Please note I don’t have any salaries income only few fixed deposits and mutual fund which is below 2lakhs..
Hi Nithin,
Please could you tell me if my account needs to be audited by CA, with the below given numbers (provided by Zerodha report)
INTRADAY GROSS PROFIT₹-6.00
INTRADAY TURNOVER₹6.00
SHORT TERM GROSS PROFIT₹-947.50
SHORT TERM TURNOVER₹3,672.25
LONG TERM GROSS PROFITN/A
LONG TERM TURNOVERN/A
TOTAL CHARGES₹31.91
FUTURES GROSS PROFITN/A
OPTIONS GROSS PROFIT₹236.25
TOTAL GROSS PROFIT₹236.25
FUTURES TURNOVERN/A
OPTIONS TURNOVER₹3,26,148.75
TOTAL TURNOVER₹3,26,148.75
TOTAL CHARGES₹2,164.96
This is for 2017-2018
hmm.. if ur other income is over 2.5lks, yeah. But since ur turnover is less, speak to your CA. Maybe u can 6% of turnover as profit and avoid audit.
Thanks for coming back Nithin, I spoke to CA, Auditing costs me about 15k, and if pay 6% tax it comes up to 6.5K. Either way I will lose money…Thinking to stop this the way its started for me.
Hello Nithin Ji and Venu Ji,
Pls clear my TO doubt-
1)If I Buy 1 lot Infra Option(lot size 1300) @16 and sell @ 18,how much is my Turnover?
2)If I short sell same option at 14 and buy back at 12 then how much is my Turnover?
Thanks
1. 2600
2. 2600
Sir,Sell side’s something get added naa as its Infra Option???
Hi, I want to understand if I am willing to maintain consolidated ledger, cashbook, trial balance etc having every transaction of mine including trading account, bank account and other assets, on which Annual P&L statement and Balance Sheet will be made then, how to proceed. This is to understand the whole thing in a single document. Can u please add a chapter here considering above requirement.
Regards.
Hmm.. will see if I can put out something on making a balance sheet. There are quite a few articles put up by CAs already on this.
Hi, sorry to bother u again. My requirement is from start i.e. how to prepare ledger and carry on further. I have searched a lot on net and YouTube but info available are in pieces. I m sure that many customer and readers here are in the same position. We still have more than one month in the case of auditing and return filing. Kindly consider.
When I download the tax P&L from Q website, it shows only the option trades which have been squared off. It does not show options which matured (either in-the-money or out-of-money). Hence, the P&L number for me is coming out to be very far from what I had expected. The one that is calculated through Turnover report seems more accurate. Is that the number that should be used then for Tax filing?
Regards,
Siddharth
Siddharth, on the tax P&L we intentionally don’t show any unrealized P&L of any open position. If you want to consider this for taxation, you can add it yourself manually.
Hi,
last 2 yrs I showed 8% of turnover as TO figure was very small..
This year,if my Turnover exceeds 2Crs mark,can I go for audit or I have to anyhow declare 8%(now 6%)??
I read that once you opt for 8% scheme,you cant switch it for next 5yrs??
Pls confirm.
You can get audit done this year.
Nithin Sir,
Equity Intraday trades turnover is 4lakhs.It covers under speculative income.So can we declare 6%(44AD presumptive income) as a profit?
so 6% 0f 4Lakhs equity turnover will be just 24,000rs only??
thx
One more query,do we add turnover of speculative and non-speculative turnover to calculate net turnover?
In Z-report,EQ intraday turnover is not added in F&O,so I am confused.
thx
To calculate your overall business turnover, yes you can combine.
Yea, u can.
Best article ever i have read. nice and love to read Varsity.
The information given are very useful. Kudos to you. My question is Can I get my accounts audited undersection 44AD Tax audit done by a Practicing Cost Accountant? Does the act allow this? Please clarify.
At present Income Tax has given Audit certification only to Chartered Accountants who holds Certificate of practice.
Hi Nitin,
There are a few issues that I noticed in downloaded Tax P&L I want to file my ITR as a trader. I will consider 2 years of Tax P&L and 2 years of holding statements as on 31 March.
Consider following example where I will put dummy values but actual fields as per downloaded statements.
Holding as on 31 March 2017 as per downloaded statement.
Share: ABC ltd.
Buy price: Rs.100
Buy Quantity: 100
Price as on 31 March: Rs.80
Profit: Rs. -2000
In the return that I file now by 31 July 2017, I will have to mention:
Closing stock = 80*100 = Rs. 8000 (i.e. Price on 31 march * quantity)
On May 1 assume I sell 100 shares of ABC ltd at Rs 90.
Now Tax P&L for FY 2017-18 will show.
Share: ABC ltd.
Buy price: Rs.100
Buy Quantity: 100
Sell Quantity: 100
Sell Price: Rs. 90
Profit: Rs. Rs -1000
Going by last years return, the profit here should be Rs 1000 i.e (90-80)*100 where 90 is the selling and 80 is the last financial year’s closing stock price. So there is a difference of Rs. 2000 in this complete scenario.
1. How will you explain this?
2. Should I have taken 90 as the closing stock price instead of 80?
Further,
3. You claim Q shows number of holding days for each script. Its incorrect.
4. You claim Q shows discrepant quantity for IPOs, Demerger shares and those offered in buybacks. Its again wrong.
5. How do you expect the trader to file ITR3 without knowing opening stock, closing stock, without knowing the buy or sell price list of those stocks which are only sold (IPO, Demerger) or only bought from zerodha? Don’t you need to provide the list of such entries with either just buy average or just sell average so that we can find the other side of values ourselves. Mastertrust provides this!
It will be great if you can provide all the figures properly asap for helping us file returns. Its computer program, you can configure it easily please.
Please respond.
PLEASE GUIDE ME WHICH ITR I SHOULD USE AND AUDIT REQUIREMENT OR NOT F.Y. 2017-18 (A.Y.18-19)
MY GROSS SALARY IS RS. 333000.00
80C DEDUCTION RS. 40000
AND SHARE MARKET DETAILS BELOW:
Profits INTRADAY/SPECULATIVE PROFIT₹ 130
INTRADAY/SPECULATIVE TURNOVER₹ 330 (TOTAL OF PROFIT AND LOSS AMOUNT)
SHORT-TERM PROFIT ₹ 15 SHORT-TERM TURNOVER ₹4500
Best to use ITR2. No need of audit since your turnover is so less.
hello sir ,
i have made profit (8.6 lakhs)on my delivery based trades in FY 2017-18. M trading full time with no other income source. What is my tax liability in such situation… 15% or something else??
i only do delivery based trading
First 2.5lks nothing, 2.5 lks to 5lks at 5%, 5 to 8.6 lks at 15%.
thank u very much sir..
Sir,I have Done
1) intra day share trading
2) Delivery based equity trading
3) Purchase and sale of Mutual funds(debt and equity fund)
I also have income from other sources
My question is whether I can show
Intra day trading as speculative business and delivery based trading ,sale of Mutual fund as income from capital gains
Also, whether I can show intra day trading and deliver based trading,mutual fund sale all under provision of 44AD?
Yes you can show them as speculative and capital gains respectively. No, you will have to use ITR3 for this.
For corporates, the tax rate is 25% for turnover of less than 250Cr and 30% if turnover is more than 250 Cr. Is the turnover for companies calculated in a similar way?
Yep, the concept of calculating the turnover is the same for a business. Big or small.
The Guidelines of ICAI for calculating the turnover for F&O is highly flawed and everybody is following the ICAI guidelines as Gospel Truth. For instance for a manufacturer the Turnover is the Gross Sales Less Returns. For a trader the turnover is net sales. The Net sales in a FY can never be negative and it is always positive. The turnover should be shown on the Profit and Loss Account as top line. ICAI is defining the turnover for F&O as the total of profit and loss for each trade/scrip and total of profit and loss for each option trade and the all sales of options. This is absolutely wrong. The turnover can only be actual receipts in my P&L account, which are profit for each trade in Futures, and profit for each trade in options. Payments are losses in the trades in F&O. Other outflow is the expenses like brokerage etc. Many AO are insisting the the turnover as per ICAI guidelines should be reflected in the topline of P&L account. The following example (actual example of my case)will clear the issue..
Turnover as per ICAI guidelines: Rs 680000.00.
Net Loss in Futures: 8000.00.
Net Loss in options: 17000.00
Other Charges: 16000.00
Net Loss in F&O: 41000.00
If I want to show the actual loss in ITR, I have get the accounts audited.
For this I have to draw the P&L account as under.
1 Turnover u/s 44AB of the income Tax ( As per ICAI Guidelines)
Favourable difference on futures and options transaction 280000
Unfavourable difference on futures and options transaction 400000
Total 680000
2 Derived Expenses / Cost of transaction related to Turnover
Net Receipts of proceeds ( net of expenses )received from settlement of future and options transactions of positive results 280000
Add : Net Receipts of proceeds ( net of expenses) received from settlement of future and options transactions of negative results 400000
Add : Net of positive and negative Results of above receipts (resultant loss) 41000 721000
3 Profit/(Loss) Before Tax (1-2) (41000)
4 Provision For Tax –
5 Net Loss Added to Proprietor’s Capital Account (3-4) (41000).
In the Balance sheet I have to show only the balance sheet pertaining to my F&O trading only, not the entire assets and liabilities.
The confusion regarding PL account has arisen as most of the CAs do not understand the F&O trading mechanism.
Please correct me if I am wrong.
Highly informative and useful read! Very nicely written. Got a bit confused on one part though. Is income from currency derivatives (currency F&O) speculative or non-speculative business income? Please let me know. Thanks
Non-speculative.
Hi Nitin,
Please guide me if an audit is needed and regarding the ITR to be filed
INTRADAY/SPECULATIVE PROFIT₹99.60
INTRADAY/SPECULATIVE TURNOVER₹700.60
SHORT-TERM PROFIT₹-406.05
SHORT-TERM TURNOVER₹43,026.95
I am salaried employee approximate annual salary 20 lac
Can I file a normal ITR 1-2 since my intraday turnover is very less
Do I need an audit?
Yes, you can use ITR2 itself because the turnover is so less.
sir i am salaried person and my annual income approx 6lakhs.
my total turnover and profit for 17-18 as follows
equity
INTRADAY GROSS PROFIT 1,164.55
INTRADAY TURNOVER 1,258.05
SHORT TERM GROSS PROFIT 2,168.25
SHORT TERM TURNOVER 1,87,436.75
f&o
FUTURES GROSS PROFIT -3,037.50
OPTIONS GROSS PROFIT -66,561.25
TOTAL GROSS PROFIT -63,523.75
FUTURES TURNOVER 3,037.50
OPTIONS TURNOVER 9,48,452.50
TOTAL TURNOVER 9,51,490.00
commodity
TOTAL GROSS PROFIT -10,262.50
TOTAL TURNOVER 44,192.50
now please please by looking this please tell me am i need to do audit ? many many thanks. which form to use?
If you have no other income other than this, not required. But if your total income is over 2.5lks, then yeah.
thanks for your valuable reply sir. sir someone told be that i cant do business income as a salaried person . it will come under code of conduct etc etc. telling file return in the name of wife and many more OR this time only file in the name of myself for fy 17-18 and let the losses go .
sir i want to know is that illegal to do business income from trading , once i am showing everything in income tax filing and paying tax ?
please suggest i am getting confuse. i shall be very grateful to you. what should i do?
Hmm.. it isn’t illegal to trade as a salaried employee. Many people do. What you shouldn’t do is trade based on any non public information that your job gives you access to.
thanks sir for your reply. hope i can continue with trading as a salaried person ? i am going to file itr 4 but audit is required as it is less than 8%. otherwise 4S i think for fy 17-18
ITR4 is renamed to ITR3 now and ITR4S to ITR4. SO yeah, ITR3. There is no issue as a salaried person, unless you company specifically doesn’t allow you from trading. Maybe look at the employee handbook or your offer letter.
Hi Nitin,
There are a few issues that I noticed in downloaded Tax P&L I want to file my ITR as a trader. I will consider 2 years of Tax P&L and 2 years of holding statements as on 31 March.
Consider following example where I will put dummy values but actual fields as per downloaded statements.
Holding as on 31 March 2017 as per downloaded statement.
Share: ABC ltd.
Buy price: Rs.100
Buy Quantity: 100
Price as on 31 March: Rs.80
Profit: Rs. -2000
In the return that I file now by 31 July 2017, I will have to mention:
Closing stock = 80*100 = Rs. 8000 (i.e. Price on 31 march * quantity)
On May 1 assume I sell 100 shares of ABC ltd at Rs 90.
Now Tax P&L for FY 2017-18 will show.
Share: ABC ltd.
Buy price: Rs.100
Buy Quantity: 100
Sell Quantity: 100
Sell Price: Rs. 90
Profit: Rs. Rs -1000
Going by last years return, the profit here should be Rs 1000 i.e (90-80)*100 where 90 is the selling and 80 is the last financial year’s closing stock price. So there is a difference of Rs. 2000 in this complete scenario.
1. How will you explain this?
2. Should I have taken 90 as the closing stock price instead of 80?
Further,
3. You claim Q shows number of holding days for each script. Its incorrect.
4. You claim Q shows discrepant quantity for IPOs, Demerger shares and those offered in buybacks. Its again wrong.
5. How do you expect the trader to file ITR3 without knowing opening stock, closing stock, without knowing the buy or sell price list of those stocks which are only sold (IPO, Demerger) or only bought from zerodha? Don’t you need to provide the list of such entries with either just buy average or just sell average so that we can find the other side of values ourselves. Mastertrust provides this!
It will be great if you can provide all the figures properly asap for helping us file returns. Its computer program, you can configure it easily please.
1/2. If you are showing your investment as capital gains, there is no need to pay advance tax. You just have to consider your buy/sell trades. The tax P&L works this way for equity. If you are showing equity investing as business, then you will have to build the P&L on your own.
3/4. Yeah some issues we are facing. Check out https://console.zerodha.net/holdings (still in alpha, should be in beta by next weekend. Tax P&L is yet to be updated on this).
Hello Sir,
My IPO Profit Not Show in my P&L Report so Profit Earn in IPO is Taxable.
And Yes, So how I Calculate it.
Yes it is taxable, short term capital gain for lesser than 1 year and long term for over. You can manually calculate this and add it to your P&L.
Hello Nithin,
As you said, “Creating balance sheet, P&L, and maintaining books of account is quite simple for individuals with just trading as a business income”, 2 questions,
1) does this mean that individual who has salaried income and only trading as business income can prepare balance sheet and PL statement on their own and still need to go to CA to get it audited? What do CA actually do if one can prepare these by themselves. Assuming, they verify and provide some kind of report.
2) How do i use those audit report information in cleartax (watched the taxation video in youtube which is actually an eye opener, thanks a ton), if i prepared PL and balance sheet on my own and get audited by a CA(not sure needed).
Because i made a loss and falling under profit less than 6% turnover. I’m clear about ITR3 and infact done 90% of work in filing. But lacking information regarding CA auditing (also in that youtube video) to proceed further. Can i do that everything myself using cleartax..?
Thanks.
1. Yes. CA audits saying you have done everything correctly and signs the balance sheet.
2. You would need to reach out to CA for the audit. You can’t do on your own.
Hi Nitin,
What if audit is not required? Can I file ITR myself (in case of salary + only intraday trading as business income)?
Yes, you can.
hi,
My intraday profit is 3400
intraday turnover is 23000
short term profit is 51000
short term turnover 58LK ( 5800000)
no fno trading ..no ltcg
my annual salary income is 75000 (75k)
should I need tax audit? & which itr form will be better ??
plz help.. and I want to avoid the tax audit.
Not required since turnover is lesser than IT slab. But do speak to a CA.
Hi Nitin
I am a salaried person with annual income of rs 750000. Along with this I have also made investment in stocks which is as below,
Speculative turnover(Intraday)= 98
Short term ternover= 39075
Short term loss= 800
My question to you is,
which ITR form should I fill ?
Do I need to get it audited ?
ITR3. Since your turnover is less, maybe you can show 6% of your turnover as profit and avoid the audit.
So, in that case, we can go with ITR-4 right.
Kudos for such a great
Hi Nitin,
This is my Tax P&L is showing
Intraday gross profit₹-61.45
Intraday turnover₹631.45
Short term gross profit₹22,783.50
Short term turnover₹4,19,928.50
Long term gross profitN/A
Long term turnoverN/A
Total Charges₹2,171.35
1. Do I need an Audit as profit is less than 8%
2. Mostly I have done short term trading in stocks. I should put the profit as short term capital gain. Correct?
3. I am trying to fill up with clear tax, they don’t mention ITR’s. There is an option for putting amount for Capital Gain. Do I need to put short term capital gain there itself? I am a salaried person. IF I show short term capital gain, then I dont need to show it as business right?
1. Since your intraday turnover is so little, maybe u can show it with your short term. Short term capital gain there is no concept of audit.
2. Yes
3. YEs, ITR2
Hi.
Wonderful article.
A couple of questions though :
Lets say that Total profitable trades in Futures is Rs.1,00,00,000
Lets say that Total adverse trades in Futures is Rs.90,00,000
So that means my turnover is Rs.1,90,00,000
So when I am drawing up my P and L, Turnover in the ITR-3 will be shown as Rs.1,90,00,000.
But what will be shown under Purchases ? Rs.1,80,00,000 ?
It is not all profitable trades, it is all profits of trades put together and losses together. all positive turnover as gross receipts and negative turnover as Gross sales
Hi,
My query is kind of the same as Mr.S S Subramaniam mentioned above.
Let me borrow his example .
Please confirm if this is correct. Thanks in advance.
The following example (actual example of my case)will clear the issue..
Turnover as per ICAI guidelines: Rs 680000.00.
Net Loss in Futures: 8000.00.
Net Loss in options: 17000.00
Other Charges: 16000.00
Net Loss in F&O: 41000.00
If I want to show the actual loss in ITR, I have get the accounts audited.
For this I have to draw the P&L account as under.
1 Turnover u/s 44AB of the income Tax ( As per ICAI Guidelines)
Favourable difference on futures and options transaction 280000
Unfavourable difference on futures and options transaction 400000
Total 680000
2 Derived Expenses / Cost of transaction related to Turnover
Net Receipts of proceeds ( net of expenses )received from settlement of future and options transactions of positive results 280000
Add : Net Receipts of proceeds ( net of expenses) received from settlement of future and options transactions of negative results 400000
Add : Net of positive and negative Results of above receipts (resultant loss) 41000
TOTAL DERIVED EXPENSES :721000
3 Profit/(Loss) Before Tax (1-2) (41000)
4 Provision For Tax –
5 Net Loss Added to Proprietor’s Capital Account (3-4) (41000).
yep, correct. But do consult a CA.
Hi Nithin,
I have got some doubts related to my tradings & investment, could you please share your thought & guide me accordingly.
A) Intraday Turnover Rs.56,000/- Profit before brokerage, STT is Rs. 2,000/-
B) If i consider mine Delivery Trade as business income then Turnover is 20 Lakhs Rs. & profit before brokerage & STT is 36,000 Rs.
C) Also i have made short term redemption from MFs for total sale value of 2 Lakhs & STCG is 21,000/-
D) Other income is only salary income under 10% slab.
Wrt above, my queries are-
1-How to derive that Delivery Trading to be declared as Business Income or STCG?
2-Can i show my MF redemption under business income?
3- Can i show my delivery trade under STCG?
4- As my profit is below 6% of Turnover, can i show 6-7% profit & avoid audit & CA fees?
I’ll appreciate your response at your convenience.
Thanks,
Hi Nithin,
My Total income (salary + business) =405000 where Rs.400,000 (salary income) + Rs.5000 (Profits from trading)
So my question is when I prepare my balance sheet that moment should I only focus of my business profit or consider of my total income?
Regards,
Surajit
I am a professional and I am doing F&O trading as well. Can I combine the income from profession and loss from F&O trading to arrive at my net profit in both businesses or should I treat both separately?
I have a question:
If i have a loss which is less than 8% of the turn over and hence qualify for audit. Now if i decide to use the presumptive tax method and pay 8 % or 6 % as applicable , then my question is how do i carry forward the loss which i have incurred?
If i am already in loss and on top of this i pay the tax :
1) can i add this presumption tax as my loss for carry forward?
2) w/o including the point 1 above, how can i really carry forward as I read in the net that ITR 4 do not allow for the negative numbers (not sure and this quite strange). pls advise ASAP to file the return on time.
You can’t carry forward a loss in this case. You are declaring your profit as 6% of your turnover, so essentially you let go of the loss.
Hi Nithin,
My f&o n intraday turnover is 1.6 crores and net profit is more than 8 %. Can i file ITR3 without going for auditing?
Yes, you can.
As from this A.Y.2018-19; 4 MANDATORY COLUMNS are there in ITR-4(PRESUMPTIVE INCOME); SUNDRY DEBTORS, INVENTORIES, SUNDRY CREDTORS, CASH-IN-HAND…..I read your reply in comments of last year in which you said,” Debtor is a person who owes money to you , with Zerodha your money is given Deposit/ Advance towards your own purchases. There is no Debtor unless you provide some other service and you have receivable.”….I also got HELP from TAXIQ in filing ITR-4 and they also said that” (on sundry debtors though it’s not in nature of debtors as Zerodha is a supplier of service to you but when advance given to vendor can be classified under debtors.”…..Sir….please guide me what to fill in these 4 MANDATORY COLUMNS especially SUNDRY DEBTOR as I leave them blank last year and filled 0 as these were not mandatory
The Amount with Broker is as a Vendor for a person for Services though the Investor has to maintain advance Balance. And in ITR you cant put Negative balances in Creditor. So same can be classified under Debtors. Still your numbers are correct and explainable , you need not worry. You have always right to explain your case.
Helo Nithin,
Following are the details of P&L. Please let me know
1. if i should use option 1 or 2
2. will an audit is required please?
3. ITR3 has to be used
• Equity Delivery:
a. Long Term: 40906.25
b. Short Term:911.5
• Commodity:
c. TOTAL GROSS PROFIT: -15,960.00
d. TOTAL TURNOVER: 22,360.00
• Interest Earned
e. FD: 43,111.00
Option 1. Business Profit: a + b + c + e
Option 2. Capital Gain: a + b
Business P & L: c + e?
You can use either options. But whichever option you chose, make sure to stick to the same stance for the next few years. Don’t keep switching to benefit paying lesser taxes.
Thanks Nithin.
So if I select option 1, can I file ITR 2 pls?
Or should I file ITR3 for the small amount in Commodities Futures.
Dear Nithin, My salary income is 8 lakhs and my FO TURN OVER is 35 lacs with losses 2 lac fy17 18.IF i can show 8% PROFIT,can i avoid audit or any other option…
You can avoid audit by showing 6% of turnover as profits and take an aggressive approach to calculate lower turnover. But considering you have 2lk loss, I think you should get yourself audited and carry forward the loss.
Can I combine Equity and F&O profit/losses if I show it as business income?
Yeah, equity delivery not equity intraday.
Thank you Nithin!
Hi Nitin,
I am a salaried employee & trade in my wife’s account (who is a housewife) with my own money.
While filing IT returns, should my F&O profits be clubbed with my income or should my wife file a separate IT return?
Thanks in advance for any pointers.
Cheers
File your wife’s separately.
what will be the “opening stock” and “closing stock” for F&O while filling IT3?
Positions brought forward from last FY to this and what is getting forwarded to the next.
I am having 1.1 lakhs Option turnover, 5k option loss which is regarded as business loss, whether it is mandatory to have books of accounts audited?
If your total income is over 2.5lks, then yeah.
If in intraday trading I had made 100 contracts , total contract sale 2 Crore and total contract purchase is 1.5 crore and net loss is 50 Lakh.
Sum of absolute profit and loss is 80 Lakhs, so turnover for audit purpose is 80 Lakhs.
Then for taxation purpose, there will be loss of Rs 50 Lakhs or (80 Lakhs less expenses).. Please clear my case.
For taxation your net loss is your actual loss, so 50lks.
Hi,
I’m taking help of cleartax to file my returns. In FY 17-18 My intraday equity turn over was 1,020 ans FNO turnover was ₹1,42,198.75 as per q.zerodha.com Tax P&L. But my CA called me and said this cannot be taken as turnover and instead the total sell value i.e. around 30,00,000 should be taken as turnover. As per that i’m in loss and requires a tax audit is my CA’s argument. What should i do now?
hmm.. Different CA’s might have different views on calculating turnover. What we have taken is quite conservative, maybe you can convince him to follow the same.
Hi Nithin,
Thanks for the detailed info. Please let me know if I can use ITR2 for the following case.
Long Term Capital Gain – 50K,
Short Term Gain – 1k.
Commodities Loss – 15k. [Turn over 30k]
Commodity loss can’t be shown on ITR2, so ITR3.
Sir,
Last year the code for Medical profession was 604 and for trading 204. This year there are lot of options. what is the code
1) for a doctor who is a visiting consultant and receiving professional fees,
2) for an individual doing investments in equity and FNO (No Intraday)?
Thank You
https://tradingqna.com/t/business-code-for-f-o-traders-for-itr-4-filling/39606
Hi Nithin,
Can you please share the official link which mentions the ” 2 CR limit for digital transactions ” (instead of 1 CR for non-digital) ?
Hi Nithin,
Can you please share the official link which mentions ” 2 Crore turnover limit” for digital transactions (audit not required)?
Some CA is saying that the 2 Crore limit is only if you opt for the presumptive income scheme, otherwise the limit is only 1 cr (even for digital transactions)
I think if you google, you should land on it. Check this article.
Ah, now I get it.
So it applies “only” if I opt for presumptive income…. Otherwise the limit is 1 crore only.
Sir
The F&O turnover 2017-2018 as per TAX PL
Rs.52158/- where as the scipt wise turnover
as per statement is Rs.201866/-.
Which Turnover amount will be considered for TAX filing.
If I show 8% profit on Rs. 52158/- and paid the TAX , Is
the TAX audit required.
¶
You can chose either ways. Upto you.
Hello Sir,
For me turnover is 38.5 lakh, losses 10.5Lakh and No other income.
So can I carry losses without audit? Or Audit is compulsory to carry forward losses
Best to get an audit.
In case person is not opting for presumptive taxation (44AD) then te limit would be 1 crore (for turnover) in order to have tax audit compliance.
It is 2 crores now.
This is exactly my point of confusion.
The 2 crore limit is only allowed if I opt for presumptive income. Otherwise it is only 1 crore (even for digital transactions). This is what I am getting to read form most articles.
Please Nithin sir, can you confirm this ( you are mentioning in the varsity chapter that it is 2 cr , but actually most other articles etc saying that 2 crore is only if I opt for presumptive income)
2 Cr Limit for Not Audit is if you declare under 44AD only, else Audit is applicable for One Crore.
Thanks, its clear now
Premium received on sale of options is also to be included in turnover is bit confusing because premium stands for the amount additional amount received say 1 lot of option bought at 1000 and sold at 1100 then 100 would be the premium received on sale of options (it may be negative or positive)
The total of favourable and unfavourable differences shall be taken as turnover is clarificatory to indicate both the negative & positive premium should be considered for computing the turnover.
As per my understanding, turnover would be = favourable + unfavourable differences (refe page 41 of Guidance note on Income Tax Audit read PARA 5.14 (a) with 5.14 (b).
Moreover, option trading shall be speculative activity in view of Guidance note. Refering the language used in Guidance note “A speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery”
It is upto you on how you want to consider it. You can show the reduced value of turnover when filing ITR. We have to take the most conservative approach as a platform.
Hello Sir,
Is it mandatory to show my current Portfolio(Holdings for Long Term) in ITR3?
Intra day Profit – 2K.
Short Term Gain – 2k.
I am salaried, Filing ITR3, have speculative business income of 10k from 1.5 lakhs turnover.
Do i need to maintain books of accounts in this case?
More than 6% profit vs turnover, hence not required.
hello sir,
1)my F&O turnover in zerodha tax P&L statement is show to be more than 1 crore and in trade wise turnover xl sheet it shown as 0/zero (accroding to zerodha helpline it’s a mistake) , so what is it ???
2) though F&O turnover is more than 1 cr. the are over all losses of 70k rupees , so do this needs audit or nor not , i asked a CA and according to him 70k would be considered as turnover not 1 CR and so no audit is required ??? is this right ???
3) the equity turnover is 49 lacs, and profit is 55k rupees, so does this requires audir or not or paying taxes on the profit is good enough ????
Hi Solkar.
Point no. 1, Extract the excel report and calculate the turnover manually.
Point no. 2 & 3, No tax audit applicable.
1. Trade wise turnover you can calculate it yourself. You can maybe create a ticket to have it fixed. Turnover can be calculated by you itself basis what is written in this chapter above.
2. If you have a lot of turnover, best to get an audit.
3. Equity delivery if shown as capital gains, need not be considered for business turnover. Do go through all the chapters here.
Hi Nitint Sir,
I am a novice investor trading only in equity shares and a salaried person. I have some short-term capital gain. And out of curiosity I tried intra-day trading for 9 to 10 days and incurred a loss in that. I have mentioned my details of profit and loss below. Can you please suggest which ITR should I file and do I need to do any audit to show this inta-day losses in ITR or shall I avoid showing this losses in ITR?
Thanks in Advance.
Details of P&L
============
Short-term Captial gain details:
Total Buy Value-> Rs. 467871
Total Sell Value -> Rs. 517254
Total Profit -> Rs. 57617
Total Loss -> Rs. 8234
Net Profit -> Rs. 49383
Intra-day Details:
Total Buy Value-> Rs. 2138363
Total Sell Value -> Rs. 2091588
Total Profit -> Rs. 5208
Total Loss -> Rs. 51983
Net Loss -> Rs. 46775
Hi Paul,
ITR 3 Form will be applicable, you need not to get audited for claiming the loss, but file your return on or before 31.07.2018 to carry forward the loss to further years.
For any clarity, you can call at 9136279838
ITR3 ideally. To avoid an audit you can show profit as 6% of turnover. Turnover is not trading turnover, check the explanation in the chapter above.
thanks CA sachin goel , agian
1) out of curiosity are appointed by zerodha officially ?? or another good Samaritan ???
2) my 1 CR turnover and 70l loss is in options not futures and according to above sect 44AD, while calculating turnover the options PREMIUM needs to be aggravated with the profit and loss of each trade, now according to investopedia , options “PREMIUM” is either the profit you earned by trading the option or the sell price of the option ……
SO, if we consider the option sell price as the PREMIUM then the options turnover crosses 1CR in this i am asking again to confirm if the audit is needed or not ???
3) what is presumption scheme and in this case can it be applied to avoid audit ???
Dear Sir, thank you for the information.
I have done trading in derivative, intraday and F&O. I am a salaried person. My total turnover is less than 1crore and i m in loss in share market.
Which ITR form should I fill??
ITR3.
mr/sir nitin kamath
1) my 1 CR turnover and 70l loss is in options not futures and according to above sect 44AD, while calculating turnover the options PREMIUM needs to be aggravated with the profit and loss of each trade, now according to investopedia , options “PREMIUM” is either the profit you earned by trading the option or the sell price of the option ……
SO, if we consider the option sell price as the PREMIUM then the options turnover crosses 1CR in this i am asking again to confirm if the audit is needed or not ???
2) what is presumption scheme and in this case can it be applied to avoid audit ???
1. You can take an aggressive stance to show lesser turnover.
2. Check the chapter on ITR forms.
Hi Nitin Sir,
As per Cleartax, if we are showing any amount in P&L section we have to fill balance sheet also.
Intra day Profit – 2K.
Intra day Turnover – 2K
Short Term Gain – 2k.
Short Term Turnover – 87k.
What exactly needs to be filled in balance sheet in this case?
Ah, not sure what they are asking for.
Dear Nithin wonderful explanation and response .we deeply appreciate your effort and help in educating small investors especially employees.I have some queries and hope your help in this regard.
1. if you have profits from longterm capital gains i.e selling equities around 12000 rs and loss of 2 lakhs in speculative and non speculative and as per your chapters taking all positives and negatives in F&O plus selling price of options plus positve and negatives in equity intraday our turn over is around 30 lakhs .so you said as turn over is less than 2 crore and loss (profit less than 6%) ) i need to submit itr3 and get my books audited or declare 6% profit and avoid audit so my query is
where i need to declare this profit and can i carry forward my losses AND IF IT offficials ask where to show this profit , can declare 6% profit in itr3 in speculative and carryforward non speculative losses or do i need to declare overall loss 6% and use only itr4 without caryyforwarding losses
suppose next year if i got profits then do i need to use same itr4 and declare presumtive profit of 6% or do i need to pay tax for full profit as per slab rate
if i get audited this year and carryforward my losses and i got my profit morethan the 6% of turnover and less than 2 crores then do i need to get audited again as i got audited this year and every year do i need to get audited irrespective of turnover and profit
if i stop trading next year like to do trading after 2 years and my income is only salary then can i submit itr1 because i can carryforward theselosses to next 8years nonspeculative or do i need to submit itr3 and carryforward the same losses every year
finally its really confusing what to keep in the sales of good column in itr3 and what to keep in purchases column of itr3 and other expenses column because one of my collegue get it done from a CA and he put contract value of buy price of shares in purchases and contract value of selling in sales column then turn over would be contract turnover but not business turnover.based on your informatio i presume all positives of futures and option s (intraday) in sales of goods and negatives in purchases and where do sales of options premium price to be included and which column speculative positive and negatives to be included
which column longterm capitalgain included (realized this year before April so i guess no tax ) it would be helpful if you can give a sample with these examples and salary an example of latest itr3 including hra and chapter via because my employee does not included hra and my house owner didnt give his PAN card,
thanks alot for your help
¶
Reply
If you declare profits, you will be letting go off your losses. To carry forward, you will need that audit. Yes, if you stop trading, you can go back to ITR1. About income tax filing help, best to speak to a CA. It is extremely tough to answer these online.
one of my known person is a house wife with no regular income and not a tax assesee.
2.But from the money received from her parents as gift, she is doing MCX futures trading intraday.Please explian cleary how to consider pofit/ loss in this, with least possoble taxliability
:), do read all the chapters of this module.
Sir, we do trading and transactions in all digital mode. So should i show 6% or 8% in ITR4? As per 44ad, if i opt for presumptive income then i think i have to continue for 5 yrs with same scheme?
Please clarify.
Thanks.
6%. you can opt out of this anytime. But if you opt out, you can’t use it again afterwards.
Ok sir thanks. If i opt out then after 5yrs i can opt again as i found in google. To carry forward loss in non speculative trades am i need to file itr3 every year? Or only itr1 as i am salaried person and stopped trading for time being. I will do start after 3-4yrs. Please tell.
One more request kindly add top and bottom in all your modules to avoid long scrolling up and down sometimes.
Thanks.
You can just file ITR applicable for that year. So you can file ITR1 for that year, until you start trading again.
Ok sir. Then in ITR 1, where I will show my previous year carry forward losses?
For non speculative losses is it 8 yrs i can carry forward?
You didn’t coment on my suggestion of adding top and bottom icon in all your modules. Kindly mention one more thing in this module that 2cr is for only presumptive income only otherwise it is 1cr. So that more clarity will come to others.
Kindly answer my above queries.
Thanks sir.
You dont’ have to mention on ITR1, whenever your file ITR3 next, you can show this value. Will get the top/down added.
I have :
Total (F&O)turnover : ₹30,51,319.70
Total (F&O) Gross profit : ₹-4,86,105.10 (LOSS)
Salary >2.5 Lacs. So If I understand correctly I need to fill ITR3 and loss should be audited.
In case I file to fill ITR3 or not audited as I incored loss , is there any legal issues ?
thanks
If there is a scrutiny, u can be charged a penalty.
Hi
i have similar problem; actually in my sace F/o turnover is 7.25 Lac and loss is Rs. 1.15 lac; i want to get my accounts audited. Can you please tell me how i prepare profit and loss account to arrive at a loss of Rs. 1.15 Lac on turnover of rs. 7.25 Lac
Here is my report
Equity
==================
INTRADAY GROSS PROFIT₹2,445.90
INTRADAY TURNOVER₹2,445.90
SHORT TERM GROSS PROFIT₹700.00
SHORT TERM TURNOVER₹4,45,930.20
LONG TERM GROSS PROFITN/A
LONG TERM TURNOVERN/A
TOTAL CHARGES₹1,444.55
F&O:
————————
FUTURES GROSS PROFITN/A
OPTIONS GROSS PROFITN/A
TOTAL GROSS PROFIT0
FUTURES TURNOVERN/A
OPTIONS TURNOVERN/A
TOTAL TURNOVER0
TOTAL CHARGES0.0
Commodity
———————–
TOTAL GROSS PROFIT0
TOTAL TURNOVER0
TOTAL CHARGES0.0
Is audit required? What is the tax over this whole thing?
DO go through all the chapters. Taxes is basis on your total income.
Sir,
Last year i have a F&O turnover of Rs. 5,21,980.00 and booked loss of Rs. 2,23,102.00. I have filed ITR-3 but bookes were not audited, am i needed to audit my books ?
In case your total income was below 2.5lks, not needed. If it is more, then yeah.
Sir,
My wife is house wife. For FY 2017-18 complete details of her is as given below:-
Turnover in intraday : Only 70000 after adding all positive and negative difference of sale and purchase value.
Intraday loss: 9000,
STCG: 20000,
LTCG: 3500
Dividend: 2000
Demat AMC & other charge: 1000
House lease income: 110000,
Income from other source: 50000
Fd and Bank saving interest : 2500,
Total income is less than 2.5 lakh
My question is
1 Which ITR form she should file ?
2 She wants to carry forward intraday loss of 9000. Is she right ?
3 In her case tax audit is required or not?
Kindly give your valuable suggestion.
Thanks a lot.
1. ITR3
2. Yeah she can.
3. If total income is less than 2.5lks, no need. If more, then required.
Thanks a lot Sir for your valuable reply in a nice way.
Kindly suggest code to be entered on Nature of Business page. Is it necessary to enter?
Check this.
I am actively trading the FO, Intra day and Short term trading.
According to my understanding
(Opening balance + investments during the year + profits) – (withdrawals during the year + All charges )
should match the ledger balance as on 31.03.2018.
I also had options short open positions as on 31.03.2018
In my case the ledger balance is not matching according to my above mentioned calculation.
Can you please guide me What it is it I am missing at arriving the right balance
You need to reduce the option premium that you had received by shorting both on the starting day and closing day of the year. Similarly if you had bought options, you can add it back.
The Common idea in the community that tax audit is needed if profit is less that 6% is wrong. 44AD is basically an optional section as it stands from amendment in 2016 read from 44AB (e) read with 44AD (5) read with 44AD (4). Basic applicability comes from 44AD (4) which reads as under;
Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).
So, if I never opted into this section, I need not bother about this section and be done with my tax return under regular provisions. But it is very unfortunate that the IT department does not bother to clarify these known big problems faced by taxpayers where lakhs of hours of CA’s and taxpayers time is simply wasted to do some exercise on figures that are already known without a fraction of doubt.
A detailed and crystal clear article for a layman. Good job Nitin.
but I have the following doubt/query.
I think loss on sell of Option should be adjusted with the Premium received on sale of options . So the formula should be
Turnover in case of Option = (Profit/(Loss) + Premium received on sale of options)
Therefore in example 2 turnover will be 1,000/- only.
Am I correct Nitin ?
Business Turnover 42 lac
Speculation Turnover 386646
Business Income 343000
Speculation Loss (178567)
STCG 244860
IFOS 165000
Is tax audit necesaary? If yes then under which clause and what will be the turnover to be shown in audit report whether of businee or speculation?
HI
i am going to get my accounts audited due to F&O Trading and intra day trading i.e speculative and non speculative both i just want to know while draft P&L should i consider / mentioned on face of p&l sale and purchase value of trade both for the determination of profit or just mention profit or loss figure.
secondly while draft 3CD in last clause there is ratio analysis here what should i mentioned under turnover full sale value or only margin.
Hi Nithin,
I am a customer of Zerodha, I need your guidance on income tax return filing.I am getting salary of more than 5 lacks.
Intra-day / Speculative profit -123308.40
Intra-day / Speculative turnover 147446.00
Short-term profit 40713.70
Short-term turnover 419926.80
Is audit is required for this? If not required, shall i fill ITR-3 form and submit the filing?
Thanks
Mallikarjuna
Ideally yeah.
Sir, I have around 3 lakhs turnover from intraday equity and F&o. can i enter 3 laks as gross receipts under section 44ad and assume 6% as my profit?
mr/sir nitin kamath
while calculating turnover in xl sheet there are two columns 1) columns one is turnover stating only profit/loss and 2)other column as turnover as sell price with profit/loss, so what shot should be consider as total turnover column 1 or 2 ???
You can chose either.
Dear Nitin,
I am a customer of Zerodha and as per your P/L statement , my EQ intraday turnover is 23000 and have a loss of 4000. Also F/O (Nifty) Turnover is 3000 and loss is 3000. My total taxable income is less than 3 lacs and self is senior citizen. pls advise if :
1) Audit is required
2) Which form to use ITR-3 or ITR-4 ( I wish to carry forward losses to next FY)
3) What entry need to be entered in ITR-3 form under “No A/C case” Item 53 , a) Gross Receipts : under sub sections i) …and ii)…..
4) What enteries required for ITR-3 in schedule BP
1. No, you can avoid.
2. ITR3
3/4. For ITR filling help, do consult a CA.
mr/sir nitin kamath,
while calculating options not futures turnover it is need to take sell price in consideration right ,
so options turnover= sell price+profit/loss, as my turnover in zerodha yearly sheets if considered with sell price is more than 1CR and Rs.70,000?- loss , so audit should be applicable ???? right
But, as my CA is telling me that options are played on margin and my turnover will be considered to be rs.70,000/- so audit is not required ……
so audit is required or not ??? is my CA right/wrong ???
As I have mentioned in the post above, there is no right answer for this. You can take an aggressive view to show reduced turnover of options. On this module, I have to share the most conservative approach.
so do you think in this case it would be safer to get audit done ??? as in case if audit is applicable and not done the fine is 1% of total turnover and need to be audited later….. so it might be better to get audit done in case of confusion ???? as i would not want any trouble in future from IT people
Yeah, audit is straightforward, best to get it done.
sir,in console new backoffice under reports under tax p&l in equity it is not showing shortterm equity turnover it showing only intraday turnover please clarify is it manditory to add short term turnover in total turnover or not……….
Short term equity turnover is required only if you show that as business income. Not required if as capital gains. Hence we are not showing by default as most show it as capital gains.
sir in case of capital gains ok what in case of loss ??actually one of my relative loss was around 6lakhs and his turnover in f&o around 70 lakhs and in equity intraday 5lakhs and shortterm equity turnover was 50 lakhs for 2016-17 . here if short term turnover is not require to consider then his turnover doesnt cross 1cr limit and audit is no need…
apart from trading, income from his profssion was 3.5 lakhs so he consulted ca, he said audit is compulsory because of 1 cr limit crossed and said audit fee around 30000.
so please guide us whether to do audit or just fill itr..
Hmm.. if short term equity trades were extremely active, then it makes sense to show that as business as well. Btw, advisable to do an audit. But a CA asking for 30k is too high. In case of trading account, all details are available very easily for a CA. Maybe you can bargain.
hmm..thank u sir………..
Hi Nithin,
Where can I get the demat holding stmt for my “PLEDGED” shares with zerodha?
The normal holding stmt which I receive each month from Zerodha does not include any details about the pledged shares. Even when I download the holding stmt from my CDSL easi account, it shows valuation of only un-pledged shares.
I want to show my total demt holdings in my tax returns (including the pledged shares value). How can I do that?
Thanks
Your demat holding statement will show shares transferred for pledging. So you will have to use this itself as a proof. But I get what you are saying, we will start giving out a separate holding statement for pledged shares.
Thanks!
Also, any idea whether I can claim back my GST which I paid on F&O turnover ? (For ex: If I register as a sole proprietor and get a GST number, then whatever GST I am paying to Zerodha, can I claim it back?) Do I have to open a separate trading account in the name of the sole proprietorship to do so?
No You can’t unless you provide taxable sale of goods/services. Trading in equity is not taxable under GST and out of purview of GST.
What if my pvr Ltd company has rental income and is registered under gst, and I also do f&o trades, can I claim input credit on the gst charged by brokers?
Are you trading through your pvt ltd trading account?
No cannot claim it back.
I have question on Section 44AD. Though this is theatrical, If all trades of a trader in F&O are profit and after deduction of the expenses, for example the turnover is Rs15,00,000/- and profit out of this turnover is Rs12,00,000/- what will be the tax implication. As per law, 6% profit needs to be shown or actual 12 Lakhs needs to be shown.
Actual 12lks 🙂
Below is my Tax P&L from Zerodha Reports
Intraday profit
7.47k
Short term realized profit
4.32k
Total charges
5.59k
How do i breakdown charges of 5.59k into Intraday and Short term?
Ah, you will have to do this yourself approximately. Our new P&L will give you breakdown as well.
Sir,
Please let me know how I can find the total cash in my zerodha account on 31st march. Most of it was being used as margin for FnO trades..I am not able to find this value to show it in my balance sheet. Please guide..
Regards
Go to ledger on console.zerodha.com
hi nithin , hope you are doing great.
Just a simple doubt, salary is 14 lakhs and only intraday trading. Intraday trading loss is 2 lakhs and turnover is 14 lakhs.
Can i show profits from intraday trading at 6 percent of turnover and pay taxes on it to avoid audit. ?
Please tell me as I am not sure whether speculative business turnover and profit can be shown under 44 AD …
Thanks in advance !!
Yeah, should be okay. Do speak to your CA.
Nithin, Two questions..
Though you have P&L reports by Trade and Script, both reports are exactly the same. Support doesn’t seem to have answer. Am I missing something here ?
Second, your P&L report does not give the net P&L nor does it give break down of the charges by category (Intraday, Short Term and Long Term). How can I calculate the net P&L ?
If all the entries and exits have happened in the time period, both trade and scripwise will give same result. Tradewise P&L is given more to calculate turnover (gross sum of losses and profits). This is not required if you have only capital gains.
Currently the charges are overall for the time period. The new console P&L is almost ready where charges will be divided scripwise and intraday/short term/long term.
Dear Nithin,
My annual income from salary is 8,00,000/-. Intraday profit from scrip IFCI is 1,25,000/-, SBI as Rs. 45,000/- and intraday loss from Maruti is Rs. 20,000/-. My short term capital profit is Rs. 20,000/-
My questions are:
(i) What will be my turnover?
(ii) What will be my profit?
(iii) What will be my tax liability?
(iv) Which ITR form I need to file – ITR-3 or ITR-4?
(v) Whether I have to maintain books and get it audited?
(vi) I have come to know that since there is no separate provision for speculative business like intraday trading all the profit is to be taxes as per individual tax slab i.e. 10%, 20% or 30%.
Regards
1. Can you go through the chapter above.
2. Intraday/speculative 1.45lks profit and STCG: -20k
3. Add intraday to rest of your income and pay as per tax slab. STCG loss, you can carry forward.
4. ITR3
5. Not required
6. yep
Dear Zerodha Team,
You had mentioned about instances when audit is required. One of the instance that have you mentioned is if turnover exceeds Rs. 2 Crores in case of Digital Transactions ie; stock trading. I am on the opinion that there is no supporting law for the same. Audit is applicable even if the turnover exceeds Rs.1crore in case of stock trading also.
Reference of your blog:
An audit is required if –
Rs 2 Crores mark – Turnover for the year crosses the Rs 2 crores. This is in case of digital transactions, and stock market trading is 100% digital. (Otherwise it is Rs 1 crore).
Please check.
Ah yeah, I had corrected the original post. If profit is more than 6% of turnover (section 44AD), only in that case this Rs 2 crores is applicable.
Dear Nithin
I am a zerodha customer. I have a tirnover of 45 lakhs with a loss of 3.5 lakhs including charges.. I would like to file returns using sec 44 ad by declaring 6% profit on 45 lakhs. Considering i have no other income. Can i avoid audit an file it returns as i do not wish to carry forward the losses. Please note that i have got my books audited for the last two years for filing returns. Can i discontinue the sa same and file returns with out audit this year.
You can discontinue, but best if you did.
In MCX,We can calculate turnover in 3 different ways.
1) Trade wise
2) Contract Wise
3) Year Wise
Turnover=Sum of the obsolute values of profit and losses
In above mentioned 3 ways ,Please tell me which way I have to proceed.
Hi
I am salaried person having taxable salary income of 204000 and other sources income of Rs. 295000.
I have a intra day loss of 10000 and short term capital loss of 9000 and no trading in F & O.
Do i need to get my books audited?
Hmm ,ideally yes. But if your intraday is extremely small, maybe you can combine it with your short term loss. Do speak to a CA.
hello sir,
Non-speculative transactions (Futures and options)
1) The total of favorable and unfavorable differences shall be taken as turnover
2) Premium received on sale of options is also to be included in turnover
3) In respect of any reverse trades entered, the difference thereon should also form part of the turnover.
i want one clarity regarding calculation of transaction in FNO
as per point 1 of icai, the TOTAL of profit and loss is transaction. In futures profit and loss is calculated on daily basis ie MtoM
eg i buy 100 lot of usdinr at 70.00 on 1 dec,
closing price on 1st 70.20 M to M +20,000
closing price on 2nd 69.70 M to M -50,000 (69.70-70.20 = -0.50)
closing price on 3rd 70.10 M to M +40,000
closing price on 4th 70.00 M to M -10,000
i sold on 5th at 70.30
my turnover will be 20,000+50,000+40,000+10,000+30,000=1,50,000
Yes, you can use this way to calculate turnover as well.
thanks for reply
sir my ques was
my turnover will be sum of daily ie 20,000+50,000+40,000+10,000+30,000=1,50,000
or
buy on 1st dec 70.00 sold on 5th dec 70.30-70.00 ie turnover =30,000
The thing is there is no clear definition of calculating turnover when trading the markets. You can use either of the methods. The first one you have mentioned is based on the ledger (all credits/debits that happen to your ledger daily) and the second is based on the P&L. You can use the second one, this is what we use on our turnover report as well.
Sir
My intraday turnover is Rs 32000 and my loss 11000, is it need to audit to fill ITR. Please tell me sor.
Since it is so less, maybe you can show this as short term investing and avoid audit.
Hi Nithin,
I have started trading newly this year in zerodha . I am an house wife. It’s the only business
1 Total turnover 20,00,000 rs
2. Loss is 2,00,000
1Q. Do I need to audit or not since turn over is less than 2 cr and loss is 2,00,000
2Q. What will happen if Ignore the IT returns . Since this is my first IT returns if filed and discontinue trading.
3Q. What will happen file it returns without audit.
1. No
2. Best to file ITR.
Thanks Nithin.
Hi, I just have a query Futures trading.
If I Buy let’s say 2 lots of Nifty at 11000 on 1 st Jan and sell the same 2 lots of nifty at 11100 on 5th Jan. (Same expiry series)
Will this be considered as delivery or just the difference between the two.
I mean do I have to consider total volume that is (11000 x 2 = 1650000) + (11100 x2 = 1665000) = 3315000
or 11100 – 11000 = 100x 2 = 15000 .
I am little confused here.
Lot size = 75.
Basically, I wanted to know will it be considered as delivery or it will be just like the non-speculative intraday trading type. Addition of sales and purchase?
For futures turnover is gross sum of P&L of all trades. So 15000.
Thank you so much Nithin, you relieved me a lot with your reply.
what is turnover to be mentioned while preparing p& l account . is it profit earned or the turnover for the purpose of audit
have explained in the post above right?
What is meant by declaring trading as business. Is there an option not to declare trading as business.
Filing income as business income on ITR3.
Kindly tell if the equity intra day long/short turnover calculation is correct or not.
Thanks.
EQUITY INTRA DAY LONG BOUGHT SOLD QTY = P/L
Rs Rs Rs
100 101 500 = +500
100 100 500 = 0
100 99 500 = -500
—————
TURN OVER = 0 OR 1000
————–
EQUITY INTRA DAY SHORT SOLD BOUGHT QTY P/L
Rs Rs Rs
100 99 500 = +500
100 100 500 = 0
100 101 500 = -500
—————-
TURN OVER = 0 OR 1000
—————-
1. 1000
2. 1000
If i deposit or withdraw money between my bank and zerodha account, will this transaction be reported to income tax department ?
No, but the income tax department might ask any bank for any information.
Hi
Can someone please clarify on tax implications of trading in Bonds like corporate bonds, Gsec etc. Also what will be tax liabit arising for income from interest in your portfolio. Can a company reduce its expenses from interest income?
Mahim, can you go through the taxation for investors chapter here https://zerodha.com/varsity/module/markets-and-taxation/
Hi Nithin,
It’s so great of you and Karthik to give us financial knowledge that most people Indian people are devoid of, you being the CEO of the largest brokerage company in India giving your time for us is amazing. You both are our superheros.
It’s because of you and Karthik that I being only 15 years old have so much financial knowledge that none of my friends have.
Varsity is like a sea of knowledge for me.
If companies like Zerodha are there then India could change into something out of this world.
Thank you for your time.
Nithin Sir,
I am new in intraday trading…following is my query,
I little bit confused about intraday trading turnover calculation.
for an example.
if I am trading using margin of 10X in Company ‘A’ and having share price 50/- per share and buy Qty- 1000 nos so
Buy side- 50,000 and sell at price of 52/- hence sell side- 52,000
(52-50=2*1000=2000/- two trades in a day so 2000*2=4000/- per day for 10 days trading in a month value is 4000*10=40000/- (for year 40000*12= 4,80,000/-).
is 4,80,000 my annual turnover?
above calculated turnover is correct or wrong. and on what amount tax get calculated.
If on every trade you make either Rs 2000 profit or loss, then yeah that is right calculation.
Thank you Nithin Sir for reply..
Nithin sir,
I’m trading in my mother’s account. My mother is a salaried employee and is an eligible taxpayer. In November, I started options trading and now after 3 months we have an options turnover of about 54L and gross profit of 1.25L. I don’t trade in any other segment. Kindly tell me do we need get audit done and also how to prepare these financial statements? Should we contact a CA or prepare them on our own?
Thank You
Best to take help of a CA. And yeah best to get an audit too, since your turnover is more.
Hello.
I wanted to know if book keeping is important if i treat my trading as business income? Should i make daily entry of buy and sell,each scrip separately, keep contract notes? Or can i just use the turnover calculated by your back end?
Book keeping would already be done by your brokers reporting platform. It will have ledger, P&L, contract notes, etc. I don’t think you need to do on trading side. But yeah, on the expenses side.
Hi Karthik,
I am confused about how the the interim budget. They announced that till 5 lakhs there will be no tax So if suppose your income is 6 lakhs then
0-5 lakhs 0% 0 0Rs
5-10lakhs 20% 1lakh 20000Rs
But it is not like this.
Check this article, https://capitalmind.in/2019/02/middle-class-indians-receive-tax-sops-in-interim-budget-2019/.
sir
1.TURNOVER F &O AND MCX BELOW 2 CRORES AND PROFIT ABOVE 8% IS AUDIT REQUIRED ?
2. NEED TO PAY ADVANCE TAX ? ANY CHANGES IN SECTION 44 AD ?
1. No
2. Yes, go through all the chapters on this module.
Thank you for reply sir.
can pay 100% Advance Tax by 15th March for such a business. No need to comply with the requirement of quarterly instalments due dates (June, sep, Dec) of advance tax.
Not allowed to deduct any business expenses against the income. regardig Advance Tax is CORRECT ?
My fno turnover is 1.25 cr
Fno loss is 2.5 lacs
Do I need audit if I don’t want to carry forward the losses. How do I opt for 6 or 8% presumptive income. Do I have to show other profit? I do not have any other income
Your turnover is quite a bit, best to get an audit
Dear Nithin,
Presently I am having a trading ac in personal name. I wish to open an ac. either as a sole proprietor or as partnership firm with Zerodha Broking Ltd.
My query is in case I happen to make trading profits ( intraday, short term, long term Etc) can I pay salary to myself, employess or as partners can we draw salary against profits earned ( business income) ? Can this be shown as expenditure of the business ? Please clarify.
Regards,
Balakrishnan.
Yes, it will be like any other normal business.
Three lots traded of reliance of same expiry
How turnover to be calculate.
Average of all three lots or difference of each trade
Either ways. Upto you.
Hi,Nitin Sir
Mostly i have traded in Options nifty and bank nifty..I have a loss of(realized profit) -280745 in this FY2018-2019.Turnover is showing 15800000.AM a salaried person and comes under the income tax slab …My Annual income is 8.5 lac.Pl suggest what i have to do regards income tax..whether the loss can show in ITR or not?
U can declare the 2.8lks loss (add charges to this if it is already not) and carry forward to next 8 years. ITR3 forms have to be used.
i have f& o income of rs 10 lakhs and i purchased shares in delivery worth rs 5 lakhs , so can i book purcahse of shares in delivery as an expense while calculating profit from f&o business.
No, you can’t.
I am a housewife , my intraday turnover Rs. 35000 and loss is 15000. I never filled ITR before. Do I need to audit? Or Can I show my profit more than 6%? Will there be any problem if I show profit instead of actual loss? Please help me sir.
You can show it as profit, since you are not evading any tax, you should be okay. Do speak to a CA.
I am an intraday trader. My turnover Rs. 75000 and loss is Rs. 20000 What kind of ITR should be filled?
ITR3
I am salaried. I trade in commodities intra day.
Salary income=7 lac
Loss in commodity =
(1) realised P&L = – 2.15k
(2) net realised P&L= -3.94k
Turnover= 7.96k
Now my questions are:-
(1) which ITR form I have to fill?
(2) is auditing required?
(3) rebate in income will be for 2.15k or for 3.94k?
Thank you
1. ITR3
2. since it is so less, not really.
3. 3.94
I have income from intraday, F&O (no options, only futures), STCG, LTCG. bank interest. Can I add all of them to show it as business income. I do not have salary income or any other income. I got profit in F&O and loss in LTCG (long term capital gains). Say I got 10L profit in F&O and 10L loss as long term capital loss, and 1L profit as STCG and 1L bank interest. Can I show my taxable income as 10 – 10 + 1 + 1 = 2L and pay no tax?
Intraday income is speculative business income, it can’t be netted off against the others. But yeah, LTCG/STCG can be shown as business income along with F&O.
If I have taken positions (sale of options) in the last week of March 2019, which are still open positions as on 31st March 2019, will this income from sale of options considered as income in the FY 18-19 or will the income be calculated after the positions are closed in April and profit/loss considered as income in FY 19-20?
Would appreciate your reply.
Regards,
Shirish
You can take the closing price of the contract and MTM your profit or loss to this price. You don’t have to show the premium received as income.
Thanks…that was useful..
Regards,
Shirish
In the turnover calculated by Zerodha , as available in the reports from Console, the options sold before March 31, 2019 and remaining open are not included. If it is not considered for turnover, can’t it be considered in next financial year instead of calculating MTM profit/loss based on closing price on March 31, 2019.
Yeah, you have both the options. MTM it to 31st or else just carry forward the position.
This poses another question. Where do I get the price of options contract as on 31-mar-2019? Like historical stock prices, are historical options prices available anywhere from NSE?
Regards,
Shirish
Yes, check here https://www.nseindia.com/products/content/derivatives/equities/archieve_fo.htm
Thanks…got it..
Earlier In Q tool, the total of tradewise turnover was calculated in the reports but in the new Console tool, the tradewise scrips are shown but total calculation of tradewise turnover isn’t there. Please include the same in Console also.
Hey Kanav, we’ll have this report up soon.
sir, every day trading in f&o ,nifty,bank nifty etc..digital contract not send by broker,some profit or loss is there.this contract notewise, taken for turnover,or script wise taken which is the correct.
You can take any method, as explained in the post above.
For calculating options turnover, if a OTM option is sold and if it expires worthless, the premium received will be the profit, but how will the turnover be calculated? Premium received + profit (positive difference) which is two times the premium?
e.g. One lot (1000) of Reliance OTM CE is sold at Rs. 25. Premium received is Rs. 25000. Option expires worthless. Profit is Rs. 25000. What will be the turnover Rs. 25000 or Rs. 50000?
Regards,
Turnover will be 50000.
If you follow the most conservative opinion, 50k. But yeah, you could also be slightly aggressive and only consider the profit or losses in such transactions as turnover.
If I have made a profit of 5 lakhs in trading options, and my turnover is 12 lakhs, can I opt for presumptive income, Can I add only 6% of 12 lakhs, i.e. 72000 only, as net income or profit from income from business for options trading profits. Does it mean instead of 5 lakhs, I need show only 72000 as income from profits in trading options? Please clarify.
Ah no, don’t do anything by which you would be reducing your tax outgo. The presumptive income option is given only for people with very little income and avoiding them the hassle of audit and etc.
Are you suggesting that we should calculate income tax based on actuals and using presumptive income, and choose the method which results in higher income tax? Is it not unfair to the tax payee? I want to opt for presumptive income since I will not need to show proof for the deductable expenses etc.
Best to consult a CA on this.
I am doing F&O trading and came out in loss. I understand tax audit is not required as my total income come under basic limit. Is it required to prepare Balance Sheet, P/L and book keeping in the case of no audit? How to manage this case in ITR3?
Not required to maintain. Btw, the total income can’t be your F&O loss + salary income. Even if your salary comes under tax, you would need to get it audited.
Thanks for the response.
My salary income come below 2.5 lakh after 80C deduction. F&O loss is fully adjusted with interest and rental income. Hope this condition leads to no audit status.
One more doubt,
Suppose Audit was done this year and F&O loss was kept for adjustment with future year’s F&O income. Is there any compulsory audit required next year even though there is no audit requirement met?
Audit not required in the future.
Can you give a sample Balance Sheet of an F&O trader with other income and fixed assets like landed properties & vehicles?
Is it really required to include moving/non-moving assets in the balance sheet of an F&O trader (no other business income)?
Hi,
I would like to clarify a point related to calculation of turnover in F&O segment:
While calculating turnover for futures contract being bought and sold on different dates, do we consider the actual profit/ loss in that contract or we consider the daily MTM values?
For eg. Consider the following position for a lot of futures (100 shares):
1st Jan – Bought at 200
2nd Jan – No trade – Settlement Price – 210
3rd Jan – No trade – Settlement Price – 205
4th Jan – Sold at 207
So, in this case whether the turnover would be calculated as:
(207 – 200) * 100 = 700
Or
(210 – 200) * 100 = 1000
(205 – 210) * 100 = 500
(207 – 205) * 100 = 200
Total = 1000 + 500 + 200 = 1700
You can use the actual loss and not daily MTM. So 700.
Can you give a sample Balance Sheet of an F&O trader with other income and fixed assets like landed properties & vehicles?
Is it really required to include moving/non-moving assets in the balance sheet of an F&O trader (no other business income)?
Yeah required, it is now compulsory even for salaried people above Rs 50lks/yr. Let me see if we can put up a sample balance sheet which covers all the cases.
Hope assets need not be included in balance sheet for salaried people below Rs. 50lakh/year. Is it OK?
I am waiting for the sample balance sheet as promised. Thanks
I want to file my ITR3 return by myself and tax audit for F&O to be conducted by a CA separately.
Is there any requirement that both tax filing & audit to done by the CA himself?
Audit is in a way of telling/vouching that tax filing is done correctly. So he has to do both.
Is there any strict rule that both tax filing & auditing to be done by the same person?
What actually a CA person is doing is easily understood by most of the people like me. The eligibility for audit is only because of his academic qualification and certification. Even though I am well aware of how to audit, I am not certified to do that. But I think I have the right to file my tax return. Am I right?
Ah my bad. Yeah tax filing you can do yourself and get audit done by CA.
Pls advise on how to go about, for the following case:
Bank FD Interest: 2L
No salary income.
Trading/Investments:
Futures Turnover = 8.5L
Profit on futures trading = 8L
No options trading done.
Delivery Based:
Long Term : -12L (loss) Turnover if calculated on long term transactions = 50L
Short Term : 1L (profit) Turnover if calculated on short term transactions = 80L
Exemptions on health insurance : 25K
Total number of share transactions (buy, sell of ST, LT): 20000
Now, please advise, what is the best to go about filing returns.
Which would be best:
1. Classify everything into business and do not use 44AD . Is tax audit needed?
2. Classify futures and intraday into business and use 44AD and classify all delivery based into capital gains and carry forward the LTCG (Capital Loss) of to the following years.
3 Or is there any other better way to do.
Point 2 will be the best way to do this.
Hmm.. Advise what?
I mean, seems there 3 or 4 ways or filing returns in this case:
1. Consider everything as business (delivery based equity long term, short term, futures, intraday), maintain books of account
2. Consider futures income as business and apply 44AD for futures and take income as 6% of turnover. Delivery based is capital gains. Carry forward LTCG losses. Do not apply 44AD on intraday turnover, just show intraday as speculative business income in the separate section for speculative business in ITR3. No books of account and No Tax audit for the case given. No commitment of consecutive 5 years to show income as business income or 44AD application
3. Add both Intraday and futures turnover and apply 44AD on that turnover and all delivery based will be capital gains. No tax audit, no books of account.
Which one of them is correct way?
Best option is 1.
Is intraday (speculative business) profits not eligible for 44AD?
Yeah.
Can we apply 44AD or Can’t we, for the trading turnover of Intraday equity trading?
Please confirm whether the following items can be treated as business expenses in F&O trading.
1. Cost of software tools supporting better trading
2. Cost of market data to run the above software
3. Advisory charges
4. AMC charges of Brokers
Yes, you can show as expenses.
Can 44AD be applied for the turnover in futures trading if it is less than the stipulated limit of 2Cr, to compute income as 6% of turnover?
yeah, you can.
When 44AD is applied on futures turnover and pay tax on 6% of turnover, for calculating income for finding tax bracket to see total income is above 2.5L, do we need to account actual income on futures or as per 44AD that is 6% of the turnover?
Vyas, I think best you go meet a CA for this.
Which ITR form are we supposed to use, when we have Capital Gains, Speculation (Intraday) gains, 44AD applied income in Futures, Bank Interest?
ITR4 for 44AD, but you can’t show capital gains on them. You will have to use ITR3.
My intraday loss is rs 20000. I don’t want to audit my account. Sir please tell me how should fill my itr3 as “books of account maintained” or as ” books of account not maintained ” ?
Best to speak to a CA for this. Explaining how to fill the ITR form is extremely complex.
Can we apply 44ad and show income as 6% even if the actual income is much higher than that (say actual income is 90% of turnover) if the turnover is less than 2cr?
Hmm… no. If you end up evading taxes, it is best not to.
What is the nature of business (Code to be mentioned in ITR3) for F&O trading?
130010, check this.
There is no such code (130010) in ITR3.
Code: 13010 – Investment Activities; Is it the right code?
Another Code: 13018 – Financial Intermediation Services, which is recommended by some tax advisors.
But nobody is sure about the right code, Why?
Ah yeah. 13010. No one is sure because IT Department hasn’t given clarification.
is wrong…
13010 is only for “FINANCIAL INTERMEDIATION SERVICES”…
the IT department has not provided any code suitable for traders….
Will LTCG loss and futures profit get
added up for calculating taxable income even if futures is classified into business and LTCG into capital gains?
No, only if you show equity income as a business, then you can set off.
Expecting from you, a sample Balance Sheet in simple format suitable only for an F&O trader.
Hope you will put it soon so that we can utilise it for tax filing on July.
My pension Income: Rs. 3.3 lakh
Interest Income: Rs. 2.0 lakh
Total deductions: Rs. 4.0 lakh
STCG: Rs. 65000
F&O Loss: 1.0 lakh
F&O Turnover: Rs. 14.0 lakh
Taxable income is less than basic limit.
Can I carry forward F&O loss without audit?
yeah, u can carry forward without audit.
My total sale value from futures and options trade as shown in PL provided by the broker- Rs 26lacs and Loss is Rs.2 lacs. the sum of total favourable and unfavourable differences is Rs. 285000. Kindly help me with the return filling. i have other business from which i have income of Rs 1.5 lacs.
Do go through the entire module, has everything you need to know. For actual ITR filing, best to visit a CA.
Hello Sir,
Previously i was filing ITR -2, now in FY 2018-19 i started F&O.
Q 1. Now my F&O Turnover as per zerodha report, is Rs. 557362, Charges – 2011 , Options Realized profit is – 86985
Which schedules of ITR 3 need to fill for it ?
Q 2. can we add intraday turnover in STCG Turnover ?
Q 3 Is there any change required for STCG ?
1. ITR3
2. No
3. No
Nithin Sir,
Apart from Business Code, ITR-3 is asking us to provide ‘Name of the Business’ and ‘Description of Business’.
In case of a person trading intraday in his personal capacity, What should he write there ?
Thanks !
You can put your name and say propreitary trading.
sir
A lot of thanks for your responses
which section of income tax act defines Business expense in detail.
Section 28 to 37. Btw 36, 37 are the important ones.
Hi, Namaskar Mr. Noting.
My intraday equity turnover for FY 18-19 is 6,10,000/- Loss is 82,000/-
1) As turnover is below 2 Cr. no audit.
2) If the turnover is less than Rs 2 crore, and if profit less than 6% of turnover and total income exceeds basic exemption limit
(A) Is audit required?
(B) Will loss be considered as profit less than 6% of turnover?
(C) Does salary income considered to attract the condition “and total income exceeds basic exemption limit”
(D) Does the use of word “and” in above condition mean that for audit requirement you have to come under both condions?i.e. profit less than 6% of turnover and total income exceeding basic exemption limit. Is it correct to say that you will need audit only after you come under both conditions and not under either of the two?
Thanks
A. Depends on your total income.
B. Hmm.. didn’t get your question. Your loss is Rs 82k, which is less then 6% of Rs 6.1lk
C. Yes
D. If total income is taxable, it is best to get it audited. Best to speak to a CA.
Sorry, Mr. Nitin, Wrongly typed Noting. Auto spell mistake.
Hi, I have a loss of 42000 and my F&O turnover is 18 lakhs. Do I need to get audited?
I am a salaried individual. What will be my source of funds and application of funds in the balance sheet?
Thanks.
Yeah, get it audited. For tax filing and audit, do consult a CA
Mr. Nitin
In the earlier Question asked by Ajay ghosh (14 June 2019) You had said that we can carry forward losses of F&O without audit, Is it possible?.
Possible only if you don’t need an audit (turnover and profitability criteria). If you are required to get an audit, then you have to for carrying forward the loss.
Hello Nitin,
As it is not that difficult to maintain the Book of Accounts, balance sheets and P&L statements, can we do the audit report on our own without involving a CA?
You will need a CA to sign it. But yeah, you can do it all on your own and get him to just sign. Cost will be less.
I am not able to find the very useful report “Tradewise turnover report”. It was available in Q before. Nw, it is missing in console. I called the Zerodha support and they say now, only scripwise P&L report is available with overall turnover at the top of the report. From the example given above, we know that tradewise turnover is the most acceptable and Zerodha was the only platform to give this one. Sad, that it is missing now. Please include the same ASAP (May be by tomorrow, since it is not a new one. It was existing earlier). The report similar to the screenshot given above is not there in Console. Pls add ASAP. We need it to calculate our TO and file the returns accordingly. Thanks.
The tradewise turnover is still available in the tradewise tax P&L statement which can be downloaded from Console. Just download the file and open the Tradewise Exit Entry sheet to find the tradewise P&L along with the turnover.
Annual Global Statement or PNL statement are segregated, good, but they should include sell date in one column. Otherwise how do I use it for calculating buy/ sell/profit per reporting timeperiod.
ITR3 asks for Buy/sell/profit by Sep 15, Dec 15, Mar15. How do I calculate these without dates ??
PLEASE ADD SELL DATES in AGM STATEMENT.
The buy and sell dates with the period of holding is part of the trade-wise Tax P&L statement in Console. You can just download the file and refer the Tradewise Exit-Entry sheet.
Girish says:
July 14, 2019 at 1:45 pm
Hello sir,
I trade with zerodha.
My F&O turnover is 4.96 lakhs and loss is 36000.
My intraday turnover is 8155 and loss is 6304
My short term trade loss is 5736 and long term loss is 3707.
My salary income is 4 lakhs and interest income is 1 lakh.
Kindly clarify regarding:
1) should I file ITR3
2) is auditing required (turnover is 5 lakhs and total income is >2.5 lakhs)
3) offsetting the F&O loss against interest income is possible without auditing in my case?
4) can i declare 6% of F&O turnover as profit under presumptive income (sec 44AD) and go without auditing.
5) In ITR-3, speculative turnover and profit is separately asked, which means that what i declare under presumptive business income is only F&O turnover.
6) how to contact tradetax.in, to get the help in auditing/filing related matters
1. Yes
2. Yeah, best to
3. do get an audit.
4. You can, but you can’t setoff the losses then.
5. IF showing as presumptive, use ITR4.
6. They have stopped supporting, you can try cleartax or hrblock.in, they have special offers for Zerodha customers.
Dear Sir,
I have Intraday Profit : 51,176
Short Term Profit : 16,048
Total Profit : 67,224
Charges: 49,568
Net Profit : 67224 – 49,568 = 17,656
Intra Day Turnover : 2,47,473
………………………………………………….
F&O Data : Option Loss : – 29957
Future Loss: – 21761
Charges : 65,292
Total Loss : – 29957- 21761- 65292 = – 1,17,010
1. Option Turnover : 4,51,422
2. Future Turnover : 8,15,557
Total Turnover : 12,66,979
Profession : I am Private servant in company & draw salary.
Question 1 : which ITR should I fill for FY 2018-19
Question 2 : Is Audit is required or Not ?
Please Ans.
1. ITR3
2. Best to get an audit.
Hi @NithinK,
Just had a opinion to reopen the petition or create a New one in favor of the fact that we are now No 1 in terms of head count and also the recent budget sounded more on investments , trades by Sitaraman.
Lets try again .
Thanks,
Kamal.
Is it required to fill balance sheet and trading account if only intraday trading is done? Or just mentioning speculative turnover and profit in P&L statement is sufficient?
Best to fill the balance sheet.
Hi Nitin,
I am a new trader who started trading in F&O from March 2019.
I made a loss in F&O trading for last financial year i.e 2018-19. I have few doubts:
Can I offset F&O loss with my short term capital gains from equity delivery?
If F&O loss cannot be adjusted with STCG, if it is considered as business income and since I have made loss then I guess an audit is required for sure.
If audit is required as I made loss in F&O then can I avoid auditing by carrying forward the loss?
Please advice.
Thanks in advance.
No you can’t offset against STCG, but you can show your equity investing as business income and do it. Do go through the module above. Yes, you would need an audit to carry forward and offset the losses.
IF TURNOVER IS MORE THAN 1 CRORE AND LESS THAN 2 CRORE. THEN TAX AUDIT IS MANDATORY OR NOT AND PROFIT IS NEAR 80000/-
plz reply and thanks
Depends on your overall income.
Hi Nithin,
I’m filing income tax under section 44AD in ITR3. While I trade/invest through Zerodha, I demarcate and earmark my money for trading business and investing activity.
My queries are
(a) I had pledged a few hundred shares of a stock and thereby, received Margin amount. As on 31st March, my Fund Balance report from BSE (as reported by Zerodha) showed this margin under ‘Funds Raised’. How do I treat this ‘Funds Raised’ in the Balance Sheet (‘No Accounts maintained’ case). Should I declare this ‘Funds Raised’ as amount of total sundry creditors. I reason this on the logic that Zerodha has extended this margin money to me deducting the haircut (much like a loan). So, can Zerodha be considered my creditor?
(b) Regarding the value of the stock pledged – Should I include this in the ‘Amount of total stock-in-trade’? with respect to my trading business. (I will not be including value of my investment portfolio in the declaration here). I say so because though Zerodha has custody of my pledged securities, I still receive benefit of any corporate action like dividend/split etc. So, I consider this pledged securities as ‘Amount of total stock-in-trade’. Is this ok?
(c) Regarding declaration on “Amount of Cash Balance”.
First, trading business activity is digital. So, “Cash” per se is not maintained. I assume this would be vital for other businesses that deal with cash, not us traders. Second, the fund balance with Zerodha as on 31st March was not meant for my trading business but for my investing activity. Basis these reasons, I want to declare zero in “Amount of Cash Balance”. Is this ok?
Thanks.
(A) Yes, you can.
(B) Yes.
(C) Cash Balance denotes both Cash in hand and Bank balance
My Case
Salary : Nil
ST gain: 2L
LT gain: -18K
F&O Gain: -3L(-ve), turnover 15L
Interest Income: 2L
a: Do I need audit for my ITR 3?
b: Simply show no loss in F&O and no audit case?
c: file w/o audit as income is under taxable slab
Please suggest
1. No need for an audit.
Mom opened FD of 25L in my name..Unable to find sheet and section/ head under which to declare it.
Please help
I have Future Trading loss of Rs.51558/- & Gain in Option trading of Rs.6000/- (Net Loss 45558/-) it means total turnover will be 57558/- (51558 + 6000) can I show Loss in my ITR in following manner:
Turnover – 57558/-
Purchase – 103116/-
Net Loss – 45558/-
Hmm.. no. It is gross sum of P&L of individual contracts. Check the chapter above.
Hi Nithin,
I am still confused whether i required tax audit or not. I am a salaried employee. I did trading only in options and had a loss of 8.5 lacs (approx). However as per downloaded PL statement from Zerodha, there is total turnover as 9.2 crore (Total side value + Total sell side value).
Do i need to show this as business income or capital gain/loss. and do i require Tax audit. (Note – my salary income comes in tax bracket)
Regards,
Nitin
Yes, you’d need an audit. Use ITR3 and show as business loss, you can carry forward. You can also set off some of the loss against your interest or other business income this year as well.
Dear Sir,
I have F&o Loss of Rs-600000/- ( only option buy) & my turnover Rs-2500000/-, no other income any source. i want to know which form i have to use also i want to carry forward loss. is audit mandatory for this case? if ITR 3 Which column i have to Show my turnover & loss.
Thank you
ITR3 and you can avoid the audit and carry forward the loss.
Hi Nitin,
I am a salaried employee and my salary income is 10 LPA. TDS already deducted by company.
As per zerodha Tax P&L Statement for FO, I have loss of Rs -1,76,000 -/- in options, and Turnover Breakdown (Scripwise) is Rs 67,62,786 -/- in options, and total turnover (Profit + Loss) is Rs 8,85,804 -/- in options.
My Questions:-
1. Tax audit is required or not.
2. Without audit can I carry forward the F&O losses.
Thank you
Sam.
1. Yeah
2. No
Sir my Salary income is above 15lakhs and I have a Loss in Options of Rs130000. Do I need to get my accounts audited before filing ITR3? I am not maintaining any books of accounts as I have only 4-5 trades in the full year.
It is best to get it audited.
where to show turnover in ITR3 ?
Check the sample ITR.
Dear Nithinji,
I’m little confused regarding the calculation of “Intraday Trading” (Equity Shares Only) Turnover. For an example…..
Profit & loss (Day 1):-
1st Trade – Profit Rs. 5000.00
2nd. Trade – Loss Rs. 2000.00
3rd Trade – Loss Rs. 7000.00
What will be the turnover for the day?
A) Rs. -4000.00=(5000-2000-7000) or
B) Rs. 14,000.00 (5000+2000+7000)
Please help.
b. 14000
Hi,
I have made a small Option loss of around 14000/- and that is the only turnover I have in FnO for the year. My other income includes house property and interest on FDs etc which is above 2.5 lakhs. As an investor, I have both short term and long term capital loss for the year which I want to carry forward. My questions is:
1. Do I need to conduct an audit if I declare 6% of 14000 as presumptive income and wish to carry forward both short term and long term capital losses?
2. To declare 6% presumptive income, do I need to compulsorily use ITR 4? In that case, does it allow carry forward of STCL and LTCL? or is it possible to declare it using ITR3?
Thanks
RD
1. No
2. You could use ITR3 and show profits of 6%. But do speak to a CA.
Hi Nithin
This is regarding Tax Audit for options trading
Options sale premium need not be added as turnover if the transaction is squared off….
Options sale premium received is turnover if one lets it expire. If the transaction is squared off it need not be included in turnover. The word difference is important.
You also consider what I got on the internet regarding this. This is important because the statement quotes your name.
Premium received on “sale of options” is only to be considered turnover. Zerodha’ interpretation is totally wrong on the subject. The previous line on the guidance note also makes it clear:
“The contract notes are issued for the full
value of the asset purchased or sold but entries in the books of
account are made only for the ‘differences’”
The context here makes it clear that, both on options and futures trading, books of accounts shall only consist of “differences”.
Also,
“In respect of any reverse trades entered, the “difference thereon”,
should also form part of the turnover.”
Key theme is “difference”
The premium received on “sale of options” is only included, because people sell options and hold it to expiry, in which case, there is no favourable/unfavourable difference as no reverse trade is entered and it is a compete sale-In which case, by all means, include the premium received.
@nithin Although I’m all for tax compliance, This interpretation is wrong and you should make it clear in varsity that this is at least too liberal. If a person does other business, the turnover sky rockets because of this liberal interpretation and costs other compliance problems like GST. Please also provide options turnover with only differences in the console.
PLEASE MAKE NECESSARY CHANGES ON THE WEBSITE BECAUSE for every body zerodhas quote has become SOME THING LIKE INCOME TAX GUIDELINE
Since the content is for public consumption, we have to put the most conservative view on this. I have mentioned this multiple times. People can take a much aggressive view when calculating turnover, audit requirement, etc – as long as it doesn’t lead to them evading taxes. Have added this line – Now, this is the most conservative approach to calculate turnover when trading options, there are many who consider premium received on sale of options only if you short options and hold it till expiry and don’t square off the position as they are worthless. You could speak to your CA and decide which is the best approach for you.
Hi,
I have below details.
Short Term Loss: 2.6 Lacs ( Turnover = 45 Lacs )
Intra day Loss: 2.4 Lacs ( TUrnover = 6 Lacs)
1) I don’t want to show my short term transactions as trading. I only want to show Intraday as trading. Please advise if it’s fine.
2) Should I need to do Audit?
Regards,
SaranKumar
1. Yes, should be.
2. Audit depends on if you have other income. If you do and it falls in tax bracket, then you will need audit.
While computing tradewise turnover for futures is it mandatory to use FIFO? Or is it that we have to use either FIFO or LIFO but consistently stick to it?
Also, scripwise turnover, to me, looks no different from profit calculation, except that in some scrips we may end up in loss which gets added as turnover.
In either method is it necessary to do it separately for each expiry?
FIFO is what is used by everyone. There are guidelines on this for equity investing, but not for derivative trades. For derivative, you could potentially do LIFO as well. Turnover will be different than the profit calculation. 1st trade profit of Rs 100, 2nd trade loss of Rs 100, turnover 200, but profit 0.
Thanks Nithin!
I do have salary income of 14Lacs for which I do have Form16 & Tax is deducted at source.
Intra day Loss: 2.4 Lacs ( Turnover = 6 Lacs)
Apart from this, I don’t have anything else. Can I consider that I don’t require to do Audit since my turnover is less than 2 Crore?
Regards,
SaranKumar
No, you would need as your total income is taxable.
Hi Nitin,
Thank you for such detailed explanation. Only one query.
If we don’t opt for Sec 44AD of presumptive taxation then tax audit applicable u/s 44AB only if turnover exceeds Rs. 1 cr.
So, if I have
1. Other income more than 2.5 lakhs
2. Total trading turnover less than 1 Cr
3. Trading Loss in financial year
Do I need to go for tax audit?
(Note – I understand if I opted for presumptive taxation u/s 44AD then I have to go for tax audit as total income is taxable. Here my question is if I don’t opt for that and remain only with sec 44 AB, do I still need to go for tax audit?)
If you want to carry forward the loss, you will need an audit. Audit isn’t really that painful.
I have started trading in options since last year. My turnover in options for last financial year 2018 2019 according to Zerodha is 6.8 Lakhs & Net Profit is 47000. I don’t have any other income.
Is it compulsory for me to file IT Returns? is there any limit of turnover below which there is no need to file ITR if income is below exemption limit?
It is best to file ITR even if no taxes to pay. IF you don’t file, there are chances of getting a letter IT department asking why you haven’t even when you have traded on the exchanges.
hi Nithin,
I have sold a piece of agricultural land, can that capital gain be offset against any trading loss that i have ?
Thanks
Anoop
You can against capital gains/losses.
Hi Nitin,
I am a zerodha customer & it will be a great help if you can answer my below queries IN DETAIL.
1) I have open position in FnO at the end of 31 March 2019 for which Turn Over / Unrealised loss is -5500. Should I consider this -5500 in FY 2018-2019 T.O. and also consider the loss while preparing P&L account or else I can consider T.O. and actual profit or loss in next year i.e. FY 2019-2020
2) On 31 March 2018 my position was as mentioned below.
FnO : Nil, Equity : Nil, Mutual Fund : NIL
But I have applied in two IPO i) Midhani & ii) HAL.
HAL shares was alloted on 26th March 2018 and listed on 28th March 2018
MIDHANI shares was alloted on 31st March 2018 and listed on 04th April 2018
My question is what should be my opening balance to prepare Trading and P&L account. Any further guidline on how this two transaction can be treated is of great help.
1. You can either consider the position with closing price as on 31st March for last year or else carry forward the P&L on the entire position to the next year.
2. Best to take some CA help for filing. Check this https://zerodha.quicko.com/
Kindly answer to above query.
I have net realised 47000 profits on options as on 31st March but I also have notional loss of Rs 57000 on options contract as on 31st March.
Can notional loss or unrealized loss from options set off against realised profit from options?
Yeah you can.
Dear Sir, Request your guidance.
I am a salaried employee and have a speculative loss (equity only) of 1200000/- for FY 18-19. If preemptive rates of 8% profit is be considered, I need to show 96000/- as profit (inspite of loss) to the income tax authorities to avoid the hassle of maintaining books of accounts and having it audited u/s 44AB.
I gain to carry forward the losses and save on the tax to be paid on profit of 96000/- (say 38200/-).
My question is what do I need to maintain
1. Can I maintain books of accounts in Excel or necessarily into say Tally or other package?
2. I have the daywise buy and sale transactions, ledger from Zerodha and bank statement from my bank.
Please advise.
Thanks and Regards
Neeraj Agarwal
Excel is enough. For a trader, almost everything is already available on the brokers P&L and ledger. Only bank expenditure has to be kept separately.
sir,
i understand that 6% profit is mandatory to avoid tax audit in intraday trading. This profit and turn over can be considered as per the amount given in the zerodha statement ,is it? because after deducting the expenses and brokerage my net profit is negative.
Yeah.
I have incurred loss of Rs 2,00,090/- in Options.There were no other transactions.As per Zerodha calcuations the turnover is 1,41,744.90/- but as per business turnover calculation(by considering absolute profits) it is 5,32,547/-. I have rental income of 279775/- and bank interest of 26898/- Deductions 80 TTA-10,000/- . Kindly suggest the way ahead of filing Income Tax Return.
You will need to use ITR3. For tax filing, you can maybe contact Quicko, check this: https://zerodha.quicko.com/
Thank you so much for your guidance of Excel records as sufficient for audit.
Please advise if equity speculative loss below 1 crore falls under any presumptive income and hence audit is compulsory and required under 44AB or any other section. Or we need to declare what % of the equity speculative loss (absolute figure) as income and pay tax to avoid audit and book maintenance which could be expensive. Many Thanks.
Thanks and Regards
Neeraj Agarwal.
You would have to declare % of turnover as income to avoid audit. But Audit is actually a very simple thing, if you have everything ready, it is just a signature from your CA. Check out https://zerodha.quicko.com/
hello Nithin,
Wanted to complement you for having introduced (https://quicko.com/) this is really wonderful and a boon to all Zerodha customers to file their taxes.
What is more appreciative is the fact any body else in your place would have tried to make this a independent revenue (profit) stream. Anybody else in your place, this kind of a massive captive customer base running in to lacs would have been highly compelling to go after and fleece, but not you that is the biggest difference why you have become the number ONE broker in India in such a short time.
the rates in quicko are so competitive and so attractive it is really highly compelling to be ignored by anyone, I have a CA friend of many years who has been auditing and filing my returns, now you have put me in a fix as i have to take a judgement call since if i go with quicko as i was seriously impressed with the speed of response, high level of professionalism as well as the competitive rates then what will i tell a good friend of many years? 🙂 anyway this is a good problem to have, right?
once again, hats of to your innovation and more importantly salute to your conscious approach to keep the rates affordable and competitive in each and every activity you do,
in recent times thanks to your wonderful initiative of many years you helped us the trader community with the scrapping of STT (https://www.financialexpress.com/market/cafeinvest/securities-transaction-tax-needs-to-be-scrapped-2019-may-offer-positive-returns-says-nithin-kamath-zerodha/1435857/)
next, on your agenda being scrapping of compulsory audit for traders where turnover is >2CR, request if you could please help have this scrapped or limit increased to 20CR, the trader community will be highly obliged to you.
Thanks and Salute! once again
Prasanna M
Hello Nitin
My Salary & Other Income is Rs. 9 Lakhs.
I am Fresher & just started experimenting with very small FnO trades last year FY 18-19.
My speculative Net loss in Equity Rs. -10.94 [Turnover Rs. 10.5]
Commodities Futures Gross Profit Rs. 110 Net Profit after charges Rs. 15.65 [Turnover Rs. 310]
1) Considering above both Speculative & non Speculative profit is just 1.5%. Whether Tax Audit is Applicable?
2) I had spent around Rs. 70k in attending various trading related seminars & other charges. If I have to book this as expense then it will be loss , then whether Tax Audit be applicable or not.
Regards
AN
1. Hmm.. you can avoid. Since turnover is so less, you can just show this as STCL on ITR2. Do consult a CA. Check https://zerodha.quicko.com/
2. Yeah, it will be if you use ITR3.
my salary income 6,80, 000 PA AND MY OPTIONS LOSS IS 3,00,000
HOW TO SUBMT MY TAX RETURNS
You can check this https://zerodha.quicko.com/
Thanks a lot for your quick response!!!
Thank you for your advise.
Could you also please clarify what % of the turnover i.e. net of purchase and sale do I need to declare as profit. I am not able to identify what section does this pertain you. Will request your advise.
Audit could be expensive and having some additional requirements so wish to avoid.
Thanks and Regards
Neeraj A.
6%. Btw, why don’t you check them out https://zerodha.quicko.com/, they have a special offer for Zerodha clients.
if my previous years los in FNO is1 lac and its carried forward and , this year i made profit of 50 thousand , then , is it that i have to compulsorily use the prevois years los? and reduce 50k from previ years los,
because my income is below taxable income , i have no benefit of using previos years los,
so in this case can i keep the prevois years los as it is?, and keep on carried forwarding , tilll the year , when my profit comes in some tax slabs and i get benefit of using the los, is it allowed to wait till that time? do i have the option to do it?
It will automatically get setoff to your previous loss.
Hi Nitin,
1)I have intraday turnover(sum of profit+loss for equity only) of around 1.38L
2)I have short term deliveries turnover(Sum of sell value) is around 68.69L.
3) My Salary Income is 5.45L(But no tax need to be paid after deductions and rebate though)
Do i need to get audited and which ITR i have to file for AY 2019-2020
ITR3. If your intraday trading is a loss (or less than 6% of turnover) best to get an audit.
Sir,
When I have trades, say 100 or so, do I need to enter each trade details into ITR
OR
Can all the short term summary be entered as a single item?
Thanks, srinivas
Summary can be etnered.
as per income tax my turnover is more than 1 cr and i have loss in FNO. My question is how to show loss (turnover, purchase) in profit and loss account. because if show only net loss and not turnover than it may not come u/s 44ab
Best to get some help filing ITR. Check out zerodha.quicko.com
sir,
Question on TURN – OVER
I do constant BUY n SELL on CASH BASIS ( CNC ) ( I SELL as soon as I see some PERCENTAGE PROFITS )
( 1 ) IT Becomes INTRA DAY TRADING ( if there is a spurt in price on same day )
( 2 ) IT Becomes SHORT TERM TRADING ( if there is a spurt in a few days )
when the END OF the FINANCIAL YEAR is NEARING.
I would like to check my TURN -OVER.
INTRA-DAY TURNOVER is visible in “” TAX P&L ” REPORT.
where do we check SHORT TERM TRADING…..TURN-OVER……. ?????????
so that we know about our LIABILITY TO AUDIT OF ACCOUNTS
THANK YOU
TUSHAR MODY
Short term delivery based trading is considered as capital gain, there is no concept of turnover for capital gains. If you show this delivery trading as business, you just have to consider total sell delivery trade value for turnover.
Thanks
sir,
yes,I show my income as a Business income.
so,since i do plenty of buy sell.
where do i see the TOTAL of ALL SALE value ??
I remember previously some years back this Turnover Figure was shown in Tax statement by zerodha.
so sir,
NOW where exactly can we see this Total. ?
I AM MAINLY WORRIED whether i need to Audit my Accounts.
Thanks
Tushar Mody
Hi,
What amount needs to be considered for P&L in “The Income from F&O, Intraday, or Commodity Trades.” Whether actual profit and loss from the share transaction or the Turnover ?
Actual P&L. For tax filing help you can check out https://zerodha.quicko.com/
sir,
I do only CASH BUYING & SELLING ( CNC )
( 1 ) TOTAL TURN OVER, at any time, of my INTRA- DAY TRADING is visible in “” TAX P & L Reports “”
BUT
( 2 ) TOTAL TURN OVER, at any time, of my SHORT TERM selling is not visible ANY WHERE in “” TAX P & L “”
Presently I don’t do any F & O.
ONCE we KNOW the TOTAL TURNOVER of ( 1 ) & ( 2 ), we know our liability to AUDIT OF ACCOUNTS.
Please clarify this point so that we can trade with a FREE mind and awareness
I remember earlier your report in “” Q “” always showed both the TURN OVERS.
While the LATEST Report in “” CONSOLE “” does not show the “” SHORT TERM SELL “” TURN OVER.
Thanks
TUSHAR MODY
If short term trades you show as short term capital gain (which is what most people do), there is no concept of turnover as it is not considered business income. If you declare short term trades as a business, just add up the sell value of all your short term trades on P&L to get turnover. The reason we stopped showing short term turnover was because most people show as capital gains and they were getting confused.
If actual P&L from intra day share trading is loss than :-
1) How can I declare it has income ?
2) If I declare the turnover ( as per guidelines of ICAI ) the expenses do i consider to declare it as loss ?
1. Didn’t get you
2. Yes
I do FnO transactions and am trying to understand when a Tax audit is required. For example, if my turnover for the FY is 1 Lac by adding up all the profits and absolute losses.
a) Turnover – 1,00,000
b) Brokerage and other expenses – 4,000
c) Profit before Brokerage, Taxes and expenses – 8,000
d) Profit after Brokerage and expenses – 4,000
e) 6% of Turnover – 6,000
Is Tax audit mandatory in the above case? when is Tax audit mandatory ?
Are the profits before brokerages, Taxes and expenses ( above 6% of turnover) are taken or
the profits after brokerages, Taxes and expenses ( below 6% of turnover) are taken as deciding factor for Tax Audit.)
Yeah audit is necessary, profits after all charges/expenses need to be more than 6% of turnover.
Sir,I am doing intraday trading. If I got profit 50k and same time I lost 50k and again got 20k profit.then my turnover will be 120k in one month and so on in a year it becomes total turnover of 14.40 lacks.
Then I have to give tax on 14.40 lacs or only on the profit I have made during year.
Only on profits Dheeraj, there is no tax to pay on turnover.
Sir, I am a student and I am doing intraday trading. If I earned a profit of Rs.2,40,000 and my turnover is Rs.4,00,000 in a year.
Will it be mandatory for me to file income tax return if I had no any other income?
Not mandatory, but best to file ITR.
Hi sir,
i recently started my intraday trading in zerodha.In your article it is mentioned that audit is mandatory if the turnover exceeds 2 crores could you please explain what exactly turnover is in intraday trading for a given day?
is it the sum of all profit and loss incurred on that day or will it be the total amount used to trade for the day(which includes our money+margin money).
Thanks,
Harsha
Sum of all profits and losses, as mentioned in the post above.
Net difference of intraday is turnover as u said is the income tax office also agree on this or they calculate total buy plus total sale of that day turnover
BCS u said it is debatable issue
Thanks
I don’t think this is debatable, gross sum of all P&Ls is the turnover. What is questionable is if it has to be tradewise or scripwise.
Hi Nithin,
I have no salary income.
Interest Income: 50 Thousand
F&O Loss: 3 Lakhs
I need to carry forward my losses. Do I need to get Tax Audit done?
Please advise.
Dear sir,
I am trading through partnership company trading account.
I want my partnership company GST number to be mentioned in all contract and invoices of zerodha.
and also when zerodha file GSTR 1 in GST portal than against our contract number and tax invoice please mention our partnership company GST so that it can be shown in our GST portal GSTR 2 all zerodha trasactions.
mobile number 9687444111
Having our team check and get back to you.
Dear Nithin
Are the following statements correct regarding Audit for Non Speculative Business Income :-
1. If turnover is greater than Rs.1 crore, audit is compulsory (considering I am not opting for Presumptive Business Income)
2. No audit upto Rs.2 crore (online transactions) is only for someone opting for Presumptive Business Income (i.e. sec44AD)
Yep, correct.
Dear Nitin,
In case of Options, selling value of options is considered into Turnover calculations. But selling value of options is considered for income tax calculations ?
100 Nifty Dec Call bought at 50 and sold at 80, Profit = Rs 3000
Selling value of options = 100 x Rs 80 = Rs 8000
Turnover = Rs 11000.
Will income tax be calculated on Rs 3000 or Rs 11000 ?
Only on Rs 3000.
Hi,
My sum of profitable and loss making F&O trades (F&O Turnover? ) is less than Rs. 1 Crore. I’ve a nominal ( less than Rs. 2000/- ) profit after the charges EXCLUDING the stamp duty. With stamp duty there is a loss of Rs. 7000/- (ie- Negative Net Realized Profit – Realised P&L +33.64k Charges 40.48k Other credits & debits 0 Net realised P&L -6.84k Unrealised P&L 0) . My questions are as under
1. In this case, do I require a tax audit while filing returns?
2. If the audit is required due to the loss after Stamp Duty, Would it be okay to NOT DECLARE loss ( Don’t want to carry it forward) in IT Return and avoid Tax Audit and the associated charges?
Please help me know this as I’m awfully tensed and unable to get a proper explanation from the people I know
Thank you
One more question. and this is crucial too. If I end up making a small, nominal net profit (Say 100 Rs. )after all the F&O trades (Including all the taxes and stamp duty paid) and my F&O Turnover (SUM of all Losses and profits during the year? ) is less that 2 Crore ( Or should it be less than 1 Crore?), am I required to get the audit done? And is the answer dependent on my annual income? ( More or less than Rs. 2.5 lac )
Please let me know ..
ANAGHA
Yeah the answer is dependent on your total income. If total less than 2.5lks, no need, but if more then best to get it done.
In a year, my contract total buy value reached to rs 1,10,40,000 and sell value reached to 1,10,00,000 and lose rs 40,000. Will I need to pay tax. Or is total sell value counted for tax.
You have to pay tax only on profit, you have made a loss so nothing. Do file your ITR.
What are “other charges” in the Tax P&L report for all segment.? I looked up in the Charges sections of Zerodha, but they haven’t mentioned about these “Other Charges”.
please explain. It shows as below in the report:
Other Debits/Credits including Service Tax
Total Charges 6.68
Total Other Charges -238.95
oh, that’s dp charges .. got it 😛
sir,
As per Latest Budget…
will the “”Turnover Limit”” for Compulsory Audit by a Chartered Accountant of Share Trading Accounts…
Become Five Crores…???
please clarify…
MSME includes Share Traders also ???
If True..it could be a MAJOR Relief for share Traders
Thanks
Urvashi Mody
Yes it is now 5 crores, will update the module.
Sir,
I am a govt salaried employee & having salaried income of 8 lacs. Recently started trading with zerodha in delivery based equity. I was having a share in delivery and sold it with profit margin and then again bought the same company share on the same day then it counted as intraday, being a newbiee I was unaware.
Now
Salaried Income : Rs. 8 Lacs for which I am paying taxes
Intraday Turnover : Rs. 80
Intraday Profit : Rs. 80
Delivery Based Short Term Profit : Rs 2500
Delivery Based Sell Value Turn Over: Rs. 15000
I have following queries
1) Do I need for Tax Audit ?
2) As I am ready to pay STCG, then intraday trading may also be considered in stcg for paying tax as amount is very less
3) Which ITR form will be required ITR-2 or ITR-3
Since turnover is very less for intraday, you can just show it as capital gains using ITR2. No need of an audit.
Hi sir,
My mom has FDs & interest income from the same.
Apart form that she has small LTCG/STCG from equity (not done as business).
F&O turnover is marginally higher than 1cr, profit on F&O is 6%+ for FY20 (all digital transactions)
Last year (FY19) she had loss in F&O, audit was done as we wanted to carry it forward.
Wanted to know
a) can this years F&O profit be set off against carry forward loss of last year?
b) will audit be required again this year because after set off, the income might not be there, loss will be there for the year (for FY20)?
Request you to share your views on the same. Thanks.
a. Yeah
b. yeah, best to get it done.
Sir,
For FY 18-19,
Speculative net Profit – 220000
Non speculative Loss – 60000
Other interest income – 8000
Total turnover – 1.3 Cr
As I have no other source of income except trading and my total income falls below the 2.5 lk slab, was audit required for my case?
Thanks
No need of audit.
Thank you Nitin Sir, for your valuable reply to all queries mentioned above.
What will be my Turnover which need to be reported in Balance Sheet as per Companies Act, If I had
Net Loss of Rs.100/- from F&O Segment.
Gross Loss from F&O Segment is Rs.500/- & Gross Profit from F&O Segment is Rs.400/-;
Moreover, Sale of Equity Shares (From Equity Segment) is Rs.1000/-.
I am eagerly waiting for your reply.
F&O turnover: Rs 900
Equity turnover (that is only if you show equity delivery as business, otherwise no turnover calculation if you show as capital gain): Rs 1000
I have both f&o loss and intraday loss , I want to file itr3 on presumptive basis.
1)can we combine both turn over for presumptive calculation?
2)Suppose next year if I don’t have any business income I can file itr1/itr2..?
Thanks in advance
1. Intraday equity can’t be shown as presumptive, it is speculative business income.
2. Yes.
I have the following query,
15 lac in F&O is considered to be reasonable turn over in the taxman eye(only 5-6 transactions)? net loss only incurred from this. normally turn over or SST paid which will be the criteria ..
Check the definition of turnover, it isn’t contract turnover. And turnover is only determining if audit is required or not.
The turn over given in the zerodha p&l sheet only 15 lac. (That is sum of absolute profit , loss and sell value). I have incurred a loss of 2.5 lac. only 6 transactions. Ideally speaking I know I have to go for audit . As it is a loss can I omit it in the itr .?
No, if you don’t show the trading income, you can potentially get a notice asking why. You’d have to then go explain.
My f&o turnover as per zerodha p& l statement is 15 lac and absolute p&l is 8 lac only.net is loss .Now on presumptive basis I have to pay tax for the 6% of 15 lac or 8 lac.
Pls do reply
15lks. But it is easier to get an audit and carry forward the loss instead of paying tax. Check them out https://zerodha.quicko.com/
I wish if Istart trading as supplimentary income…along with my full time service….as per your example of spaculative trading, if I purchase 100×800 = 80000 in morning, and sold at 100×820=82000 in the evening. as 2000 profit , turnover will be 2000. Now query is : turnover to less than 6% profit..books to be audited…what will be profit and what will be turnover in this case and how much is the profit in percentage w.r.t. turnover…pl elaborate
Turnover Rs 2000, Profit Rs 2000. So profit is 100% of turnover and no audit.
Hi do the transactions of “Add funds” and “Withdraw funds” between zerodha and bank account add up when calculating trunover ? Because my CA is telling me i have hudge turnover so her charges would be more (she is adding up all withdrawl and deposit amounts to zerodha account and condiering it as turnover)
Not really. Transferring and withdrawing isn’t really turnover.
Hello, I have a trading account with Zerodha but my wife doesn’t. She transferred some funds to me and I have done trading on her behalf as I can’t show the same in my account. So can I shown all the transactions in her P & L and as well as her return. All the transactions are legitimate.
Sure, you can. A gift to immediate family isn’t taxable.
Sir , where to show BITCOIN profits? There is no provision about BITCOIN in capital gain also.
I am guessing you will have to show it as a speculative income.
suppose, I am engaged in activity of buying and selling of share of listed companies and I have decided to classify my activity as “Trader and not investor” as per circular no. 06/2016. now my trading income will be considered as speculative business income as per explanation to Sec. 43(5) now my question is , Am I suppose to show share held in balance on 31st, March as stock in-trade and thereby do M2M job and show un realised profit or loss in my p&l as unrealised speculative loss or profit ?
Your equity delivery trades will be considered as non-speculative business income, only intraday is speculative.
Dear Nithin,
I currently trade in Profitmart but considering your brokerage charges, clear taxation reports, Brokerage & margin calculator where i do not have to call the broker to check for margin everyday, i would want to trade with zerodha instead.
Just had one query to get clarified.
Going by the para in chapter 6 i understood that my business turnover for below trade would be 7500/- Rs.
Trade 1 :
Intraday Crude Oil FUT Buy @ 1500 (MIS) 5 lots
Intraday Crude Oil FUT Sell @ 1510 (MIS) 5 lots
Profit – 10×5 = 50 points = 50 x 100 = Rs 5000/-
Trade 2 :
Intraday Crude Oil FUT Buy @ 1500 (MIS) 5 lots
Intraday Crude Oil FUT Sell @ 1495 (MIS) 5 lots
Loss – 5×5 = 25 points = 25 x 100 = Rs 2500/-
But Profitmart contract note would show it – 15,02,500/-
For trade 1: Net sell turnover Intraday Crude Oil FUT 1510×500(qty) = 7,55,000/-
For trade 2: Net sell turnover Intraday Crude Oil FUT 1495×500(qty) = 7,47,500/-
In this case if my understanding for turnover calculation in zerodha is correct, it would help me in Tax calculation & ITR filing.
Please let me know if my understanding is correct.
And for my second question, i started trading in profitmart on 19 March 2020 in Crude Oil FUT and have booked loss of -33000/- in FY 2019-20
according to profitmart contract note the sell turn over for FY 2019-20 is 1,80,68,200/-
will i require Tax audit or you think turnover calculation is wrong here??
Contract note traded value isn’t the turnover. Like I have explained, it is gross sum of P&L. You have to calculate and mention on your ITR if your broker doesn’t give this turnover data. Yes, in your example, Rs 7500 is turnover. You can take help of https://zerodha.quicko.com/ for tax filing help.
Many thanks for the extreme efforts taken in detailing this grey area with respect to taxation, expecially FnO. Everything is very well explained.
My one concern remains. For moving into ITR3/4 treating as business income (say to trade in FnO), one needs to put on display everything you are worth – vide the Balance Sheet. There may be unscrupulous people in the process who (being privy to this information) may misuse this information of your assets, and serve you valid / invalid notices attracting heavy penalties for things such as non-compliance, etc, which you may or may not be eligible to receive otherwise. In this age where even social media display attracts the evil eye, would it be prudent to be open up your asset information to possibly, predators.
Sorry for sounding pessimistic, but I know this is a concern hounding others I know too. Which is keeping them from trading in FnO.
Would appreciate your views on this.
Thanks
Ah the richest people in this country use ITR3 to file their returns. I don’t think you should be worried about that.
Sir
as per the above information given in the article i have a picked the case
In options, if you buy 100 or 4 lots of Nifty 8200 calls at Rs.20 and sell at Rs.30. Firstly, the favorable difference or profit of Rs 1000 (10 x 100) is the turnover. But premium received on sale also has to be considered turnover, which is Rs 30 x 100 = Rs 3000. So total turnover on this option trade = 1000 +3000 = Rs 4000.
in the above case
Turnover is 4000 Rs as per rules
purchase price is 2000 Rs
Real profit earned is 1000 Rs
my question is how will i present it in T format Profit and loss account to arrive at exact same profit.
Turnover is only to determine if you need an audit or not. Otherwise, you don’t need to use turnover in any other calculation.
Hi Nithin,
Thanks for the article. Never thought taxation in business income would be so complex 🙂
Can you update on what happened to the petition to the government regarding auditing for below 6% profit (below 2 crores turnover)
Also, I got little confused as in some places it is mentioned below 6% and and some places it is below 8%.
and is the turnover 1 crore, 2 crore or 5 crore. (for Auditing)
Thanks,
Pratibha
Nothing has happened on the petition yet. 🙂
These numbers have changed over the years. It is Rs 5 crores and 6% from FY 20 – 21.
Dear Nithin,
I have opened account at zerodha and traded in MCX Commodity from 30.4.20
I had a profit as per below
on 30.4.20 – Rs 260
on 4.5.20 – Rs 600
on 5.5.20 – Rs 2125
Total is – Rs 2985
Your Tax P&L report also shows my total profit is Rs 2985 & my total
turnover is also Rs 2985/-
But on 6.5.20 in first half
i had a loss of Rs 1250
& in second half
i got profit of Rs 250
Now Your Tax P&L report shows my total profit is Rs 1985 i agree, but it shows my total
turnover is also Rs 1985/-
As per my understanding my
Total turnover is 2985+1250+250 = Rs 4485/-
Total profit is 2985-1250+250 = Rs 1985/-
Can you please help me understand if this is correct…
Best to raise a support ticket on this. Ideally, the turnover at the end of 6th should be higher than 2985
I think what you are looking for is the tradewise turnover. This is available in the tradewise tax P&L statement which you can download from Console. You will have to refer to the Tradewise Exit-Entry sheet in the file.
I am a student , done the intraday trading total trade value ( buy + sell) is 80 lac. And the turnover ( absolute sum of profit and loss) is 20 k
Total net profit 15 k
There no others income
Is i require audit ?
Is i have to file itr
Is high trade value affect me in itr
Please help sir , i am new in market
ITR is not needed. Please go through the entire module, have explained in detail.
Hello Nithin,
Just want to share my story. I have been studying the markets since 3 years now and even dabbled with intraday a little bit, I know big profits are in Index F&O and I really want to trade BankNifty contracts. I have even developed a custom trading system which I have paper traded for at least 3 months now. Unfortunately, I am so scared of all the headaches of maintaining book of accounts having to get a CA audit done, I’m just procrastinating on doing real trades. I am a small scale trader with just few thousands as capital available for trading, and the CA audit fees far exceeds my capital. I just wish one day our government will make the processes of filing ITR a simpler procedure without much headache, just don’t know when will that day come.
I’d suggest trading F&O only once you have enough capital that you can afford to lose and not hurt you. Btw, Audit ain’t as tough as people make it out to be.
Do I suppose show stock in trade as invetory on balance sheet date?
I have asked question on 17.04.2020?
Hello Nitin,
If i use ITR3 for FY20-21 should i maintain P&L, balance & book of accounts even if audit is not applicable ?
Suppose my intraday profit is 20 lacs and turnover is 30 lacs and i have a annual salary of 10 lacs.
Yeah, it is best to maintain.
Thanks
One more doubt..I have started my career in 2010, from 2010-16 I had used ITR1, 2016-19 ITR2 as I had STCG income also around 40-50k
Now in Fy20 I’m using ITR3 as I’m trading in the market, so is there any issues if I keep on changing my strategies ?
Like in fy21 if I have only STCG can I use ITR2 again ?
No issues as such. As long as you are filing ITR genuinely.
I need tax consultant’s help
How can I contact you?
you can reach https://zerodha.quicko.com/
The petition on change.org is closed. Is it successful and closed now? or do we retail traders still need to have tax audit if our earning is less tha 6% of our turnover?
You still need audit.
In example of calculating turnover of futures , both methods are giving different turnovers. I.e 5000 and 15000. Is it correct. ?
Yeah, they are different ways to calculate turnover.
Hi, i just begun trading this month,
1. Should i keep my records since the start, and what all records to maintain except bank details ?
2. My capital invested is small and i am NOT expecting a profit of more than 2.5lakh rs and NEITHER would touch the benchmark of 5crore turnover in intraday. would the tax returns and payments apply to me ?
3. Being a srtudent, I have no incomes as of now and the amount invested here was recieved was given by my dad. How should i treat this (loan/Borroings/Gifts) or just ignore this small source from where i invested ?
1. All your records will be on Console.zerodha.com, you don’t need to maintain any. Just your expenses towards from trading from your bank account.
2. There won’t be any tax to pay, but it is advisable to file income tax returns.
3. Gift
Nithin Sir. I am 24, just left my job and teach students. My total yearly income is around 4 lakh rupees. I file ITR and also maintain yearly Balance Sheet.
I opened my equity Zerodha A/c in March 2020 and did only few MIS transactions and earned only Rs. 6.
On 31.03.2020 my Zerodha A/c had balance of Rs 48. No Share in holding.
How should i show it in my Balance Sheet? Is it ok if i don’t show it this year and show it next year?
Ah yeah, it is okay if you don’t show as there is hardly any activity.
Does options turnover affect our tax liability??
If options turnover is above 5 crore and if options turnover is above 50 crore…
In both cases – profit is of 4 lakh – 1lakh expenses = 3 lakh profit.
Does turnover matter?
No, turnover doesn’t affect tax liability. You pay tax only on profits. Turnover is only to determine if audit required or not. Go through the other chapters of this module.
Hi Nithin Sir,
i am a salaried professional, i did F&O trading last year from my savings and made a big loss.
My turnover is above 5 crore and there is no profit at all. My income is also less than taxable income.
Kindly guide me, How to proceed with my ITR.
Should i file normal ITR without any details on my losses on F&O trade?
ITR3 and do show your losses. Go through this entire module, explained in detail.
Hi Nitin Sir ,
1. My Trading turnover in FY 2019-2020 through Options is 10.2 Crore therefore Real turnover is nearly 5.1 Crore . My profit is Less than 2.5 L in FY 2019-2020 . Then is there need of audit ?
2. What was Limit for FY 2019-2020 to Require Audit ?( Like for 2020-2021 is 5% Crore )
3. I am student and I dont fill ITR because my Profit is Less than 2.5L in FY 2019-2020 I dont have any other Income source . In case if I want to do audit, then is there need to fill ITR ?
4. How much charges taken by Government for Audit ? What will happen if I dont make an Audit ?
5. If I want to do audit, what is the last date before which I am supposed to complete it ?
1. It is best to get an audit if you have traded so much.
2. 8%
3. You have to file ITR
4. Nothing charged by Govt. Only the CA will charge. You can check https://zerodha.quicko.com/
5. This year, dates have gotten postponed to Nov 30th.
how can I maintain books of accounts. Is it necessary to maintain books of accounts in TALLY .
or
can I just use zerodha account statement excel file as a books of accounts.
PLEASE HELP ME to get through this. 🙁
Just excel is enough. Just keep a tab of your bank expenses, everything else will be on Zerodha ledger and P&L.
Thanks for reply Nithin sir …..
Hi Sir,
I would like to know the bifurcation of charges provided in TAX P& L Statement generated from ZERODHA.
I am getting the charges on top in worksheet “EQ-TAX-PNL” where under Account head column various types are given (Brokerage – Z,Central GST – Z,Clearing Charges – Z e.t.c); however , i am not able to get the details of the brokerages calculated.
The different details regarding various charges (brokerage,sebi,sgst) provided in the same worksheet about the trades (short term trading) done on various scrips show that brokerage charges applied is zero.
Could you please help me
Thanks
Nicku
Can create a ticket on support.zerodha.com for account specific queries.
Hi
I would like to know when trading in F & O, how do we report the unrealized losses on the positions held as on 31st March of the respective year? Could you please help me.
You can MTM it to March 31st closing price.
Hello,
I really enjoyed reading the entire module on Taxation, since I follow the subject and the developments closely. This module has simplified the concepts involved, such that even a layman can understand what is being conveyed without much difficulty.
I think certain corrections may have to be made with respect to the recent amendments:
a. The turnover limit for Section 44AD remains unchanged at Rs. 2 crores. It is only for Tax Audit [ 44AB(a)], that the threshold has been increased to Rs. 5 crores from the earlier threshold of Rs. 1 crore.
b. Finance Act, 2017 brought changes to Sections 44AB and 44AD, as to when Tax Audit would be applicable for assessees mentioned under 44AD. The relevant excerpts are as follows:
44AB(e) –
“…if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year”
44AD(4) –
“…where an eligible assessee declares profit for any previous year in accordance with the provisions of this section [44AD] and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1) [of 44AD], he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1) [of 44AD].”
Basically it says that, the limit of 6%/8% of the turnover [for computation of profits], for determination of Tax Audit will be applicable only for those assessees
1. who had opted for the presumptive income scheme under 44AD, for a particular year and
2. in any of the immediate 5 years, such assessee does not compute profits in accordance with the provisions of Section 44AD.
Of course, I might have misconstrued the provisions, in which case, I am terribly sorry for the confusion.
Regards,
Pratist
Thank you Pratist, we will incorporate the necessary changes.
Hi,
Thanks for the detailed explanation, very informative.
I have had a terrible year (2019-20) with LTCG ( P/L = -5,07,447) / STCG (P/L -8,723), Equity Intraday (T/O = 4,808, P/L = -1613), Futures & Options (T/O = 9,82,318, P/L = -1,44,441) with all in RED/negative :(. Learning the hard way.
As I can see I’m in negative and I definitely feel that I should go for audit as per your explanation (profits of less than 6% of T/O). When I reviewed in the Quicko, I could see that they also recommend to go for Audit.
When I contacted a known CA, they told that we can show the loss in LTCG/STCG so that we can offset any incomes for next coming 4-5 years. But they preferred and advised me not to go for Audit and asked me to show profit and pay 6% of the T/O.
As per your explanation, it is enough if we have the Bank statements and the Tax P/L which we get in Zerodha and looks simple. But why do they make it look scary or complex?
What is the disadvantage of going for an Audit? (you also told that we need not go audit next year if we don’t have Intraday/F/O transactions).
Thanks.
Hmm… There is no disadvantage of audit. You can carry forward your losses and setoff against future profits, doesn’t make sense to let go off the losses.
Sir really thank you for simplifying the things.
My doubt is : A person deals in F & O and Speculation (Intraday of Equity Shares) and occurred loss in both type of transactions.
As per above details we have to calculate Turnover aggregating all Positive and Negative Values ignoring sign.
Now while making P & L how we reach to profit, the difference will be marked in which head.
For eg. In one scrip my profit was Rs.1000/- and in one scrip my loss is Rs.3000/- , total loss Rs.2000/-
So, here we will consider Turnover as Rs.4000/- in P & L , how we will show loss of Rs.2000/-
And Second doubt is, in speculation income also we can show 6% profit.
Surbhi, best to consult a CA for filing help. Check this https://zerodha.quicko.com/
hai nitin kamat good effort on your side by guiding the trader , so i am confused little bit and give me your explantion
for year 2018-19
speculative income: 139000/- (turnover is around 20 cr considering both buy and sell side)
non speculative income(BTST): 391000/- (turnover is arount 55 cr considering on sell side)
net delivery in my demat at year end : 12 lac
how i make my p&l
please clarify i have to mentioned turnover in P&L
what is DB10 report?
I have total anual 6,00,000 as a salary income.
my F&O turnover is 20 lac. and my total profit is less than 1.5%
Is it Requires Audit or not? please help me.
Hi Vishal,
I have total annual 6,00,000 as a salary income.
my F&O turnover is 20 lac. and my total profit is less than 1.5%
Is it Requires Audit or not? please help me.
You have two options;
AA] If you want to show profit at 1.5% – Audit is applicable as you net income is below threshold limit.
BB] You can show 6% profit on your FNO turnover under presumptive scheme and avoid audit.
Hope this helps. However please contact your CA for further information.
Sir,
1.Can you please give information regarding submission of Form 8949 and 1090B
2.I am a pensioner with salary income of Rs 5.5L per annum and do intra day trading(loss of Rs2000 and turnover Rs 10000/-) and also short term delivery trading. Is audit required? Which IT form Ihave to use?
Hey best to consult a CA for this. You can reach out to https://zerodha.quicko.com/.
Sir,
1.Can you please give information regarding submission of Form 8949 and 1090B – this is applicable for people in US. Are you from US??
2.I am a pensioner with salary income of Rs 5.5L per annum and do intra day trading(loss of Rs2000 and turnover Rs 10000/-) and also short term delivery trading. Is audit required? Which IT form I have to use? – Use ITR 3.
Hi VIkram Chopra,
1. speculative income: 139000/- (turnover is around 20 cr considering both buy and sell side)
2. non speculative income(BTST): 391000/- (turnover is around 55 cr considering on sell side)
3. net delivery in my demat at year end : 12 lac
how i make my p&l
please clarify i have to mentioned turnover in P&L
what is DB10 report?
I assume 12 Lacs (net delivery) as your capital gains earned other than BTST Cap Gains and not the turnover.
You have to aggregate both favourable (positive) and unfavourable (negative) difference for the purpose of turnover. Here, it makes no difference, whether the difference is positive or negative.
Further use ITR 3 and declare as follows:
A] Turnover from Speculative Activity: Aggregate of both positive and negative difference
B] Gross Profit: Rs 1.39 Lacs in this case.
C] Expenditure : If any
D] Net Profit : Rs 1.39 Lacs minus expenditure (C)
Furthermore, declare 3.91Lacs(BTST) and whatever Cap gains in delivery under Capital Gains Head.
No idea about DB10 report.
Hope this helps.
I do trading in equity delivery and equity futures on daily basis with huge volumes for short term gain
1. For equity delivery – Can I treat that as Capital Gains based on CBDT circular which suggests that irrespective of period of holding, assessee can opt for capital gains or business income? What you would do personally do if volume is huge on daily basis? I fall into 20% slab. If I treat that as business income I would be under 30% slab whereas STCG is 15%. Please suggest with justifications.
2. If I show that as business income, my estimated turnover (incl. delivery actual turnover and absolute difference in futures) will be less than 5 crores but profit will be less than 6 %. Is it ok to show 6% profit or show actual profit by doing tax audit.
I dont want to get into tax audit owing to complexities and compliances related to maintaining of books of accounts.
If you are trading with huge volumes, I think best to show this as business income. Also, best to get the audit done.
Hello sir,
First of all thanks for this informative article
I have salary 4LPA.
Intraday turnover 50k, profit 13k
Short term turnover 20lakh, profit 130k
(No other income)
1. Which ITR form applicable for me ?
2. Is audit required ?
Thanks !
1. ITR3.
2. No need. But do speak to https://zerodha.quicko.com/
Hi Mayank,
ITR – 3 is applicable for you. No Audit required.
I trade only in options on zerodha.can you pl guide me as to where can i get my trade wise turnover report so that i know whether i need to be audited or not?
thanks
I am salaried employee Gross income from salary 4.80 lakh , short term gain from trading 20k ,intraday loss 40k turnover below 2.00 crore ,which itr should i file .
Hi Ashesh Gala
I trade only in options on zerodha.can you pl guide me as to where can i get my trade wise turnover report so that i know whether i need to be audited or not?
Please check in console – TaxPL
Hi Mohit,
I am salaried employee Gross income from salary 4.80 lakh , short term gain from trading 20k ,intraday loss 40k turnover below 2.00 crore ,which itr should i file .
You should file ITR 3.
Sripe wise detail of short term trade and intraday is mandatory or optional itr…
Not required. You just have to put overall P&L of short term, intraday, long term.
Salary 800000
Intraday turnover 400000
Profit (-)110000
F&O turnover 250000
Profit (-)45000
Is it compulsory to audit my accounts and file ITR 3. If I don’t want to c/f losses,should I file ITR 4 (44AD) instead of ITR 3 without audit.
You could use ITR4. You can speak to https://zerodha.quicko.com/
sir,
Sub:- Tax Audit.
I do only and only Cash Delivery based trading by constant by and sell at a profit percent of JUST 3.25 %.
I do no FnO.
Due to constant buy n sell.
My Turnover is likely to reach about more than 4 crores in the coming year.
I have been submitting my Returns as Business income as per Section 44AB.
I am not interested in section 44AD ( Assumed income )…where if you show profit below 6 % ,Then Audit Becomes Compulsory.
I am Ready to pay Tax on my profit of 4 Crores × 3 %=12,00,000.Rs.
Does Audit Become Compulsory in my case ??? Just Because my Profit precentage is 3 %.(which is below 6%)
My Turnover will Remain Below 5 Crore.
Please Clarify ..
I wish to do Maximum trading pay Maximum TAX..But Avoid Tax Audit “”FOR Some time “”
Kindly Advise so that I can go ahead trading in Full swing without Worrying about “Audit” Hassles…
Thanks
Urvashi Mody
sir
Sub :- Tax Audit.
what I wrote in Above
question.
I Really Hope…that
income Tax Rules of section 44 AD.
That Assumed profit percentage should be Minimum 8 %.
( 6 %in Case of Digital Transactions )
is Applicable only if we have “”opted”” For Assumed income scheme…
while its 6 % n 8% Rule is not Applicable to ALL n Everyone.
Specially it should not be Applicable to those who pay taxes as per section 44AB.
please confirm
Thanks
Urvashi Mody
In case of Option Trading- can i claim option buying price as expenses against turnover.
Hi Urvashi Mody,
My Turnover is likely to reach about more than 4 crores in the coming year.I have been submitting my Returns as Business income as per Section 44AB.I am not interested in section 44AD ( Assumed income )…where if you show profit below 6 % ,Then Audit Becomes Compulsory.I am Ready to pay Tax on my profit of 4 Crores × 3 %=12,00,000.Rs. Does Audit Become Compulsory in my case ??? Just Because my Profit precentage is 3 %.(which is below 6%)
Coming year – I assume you are referring here is from April 20 to March 21.
Tax Audit is not applicable if turnover is below 5 Crores and 95% of the business transactions should be digital or done through banking channels. Since trading transactions are 100% digital and is around 4 Crores – tax audit will not be applicable.
Trading in full swing is your personal choice.
Assumed or Presumptive Income Scheme (44AD) is applicable for all businesses except the business of hiring or leasing goods carriages,agency business and commission or brokerage business and turnover should not exceed 2 Crores.
sandeep sir,
Thanks for reply,
But Doubt still remains.
In Turnover Chapter
at the Extreme Bottom is
:- Key takeaways from this Chapter
Here in point Number 2
It is clearly mentioned that Audit is required even if Turnover is Below 5 Crores..if your income percentage is BELOW 6 %.
sir
since i trade heavily at just 3.25 %profit.
Obviously my turnover will be very high and precentage profit will be ONLY 3 %.
so now tell me…
is Audit Compulsory in my case ???
yes its for Fin year 20-21.
Its comparatively easy to book profits at 3.25%.
while Quite Difficult to wait till 6 %.
I wish to trade Maximum….But with Freedom from Audit
kindly Clarify…
point No 2 which i mentioned above is Already printed… in your Turnover Chapter.
Titled # 5 CRORE
is there any change required to be
done by ZERODHA in
key take away point No 2.
kindly check and clarify
Thanks a Lot
it will help many of your clients…who wish to do this type of trading
thanks
urvashi mody
Hi Urvashy Mody,
There is bit of confusion here.
https://blog.quicko.com/no-more-tax-audit-for-business-trading-income-having-turnover-up-to-inr-5-cr-is-it-true
Refer here Situation 3
Thanks Sandeep,
I went through the Blog “”Qicko””
Unfortunately it says
confirmation awaited from CBDT.
I feel this point should be High-lighted in Zerodha chapter on Turnover
I feel very proud that
ZERODHA has taken up the case for share traders through
change.org.
This rule modification by CBDT can mean a LOT to the share traders..
Lakhs of people can start saving ajnd investing through shares by opening a Demat and Trading Account
Meanwhile i will have to Restrain myself from Booking profits at less than 6%.
Awaiting CBDT clarification.
please do “”Declare”” it as a Major News item for Traders at ZERODHA
Thanks
Urvashi
Hello Nitin Kamath!
I would really appreciate the way Zerodha is working and keep growing.
I have a small request for your technical team to share with me the excel file with formulas in it so that I can keep a record of all my profit and losses maintain my trade book since the beginning of my trading journey all in one place. Actually I have a few Demat accounts earlier with different brokers where there are different Profit & Losses and Holdings in each account. I want all to sum up together in one single spreadsheet and manage my current inventory all at one go, hope you know the importance of doing so.
There were few similar spreadsheets, I found on the internet but didn’t work the way I want, some give error while selling short first and then buying it back. None of them were able to sort out things for me. Also, I belong to the Computer Science background, I may be able to make it, but it could take a lot of time, I’ve been working on it for the last 10 days.
I would appreciate a reply with the procedure on how to proceed next.
Nicely explained sir, I have a query that my turnover is around 40 lakh and I have a loss of one lakh, should I require audit Or I have to give tax???
Hi Abhay,
My turnover is around 40 lakh and I have a loss of one lakh, should I require audit Or I have to give tax???
Yes, you audit is required as you have a loss of one lakh.
Other option is you can go for presumptive taxation, but you need to declare profit of not less than 6% i.e 2.4Lacs and can avoid tax audit.
This trade is only in equity not in Future & Options
My Intraday (Buy+Sell) value is 12,31,66,395.00 and STCG (Buy+Sell) value is (7,47,37,816.00) and LTCG (Buy+Sell) value is 1,24,617.00 and my Buisness Income is approx 4,00,000.00. Is Audit is required for this or not. Please clearify.
Hello Sir,
Although this question/related-query seems to have been asked by many already..I am still confused and not getting clarity
My wife is a doctor, and she will be filing ITR-4 (this FY-2019-20/AY-2020-21). So she will be declaring her income as Business-Profession, under section 44AD, etc
1. She will be declaring her final income from her practice as say Rs.6 lacs
2. She will also be investing 1.5-lacs in the tax-saving Fixed-Deposit (locked in for 5 years) every FY
3. Now this FY, she has traded in Options-Derivatives AND i have calculated the turnover (as per the instructions you have mentioned above – Gain+Loss+PremiumForsellingOptions) as Rs.10,85,606/-
4. And the total profit (positive-gain) overall of all option-trades is coming to Rs.1,95,300/-
Now, sir, can you very kindly please help me by clarifying whether she will require to get a tax-audit done by the CA?
– If yes, why? Becos as per my layman understanding of the rules mentioned in your varsity site, the turnover for F&O is less than 2cr, BUT the profit is above 6%….does she need to still maintain the accounts/P&L/audit?
– as mentioned, iam confused by the rules interpretation…when the Presumtive-income is being declared more than 6%….why the audit is required?…or something like that…
You are more knowledgeable and the expert….can you please kindly clarify and explain once again
I have another same question with respect to myself….my taxable income from “Salary” (after the savings of 1.5 lacs) will be 27-lacs/- AND this FY i have done options-trading with turnover of 23-lacs….and i have gained a profit of Rs.1,91,500/-…..So the same query….do i need to have a audit done?
thanks in advance
regards
RajeevK
Hi Rajeev,
AA]
Professional Income under Section 44ADA – Rs 6Lacs. (I assume you are declaring not less than 50% of the gross receipts earned under presumptive taxation scheme)
80C Tax Saving FD – Rs 1.5 Lacs
FNO Turnover – Rs 10, 85,606/-
Total Profit (Positive Gain) – Rs 1, 95,300/-
Can you very kindly please help me by clarifying whether she will require getting a tax-audit done by the CA?
Tax Audit is not required. Profit Percentage on Turnover is 17.98 %( well above 6%). You are required to maintain books of accounts – if you are declaring income normal provisions i.e other than presumptive provisions.
Also, with regards to professional income – I assume you are declaring not less than 50% of the gross receipts earned under presumptive taxation scheme.
BB]
Salary Income – Rs 27Lacs
FNO Turnover – Rs 23Lacs
FNO Profit – Rs 1.91Lacs
FNO Profit% – 8.32%
Do I need to have audit done?
No need to get tax audit done as Profit is more than threshold limit of 6%.
Hope this helps..
Hi Kalu,
This trade is only in equity not in Future & Options
My Intraday (Buy+Sell) value is 12,31,66,395.00 and STCG (Buy+Sell) value is (7,47,37,816.00) and LTCG (Buy+Sell) value is 1,24,617.00 and My Business Income is approx 4 Lacs. Is Audit is required for this or not. Please clarify.
Turnover from Speculation Business is 12.31 Crs which is more than the applicable threshold limit. AUDIT applicable.
Hello Mr.Sandeep Sir,
I am very very grateful and very much thankful to you for taking out your time & effort in responding to my queries.
Thank you so much for your kind help in clarifying with details
>>>I assume you are declaring not less than >>>50% of the gross receipts earned under >>>presumptive taxation scheme.
Further, your point above is correct. we are declaring as such.
Your confirmation and advice on the “audit” aspects has lifted a load off my chest 🙂 so to speak…
with regards
RajeevK
1. No work, No salary
2. Income only from trading, shares investments, bank interest
3. Income detail:
a. FNO losses = -20L,
b. STCG and LTCG loss = -8L
c. Bank Interest = 5L
d. Total FNO&Speculation is turnover much less than 1 Cr.
4. Last year opted for 44AD (presumptive 6%)
5. Pls let me know if I need to get Tax Audit done.
Hi Vyas,
Turnover is less than 1 Cr.
No Audit is required provided if you declare losses under regular provisions. (other than 44AD)
If you want to declare under 44AD and show losses – Audit is required.
Namaste Sir🙏,
Sir I have a query,
My salary income is 1,80,000 annual
F&O trading turnover is 6 lakh+ and profite is less than 6% .
Short term capital gain only 300 Rs.
1 Is tax audit required in my case?
2 is mandatory to file ITR ?
3 any tax liability?
Hi Ishant,
Salary is 1,80,000.
F&O 6 lakh+ and profit is less than 6%.
STCG 300 Rs.
Your taxable income is less than basic exemption limit – it is not mandatory to file income tax.
No tax audit applies if you are declaring income under normal provisions.
No Liability as income is below 2.5Lacs.
🙏Thank u for information
But sir,
I am not clear about one sentence “declaring income under normal provision”
Is declaration mandatory?
*Sir actually 6 lakh + is my F&O turnover*
My user ID QX9250.
Good explanation about calculating turnover. In your example it is mentioned to add premium of Call sell, but what about Put sell?
Secondly after calculating turnover, while preparing P/L it can be taken as sale value /figure but how to calculate purchase value?
I have suffered loss of around Rs 1lakh in FNO.
Hi,
I am senior citizen…did f&0 trading n Last year had profit and got books audited n filed return….let’s say I end this year with F&o turnover of less than 2crore (all digital transaction) and loss of say 10-15 lacs this year (FY21)…Have small FD Interest income less than 2lacs.
A)Is audit mandatory when I file return for FY21.
B)Is audit required if one wishes to carry forward this loss or u can carry forward loss without audit too
C)And if I don’t wish to carry forward losses then is audit still required
Ishant,
I am not clear about one sentence “declaring income under normal provision”.
“declaring income under normal provision” means not declaring under 44AD.
Sandeep
While replying to Mr Vyas on 10 Sept 20, you said no audit required if losses declared under regular provision. (T. O less than 1 cr) What does it mean?
In earlier post Nitin Kamath says even if turnover is less than 1 Cr but profit is not declared less than 8% (6%) Audit is necessary.
Please explain
Hi Pradip
Good explanation about calculating turnover.
AA] In your example it is mentioned to add premium of Call sell, but what about Put sell? – You have to consider put sell as well while calculating turnover.
BB] Secondly after calculating turnover, while preparing P/L it can be taken as sale value /figure but how to calculate purchase value? I have suffered loss of around Rs 1 Lacs in FNO.
Turnover calculation is only for the purpose of determining the applicability of Audit. If your FNO turnover is more than threshold limit of 1Cr or 5Cr, then audit is applicable.
In Profit and Loss Account – take sale value of premiums under Sales/Turnover tab ; and purchase value of premiums under Purchases.
Once you enter these values; the resultant value will be either loss or profit. In your case, it should be loss.
Dear San, Thank you for your reply to my query as of 16sep20
You said for PL, to take sale value of premium as sale figure and purchase value of premium as purchase figure. It will show loss, I. E ok but what about future transactions loss. My loss in option is (-) 14948/ and future loss (-) 76179/
Your suggestion does not reflect future loss. If I take actual sale / purchase value,of future transactions then turnover will be huge and not as suggested
Hi Pradip Bhaskar Gupte,
You said for PL, to take sale value of premium as sale figure and purchase value of premium as purchase figure. It will show loss, I. E ok but what about future transactions loss. My loss in option is (-) 14948/- and future loss (-) 76179/-
You need to put the sale value of futures and reduce purchase value of futures, to arrive at future loss figure of 76K(rounded off).
Obviously turnover value will be huge and I don’t think there is no other way to carry forward loss and at the same time you can’t alter the figures, right?
Hi Nithin
(A) I have done the below intra day transaction in 2020:
I made a speculative loss of Rs 16,000 and speculative gain of Rs 19,000. As per your explanation, my turnover would be Rs 35,000. The net income here is Rs 3,000 which is 8.57% of turnover. In this case, since the turnover is less than Rs 5 Cr and profit is more than 6% of the turnover, no audit will be required. Please confirm.
In this case I have to file ITR3 while filing return for FY 2020-21
(B) In 2021 I dont do any intra day trading however, I get capital gains income. So from next year can I start filing ITR2 again or I have to file ITR 3 in future even if I dont have any speculative income
Hi Neha,
I am senior citizen…did FNO trading n Last year had profit and got books audited n filed return
Let’s say I end this year with F&o turnover of less than 2 crore (all digital transaction) and loss of say 10-15 lacs this year (FY21)…Have small FD Interest income less than 2 lacs.
AA) Is audit mandatory when I file return for FY21 = No, audit is not mandatory because for FY 2020-21 – the turnover limit is Rs 5 Crore.
BB) Is audit required if one wishes to carry forward this loss or u can carry forward loss without audit too = You can carry forward the losses without audit if turnover is below the threshold limit.
Eg: for FY 2019-20, if turnover is more than 1 Crore and less than 2 Crore and you want to carry forward loss – then tax audit is required.
For FY 2020-21, if turnover is more than 5 Crore and you want to carry forward loss – then tax audit is required.
You can carry forward the loss without tax audit provided if your turnover is below threshold limit.
CC) And if I don’t wish to carry forward losses then is audit still required = If your turnover is less than Rs 2 Crore & if you don’t want to carry forward loss – you can opt for presumptive scheme and ignore loss.
Hi Nikhil,
AA(1)] I have done the below intra day transaction in 2020:
I made a speculative loss of Rs 16,000 and speculative gain of Rs 19,000. As per your explanation, my turnover would be Rs 35,000. The net income here is Rs 3,000 which is 8.57% of turnover. In this case, since the turnover is less than Rs 5 Cr and profit is more than 6% of the turnover, no audit will be required. Please confirm.
Yes, no audit is required.
AA(2)] In this case I have to file ITR3 while filing return for FY 2020-21
I assume it is for FY 2019-20. Yes, you need to file ITR 3
BB] In 2021 I don’t do any intra day trading however, I get capital gains income. So from next year can I start filing ITR2 again or I have to file ITR 3 in future even if I don’t have any speculative income
Yes, you need to file ITR2 and no need of ITR3 in FY 2020-21
sir,
Sub :-
Modifications required in some Printed Knowledge about Financial year from which the Turnover of 5 CRORE is Applicable in your chapter on Turnover and Taxation.
I read in Quicko.in
that 5 crore Turnover is
“”Retrospectively””
Applicable from
Financial year
2019-20.
Assessment year
2020-2021.
I surely feel this change should be incorporated as a SURE Knowledgefor All your Clients and Traders.
Plus you can also clarify whether
Minimum 6 % profit is to be shown as per section 44AB Also ?????.
OR 6% Profit is Applicable only in case of 44AD Assumed income Scheme.
CBDT was to issue some clarification on this section 44AB and 44 AD confusion
Thanks
please check and Modify the DATA on Financial year Applicability at Zerodha chapter on Taxation
Urvashi mody
Hi my f&o turnover is 12lakhs and loss is 56k.I have no other source of income and is less than 2.5l so do i need audit??
Hi Rudranil,
My f&o turnover is 12 lakhs and loss is 56k.I have no other source of income and is less than 2.5l so do i need audit??
There is no requirement of tax audit as the turnover is less than the threshold limit.
Further, you can carry forward the loss if you file within the due date of filing of return.
Tax audit limit Applicability of 5Crore is from F.Y. 19-20 and not from F.Y. 20-21,Am i Right?
Hi Manikantha,
Yes. 5 Crore is applicable from FY 2019-20.
Really appreciate your efforts. It was very very helpful. My respect has increased for Zerodha.
Thank you
My Intra Day profit for the FY 2019-20 thru Zerodha is less than ₹50000. Turnover and Profit is the same. Please advise what I need to mention in the Balance Sheet tab of ITR3 at Item No.6 – Amount of Total sundry Debtors, Creditors, Total Stock in Trade, Total Cash Balance. Thanks.
Hi Padmakumar G
My Intra Day profit for the FY 2019-20 thru Zerodha is less than ₹50000. Turnover and Profit is the same. Please advise what I need to mention in the Balance Sheet tab of ITR3 at Item No.6 – Amount of Total sundry Debtors, Creditors, Total Stock in Trade, Total Cash Balance. Thanks.
This typically applies for a individual who is opting for 44AD and 44ADA.
You can put Zero for Total Sundry Debtors, Creditors and Stock in Trade as we don’t have any open positions in Intraday.
For Cash balance you can put the sum what you had as on 31st March 2020 say Rs 5000 or Rs 10000, even Zero if you had no cash.
Hi,
I am an FNO trader. I need to prepare a BS and PL for filing my income tax return. Request to provide an insight into the preparation of BS and PL.
Apart from FNO income I also have rental income and interest income. Is it necessary to show rental and interest income as revenue in the PL that is prepared for the purpose of FNO? Please suggest.
Thank you.
Hi sir, I have a small query. I am a small trader who is just learning, so the volume of my trade is very less. I have traded in intraday and have 3-4 trades in options. I have a total loss of 23K with turnover being just 70k. So since it is a small amount, I dont think I need to get my books audited. My taxable income is 4.5 lacs. So instead of carrying forward loss, can I just show my trading as a business with 6% profit and file itr-4?
Hi Rishabh,
I have a small query. I am a small trader who is just learning, so the volume of my trade is very less. I have traded in intraday and have 3-4 trades in options. I have a total loss of 23K with turnover being just 70k. So since it is a small amount, I dont think I need to get my books audited. My taxable income is 4.5 lacs. So instead of carrying forward loss, can I just show my trading as a business with 6% profit and file itr-4?
Yes, no need of audit in your case as the turnover is less than threshold limit.
You have two options
• Maintain books and File ITR-3 and carry forward the loss.
• Go for presumptive scheme and File ITR-4.
Hi
I have a doubt..
I have loss of 13L and turnover of 1.43 Cr for the fy 2019-20.. all are options trade..
1. Is Tax Audit required ?
2. Should I file ITR 2 as non buisness income and carry forward loss ? Or I have to file ITR 3 Or ITR 4 ?
Please reply
Hello sir, is turnover showing in zeroda statement consists of all components like premium and absolute diff of profit and loss… I mean does the turnover which zeroda displays is the turnover we need to consider for opting tax audit….???
HI M Saha,
I have loss of 13 Lacs and turnover of 1.43 Cr for the FY 2019-20.. all are options trade..
1. Is Tax Audit required?
Tax Audit is not applicable as your turnover is less than the threshold limit.
2. Should I file ITR 2 as non business income and carry forward loss? Or I have to file ITR 3 Or ITR 4?
You need to file ITR-3 and declare FNO Loss as business loss and further carry forward the loss.
Hi Mounica,
Is turnover showing in zerodha statement consists of all components like premium and absolute diff of profit and loss… I mean does the turnover which zerodha displays is the turnover we need to consider for opting tax audit….???
Yes, turnover reflecting in zerodha stmt is conservative. You can use it for determining the applicability of tax audit.
Dear Nithin,
I am your client and investing in delivery based transactions. If I do swing trading in delivery based stocks and earn short term profit of Rs 1crore. Whether it will be subject to 15 % short term capital gain tax or will be treated as business income subject to 30% slab tax. Regards
In case of balance sheet for audit purpose for derivatives trading loss, is there a need to show all my assets like house, gold, mutual fund and equity shares holdings etc. which have nothing to do with my derivatives trading business. Is it not enough of we show the closing balance in bank accounts and all the trades in options and futures? Please clarify , since I have been advised that there is no need to show all your personal assets and liabilities which are not related to derivatives business. But in your explanation of balance sheet you have indicated that all assets should be shown.
Hi Mahendra Gupta,
I am your client and investing in delivery based transactions.
If I do swing trading in delivery based stocks and earn short term profit of Rs 1crore. Whether it will be subject to 15 % short term capital gain tax or will be treated as business income subject to 30% slab tax?
This is bit tricky, please refer this once..https://www.incometaxindia.gov.in/communications/circular/910110000000000316.htm
Hi Mohan,
In case of balance sheet for audit purpose for derivatives trading loss, is there a need to show all my assets like house, gold, mutual fund and equity shares holdings etc. which have nothing to do with my derivatives trading business. Is it not enough of we show the closing balance in bank accounts and all the trades in options and futures? Please clarify,since I have been advised that there is no need to show all your personal assets and liabilities which are not related to derivatives business. But in your explanation of balance sheet you have indicated that all assets should be shown.
All the assets and liabilities as on financial year ending(31st March) needs to be shown.
Further, if your taxable income is more than Rs 50 Lacs – you need to compulsory fill Schedule AL – Details of Assets and Liabilities.
If total income is less than 50 lakhs, and my business activity is only derivatives trading, my CA says that there is no need to show all assets such as real estate and mutual fund holdings which are not related to the business of derivatives trading in the balance sheet. Only the derivatives traded and held and if required the cash balance on bank accounts only need to be shown.
If total income is less than 50 lakhs, and my business activity is only derivatives trading, my CA says that there is no need to show all assets such as real estate and mutual fund holdings which are not related to the business of derivatives trading in the balance sheet. Only the derivatives traded and held and if required the cash balance on bank accounts only need to be shown.
If CA is suggesting – Please go ahead.
In the case of open futures positions, should we show the full futures value or only the premium or margin paid for buying or selling the futures? Also, should the Margin used and pledged but still available be also shown in the balance sheet for income tax audit?
Hi Chitra,
In the case of open futures positions, should we show the full futures value or only the premium or margin paid for buying or selling the futures? Also, should the Margin used and pledged but still available be also shown in the balance sheet for income tax audit?
In case of option FNO positions – please show the margin or premium paid for buying or selling the futures or options under Stock in Trade.
Further, if you have pledged and with the available margin if you have taken positions; You need to show margin utilized from pledged value under Liabilities and correspondingly the margin or premium paid for position taken under Stock in Trade.
Hope this helps.
Hello Nitin Kamath!
I would really appreciate the way Zerodha is working and keep growing.
I have a small request for your technical team to share with me the excel file with formulas in it so that I can keep a record of all my profit and losses maintain my trade book since the beginning of my trading journey all in one place. Actually I have a few Demat accounts earlier with different brokers where there are different Profit & Losses and Holdings in each account. I want all to sum up together in one single spreadsheet and manage my current inventory all at one go, hope you know the importance of doing so.
There were few similar spreadsheets, I found on the internet but didn’t work the way I want, some give error while selling short first and then buying it back. None of them were able to sort out things for me. Also, I belong to the Computer Science background, I may be able to make it, but it could take a lot of time, I’ve been working on it for the last 10 days.
I would appreciate a reply with the procedure on how to proceed next.
While filling ITR3 with business income only from F&O trading, is it enough if we fill in PART A, only BS and P&L, and among schedules only Schedule BP with respect to data regarding F&O trading? Should any other statements such as Trading Account in Part A , and other schedules such as AMTC etc. be filled? Please inform which other schedules if any to be filled exclusively for F&O income or loss?
Among the reports available in Zerodha Console, where can I get information on the amount of money used as Margin for the open option and futures positions held by me on March 31,2020? Also, where can I get information on the available margin , used margin and available cash as on March 31,2020.
Hi Chitra,
While filling ITR3 with business income only from F&O trading, is it enough if we fill in PART A, only BS and P&L, and among schedules only Schedule BP with respect to data regarding F&O trading? Should any other statements such as Trading Account in Part A , and other schedules such as AMTC etc. be filled? Please inform which other schedules if any to be filled exclusively for F&O income or loss?
With regards to FNO Income – Filling Schedule PL and BS in enough as almost all the details will be included there.
In Schedule BP – you will add back and reduce the incomes or expenses to arrive the business income. Eg: If you have included any interest income in Schedule BP; the same needs to be added back and you should declare it under Schedule OS.
If you are claiming any depreciation – Please fill Schedule DPM(Depreciation on Plant and Machinery like computers etc.,) and DOA.
Further if there are any previous year losses – Please update the same in Schedule CFL – Column 5.
Hi Mohan
Among the reports available in Zerodha Console, where can I get information on the amount of money used as Margin for the open option and futures positions held by me on March 31,2020? Download Tax PNL – you will get list of open positions of FNO trade in a separate sheet.
Also, where can I get information on the available margin , used margin and available cash as on March 31,2020 – Download Equity Statement under “Funds Tab” in Console.
Nithin, A superb and very helpful article explained in very clear and simple terms just like any other service offered by Zerodha. I have recently started using your platform and wanted scale up. being a software guy the one and only thing that bothered me was the headache of managing tax and audit.
I see three takeaways for delivery based traders from this article
1) if the trades are few and you are holding for a long time you can declare it as capital gains even though this is subjective and there is small risk of this getting challenged
2) if you decide to decalre as business income then, on an average, every time you sell you need to make atleast 6% profit to avoid audit.
3) even if you make less than 6% profit , you can show it as 6% and pay tax accordingly to avoid audit.
Hi CC,
AA] if the trades are few and you are holding for a long time you can declare it as capital gains even though this is subjective and there is small risk of this getting challenged – Yes; I hope you have gone through circular this https://www.incometaxindia.gov.in/communications/circular/circular-no-6.pdf
BB] if you decide to declare as business income then, on an average, every time you sell you need to make atleast 6% profit to avoid audit – Not necessary. This minimum 6% profit applies in the below scenario:
Suppose, if you had Business Income for any previous years and you were declaring under presumptive scheme i.e. section 44AD – minimum 6% ; (meaning currently you are in presumptive scheme upto FY 2019-20)
AND now if you are opting OUT of presumptive scheme in FY 2020-21 and your Business Income is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then you have maintain books of accounts and Tax Audit is applicable.
CC] even if you make less than 6% profit , you can show it as 6% and pay tax accordingly to avoid audit – if your turnover is below threshold limit i.e. 5Crs and profit is less than 6%, then tax audit is not applicable.
Also, to carry forward the loss – Tax Audit is not applicable.
In case of Future & Options trading if turn over is less than 5 cr. and Profit is 10 lacs (Exceeds basic exemption limit) then audit is required or not ?
Hi Alok Jauhari,
In case of Future & Options trading if turn over is less than 5 cr. and Profit is 10 Lacs (Exceeds basic exemption limit); then audit is required or not?
Audit is NOT required.
My turnover is 6 core 13 thousand and profit is 2lac 3 thousand how much tax i have to pay…. and I don’t have other income…. only trading income 213000
Hi Prasad,
My turnover is 6 core 13 thousand and profit is 2lac 3 thousand how much tax i have to pay…. and I don’t have other income…. only trading income 213000
There is NO tax liability as your income is below Rs 2.5Lacs.
Also, tax audit is applicable for your as your turnover is more than 5Crore and you need file ITR-3
Respected sir,
I am Palash Sarkar,l am going to fill ITR3. How can I get Gross profit from zerodha statement?
Hi Palash,
I am Palash Sarkar,l am going to fill ITR3. How can I get Gross profit from zerodha statement?
Please download TaxPL Excel. Refer “EQ-TAX-PNL” Sheet and consider turnover from “Intra-day/speculative turnover” [65(i)]
Gross profit will be under “Realized Profit Breakup” – Intra-day/Speculative profit. [65(ii)]
Hi,
Nithin
If I buy call option of Tata motor 3,000 lot size @ 25 and sold @ 20 So Turnover calculation in this options ?
3,000*20= 60,000
3,000*5= 15,000
Total turnover will be 75,000 ??
Or turnover will be 15,000 ??
I used to buy 100/200 lots daily.. If (1) 75,000 is turnover then Audit apply
(2) 15,000 then No Audit
Which one apply??
Thanks
Dear Sir,
I am Salaried + Trader
Intraday I have gain
Short term I have loss
F&O I have loss
Which ITR I have to file??
Audit also Required or not?
Hi Sumit,
I am Salaried + Trader
Intraday I have gain
Short term I have loss
F&O I have loss
Which ITR I have to file?? Audit also Required or not?
You need to file ITR-3. Declare F&O and Intraday Details in Schedule-PL and Short Term Capital gains in Schedule-CG
Audit applicability depends upon on your turnover.
If your turnover is less than 5Crores – then Audit is NOT applicable.
Thank you.
My turnover is approx 1.25 crores for future and options
But I have overall loss
So audit will be mandatory??
Interest income can be used to set off f&o loss (Non- Speculation)??
Thanks
Hi Sumit,
My turnover is approx 1.25 crores for future and options
But I have overall loss
So audit will be mandatory??
Interest income can be used to set off f&o loss (Non- Speculation)??
If the turnover is below the threshold limit – Audit is NOT mandatory to carry forward the loss.
However, audit becomes mandatory in the below scenario:
Suppose, if you had FNO Income for any previous years and you were declaring under presumptive scheme under section 44AD; (meaning currently you are in presumptive scheme upto FY 2019-20)
AND now if you are opting OUT of presumptive scheme in FY 2020-21 and your FNO Income is less than 6% or you are in loss but total income is greater than basic exemption limit; then you have maintain books of accounts and Tax Audit is applicable.
Interest Income can be set off against FNO Loss(Non Speculation).
Thank you Sir
This is 1st year I traded in stock market via F&O..
Threshold limit for FY 2019-20 is 2 Cr or 5 Cr.?
My turnover is 1.25 Cr
Loss of Approx 50,000 in F&O
So in my case audit required or not?
Could you help me to Share P&L & Balance Sheet Format..?
In P&L what is Purchase we need to show for F&O trade .. Is it cost price??
Thanks
Hi Sumit,
This is 1st year I traded in stock market via F&O
Threshold limit for FY 2019-20 is 2 Cr or 5 Cr? – It was Rs 1 Crore earlier now extended to Rs 5 Crore.
My turnover is 1.25 Cr
Loss of Approx 50,000 in F&O
So in my case audit required or not? – No Audit is required.
Could you help me to Share P&L & Balance Sheet Format? – Please refer page 3 to 8 https://www.incometaxindiaefiling.gov.in/eFiling/Portal/StaticPDF/ITR_Notified_Forms/AY_2020-21/ITR-3_Notified_Form.pdf
In P&L what is purchase we need to show for F&O trade.. Is it cost price?? – You need to show buying value of premiums.
Hello Zerodha Team,
If there is Profit of Rs.5 lakhs from F&O trading & that Rs.5 lakhs is my business turnover also (assuming there is no loss trade), then can we declare income under presumptive scheme at 6% of Rs.5 lakhs and pay tax on Rs.30,000/- only. Is this what above article explained?
Hi Vishal Sawant,
If there is Profit of Rs.5 lakhs from F&O trading & that Rs.5 lakhs is my business turnover also (assuming there is no loss trade), then can we declare income under presumptive scheme at 6% of Rs.5 lakhs and pay tax on Rs.30,000/- only.
Yes, you can declare income under presumptive basis; 6% on turnover – Rs 30000/-.
If I reinvest my capital gain (booked in equity or trading) in equity or keep it in kite wallet. Will I still have to pay tax on capital gain?
Hi Karan,
If I reinvest my capital gain (booked in equity or trading) in equity or keep it in kite wallet. Will I still have to pay tax on capital gain?
Yes, you need to pay tax as applicable.
I’m student and my total loss is 11000. Which ITR should I filled ITR2 or ITR3. Please suggest me. Thankyou…
Hi Suraj Kumar,
I’m student and my total loss is 11000. Which ITR should I filled ITR2 or ITR3. Please suggest me..
If you have incurred speculative loss – please file ITR-3.
If you only have incurred capital loss – please file ITR-2.
Hi Nithin,
1) My Option turnover is 1.07 lakhs. my loss in option is 38 thousand.i.e.(-38000 rupees).In 5 paisa Demat tax p&l report it shows that intraday loss -2000 and short term loss -36000 in f&o script.
my question is that while calculating F&O turnover, if it is intraday then turnover will be the absolute amount of p&l and if not intraday then sell premium plus p&l in an absolute amount for option?
2)my 44ad turnover is 15 lakh and profit from there is 4 lakh and my loss in f&o is 38000 then audit is applicable? if audit not applicable then I need to provide full b/s, p&l detail?
sir kindly clarify my doubt . my son is a software engineer. he incurred loss an amount of rs.800000 on speculation and 300000 on delivery.and turnover on speculation 23 lacs, delivery 27 lacs. so is it necessary ca audit. he is interested to carry forward the less to next years as per the act, i think 44ad is not possible to declare 6 percent. because loss. he is not maintaining any books of accounts. taken loans from credit card and personal. can i declare under capital gains head. or compulsory business head. ? pl guide me. thank you
Hi SPS Narayana,
AA] Speculation Loss – Rs 8 Lacs
BB] Speculative Turnover – Rs 23 Lacs
CC] Capital Gains (Delivery) – Rs 3 Lacs
DD] Capital Gains Turnover – Rs 27 Lacs
Use ITR – 3 and declare capital gains/loss (delivery) under Schedule CG and Intraday details under Schedule PL.
Intraday loss/gains mandatorily falls under the business income head. Loss on delivery trades – you can treat either as capital gains or business. You need to maintain consistency. Please go through this circular…https://www.incometaxindia.gov.in/communications/circular/circular-no-6.pdf
Tax Audit is not applicable as the turnover is below the threshold limit.
IN F&O, INTRADAY TRANSACTION WILL consider AS SPECULATIVE BUSINESS OR NON SPECULATIVE BUSINESS?
Hi Rahul,
IN F&O, INTRADAY TRANSACTION WILL consider AS SPECULATIVE BUSINESS OR NON SPECULATIVE BUSINESS?
FNO transactions will always be considered as Non Speculative Business irrespective of intraday transaction or not.
my turnover in f&o is 3.5 crore and my profit is 3,15,000 after deducting all expenses. further, I have a commission income of 2,25,000 and also a 44 ad income of 90,000 on a turnover of 10,00,000. in this situation, I need to do an audit?
Hi Hemal,
my turnover in f&o is 3.5 crore and my profit is 3,15,000 after deducting all expenses. further, I have a commission income of 2,25,000 and also a 44 ad income of 90,000 on a turnover of 10,00,000. in this situation, I need to do an audit?
No Audit is required as the turnover is below the threshold limit.
Can I show my F&O loss in ITR 3 without maintenance of books but not as presumptive income, as there is option in ITR 3 for the same?
Hi,
Superb information and thanks a lot.
I am a salaried employee with CTC of 10 lac. In FY 19-20, I tried intraday trading for first time and made a loss of 10500 with turnover of 25000 as per Zerodha statement. I have STCG of 15500 approx during the same period and carried forward ST capital loss of 2500 from previous years. There is no LTCG, but a carried forward LT capital loss of 55000.
As I understand, I need to file ITR 3 for AY 20-21.
Do I need an audit? I am confused as though my turnover is less, however the profit (loss) from Intraday is less than 6%.
Thanks
TS
Hi Mrudula Joshi,
Can I show my F&O loss in ITR 3 without maintenance of books but not as presumptive income, as there is option in ITR 3 for the same?
You cannot do that – you need to fill both PL and BS as well; the option which is available is for presumptive scheme tax payers.
Hi TS,
I am a salaried employee with CTC of 10 lac. In FY 19-20, I tried intraday trading for first time and made a loss of 10500 with turnover of 25000 as per Zerodha statement. I have STCG of 15500 approx during the same period and carried forward ST capital loss of 2500 from previous years. There is no LTCG, but a carried forward LT capital loss of 55000.
As I understand, I need to file ITR 3 for AY 20-21 – Yes, you need to file ITR-3.
Do I need an audit? – No requirement of Audit as your turnover(25K) is below the threshold limit. Further you can carry forward the loss for next 4 years.
Hi San,
Thanks for the wonderful support u guys are doing for ur clients..
I have 2 questions:
1 . I want to show my BTSTs/STCG as stock-in-trade as per IT circular(ie as a Business Income as Nitin explained earlier) https://www.incometaxindia.gov.in/communications/circular/910110000000000316.htm
So, how would the turnover be calculated for such non-speculative Business income?
2. In ITR3 where would the profit from such a transaction end up … should it be filed under “Other income” .. and if yes, then under whcih filed..
Thanks in advance..
Hi Vishal,
I have 2 questions:
AA] I want to show my BTSTs/STCG as stock-in-trade as per IT circular (i.e as a Business Income as Nitin explained earlier) https://www.incometaxindia.gov.in/communications/circular/910110000000000316.htm
So, how would the turnover be calculated for such non-speculative Business income?
In case of equity shares – the total sale value of shares shall be considered as turnover.
In case of derivatives – turnover will be absolute profit i.e sum of both positive and negative differences.
BB] In ITR3 where would the profit from such a transaction end up … should it be filed under “Other income” .. and if yes, then under which filed..
Once you enter sale value and buy value in Schedule Trading Account – the profit or loss gets reflected in Schedule PL (#53).
Nithin,
Can a salaried employee choose to be an investor (instead of a trader) and still set off losses in F&O Trades against Short Term Capital Gains accrued by selling shares bought for portfolio-building less than a year ago?
Hi Prasad Rao,
Can a salaried employee choose to be an investor (instead of a trader) and still set off losses in F&O Trades against Short Term Capital Gains accrued by selling shares bought for portfolio-building less than a year ago?
Yes,
As per Income tax provisions, you can set off Short Term Capital Gains with current year FNO losses.
Hi Nitin,
I am a Zerodha customer.
My query is..while filing ITR you say to maintain books of accounts for the trades done.
But in Zerodha console we have detailed trade wise reports, can we not download the same and copy in excel?
By doing this we are saving time of maintaining books of accounts separately.
Is it possible?
Hi Manoj,
In Zerodha console we have detailed trade wise reports, can we not download the same and copy in excel?
By doing this we are saving time of maintaining books of accounts separately.
Is it possible? – Yes you can download the reports in Excel; Go to console – Select Tax P&L and download.
Hello
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Sir
“”Tax Audit””
Even after new limit of Ten crs.
Audit still remains Compulsory.
We do plenty of cash buying and selling and intra day at just 2 to 3 percentage.
Cash buy sell increases our turnover tremendously.
Share mkt is a unique place where today a profit of 2000 or 3000 on investment of one Lakh.
May get wiped off tummorrow.
There is No Guarantee to reach a profit of 6000….. That is six percent next day.
Hence we would prefer to Book small profits of 2 to 3 percentage.
Share trading is totally different from other types of trading business.
Three percentage of upto ten crores turnover may mean an income of
“”Thirty Lakhs””
We are willing to pay whatever is the income tax.
We just don’t want the Botheration of an Audit.
Sir
I may not have worded my request properly
But the request is to shri Nithin kamat and other Associates. To take up this issue of Minimum six percent profit of turnover….
If LESS…then Audit becomes compulsory.
Govt is very receptive now a days.
I have sent a similar email to Finance ministry .
This point can be a big relief to new comers.
Any doubtful cases can always be checked by I Tax dept.
Basically,Liberty should be given to only share trading business
To Book profits at whatever percent they want…
New traders will give a standing ovation to this point
Thanks
Tushar mody
Sir,
In Banks we can go and deposit a cheque in our name ,in our joint Account with other Family members … Say wife…or son…
But
In a Demat Account if one demat account has two names
Say
Husband, n wife
The shares in this demat cannot be transferred to another demat with Three names
Husband,wife n son…
Why this Anomaly in Rules.
Bank n demat Both are meant for financial transactions.
Shares are also Basically…money.
I really wonder who can make such basic changes.
I have conveyed to SEBI by e mail.
The real owner is always the first holder in demat…so why this rule of sequence…or…exact equal names in same order.
Plus if you want to Delete one name…it is not allowed…
Zerodha’s efforts are working….and Govt is making suitable changes…
Hope share trading becomes more n more….a Smooth operation… For all participants….
Rules for Bank account n demat account should be similar…
Thanks
Tushar mody
CAN I PLEASE REQUEST A CORRECT CLARIFICATION TO THE FOLLOWING QUERY :
I am a senior citizen receiving pension and interest income from deposits. The amount after deduction of eligible deductions and after application of income tax rebate under Sec 87 C is under the taxable limit – ie zero tax on other income.
I have conducted share trading during FY 2020-2021 with a turnover of 98.60 lakhs under intra day and delivery based trades.
KINDLY CLARIFY WHETHER AUDIT OF MY SHARE TRADING IS REQUIRED UNDER RELEVANT INCOME TAX RULES GIVEN THE FACT THAT THE SHARE TURNOVER IS LESS THAN 1 CRORE AND OTHER INCOME IS NOT ABOVE TAXABLE LIMIT. I have received conflicting clarifications from the CA CLUB INDIA website and even experts tend to mislead. PL send me a clarification by email to rvrv0022gmail.com. I use zerodha for my trading.
Hi Sir, Please help me out with my query:
Salary income: 2.7 L
Equity Intraday Loss: -18.3 k
Turnover (27.7 k), Total charges(7.7 k).
STCG:
Number of Trades: 6 transaction.
Realised profit: 16.4 k
Total turnover(sell value): 3.72 L.
Basically now I am in loss of approx 10k in stock market from above transactions.
Please let me know do I need to go for Audit as I couldn’t show min 6%/8% profit?
If yes.. To avoid audit, can I invest arround 30k in PPF so that my total income will fall under 2.5L?
Please suggest accordingly, Thank you!
Hi Arun,
Salary income: 2.7 L
Equity Intraday Loss: -18.3 k
Turnover (27.7 k)
STCG Realised profit: 16.4 k
Total turnover(sell value): 3.72 L.
Basically now I am in loss of approx 10k in stock market from above transactions.
Please let me know do I need to go for Audit as I couldn’t show min 6%/8% profit?
If yes.. To avoid audit, can I invest around 30k in PPF so that my total income will fall under 2.5L?
There is no requirement of Audit as your turnover is less than the threshold limit.
The condition of minimum 6% applies when you were in presumptive taxation scheme in the previous year.
Hi,
My uncle has F&O turnover for FY21 of less than 2cr (all digital transactions) but has loss of ~20 lacs.
Is audit required for FY21 returns?
Also last year he had profit n he got books audited n submitted return but its a cumbersome process for senior citizen
Is it ok if he goes for presumptive taxation scheme n declares 6% of T/O as income, as he doesnt wish to do F&O anymore and doesnt want to carry forward loss.
Thnx
Hi Dhaval,
My uncle has F&O turnover for FY21 of less than 2cr (all digital transactions) but has loss of ~20 lacs. Is audit required for FY21 returns?
Also last year he had profit n he got books audited n submitted return but its a cumbersome process for senior citizen.
Is it ok if he goes for presumptive taxation scheme n declares 6% of T/O as income, as he doesn’t wish to do F&O anymore and doesn’t want to carry forward loss?
Yes, you can declare 6% profit on the turnover under presumptive scheme and avoid carry forwarding of loss.
With reference to the section dealing with Section 44AD, the last line says ‘this limit was extended to Rs 5 crores for FY 2019-2020’. Isn’t it supposed to be Rs 5 lakhs? Also, was the extension ‘just’ for FY 2019-2020 or for subsequent years?
Hi Abhineet,
With reference to the section dealing with Section 44AD, the last line says ‘this limit was extended to Rs 5 crores for FY 2019-2020’. Isn’t it supposed to be Rs 5 lakhs? Also, was the extension ‘just’ for FY 2019-2020 or for subsequent years?
The limit referred here is pertaining to Tax Audit threshold limit; it is INR 5 Crores for FY 2019-20. The revised limit is applicable for subsequent years as well.
Hi nitinji,
I have a query, IF my turnover of FNO is approx. 35 lack and my profit is 10 lac so it is more then 6 or 8 % what ever is applicable in 2020-2021. I don’t need a audit. But I don’t maintain books also. So i can pay tax at 6% or do i need to keep all the expenses slips and then make profit and loss statement and show the x among of profit which comes.
Hi Chirag Gogia,
IF my turnover of FNO is approx. 35 lack and my profit is 10 lac so it is more then 6 or 8 % what ever is applicable in 2020-2021. I don’t need a audit. But I don’t maintain books also. So i can pay tax at 6% or do i need to keep all the expenses slips and then make profit and loss statement and show the x among of profit which comes.
Yes, you can opt 44AD presumptive taxation scheme and declare 6% as profits on the turnover.
Hi Nitin
Can I trade options with pvt ltd company and if profits r significantly higher if go by the last year levels then,tax benefits too will be great in case of Pvtltd company than individual?
Hello Sir,
Let’s say I decide to classify my trading as a business income.
I have a couple of stocks that I have decided to hold over periods of 1 year +. They would classify as LTCG.
While all the trading I do in F/O and in the capital markets would come under business income correct?
Do I need to make 2 different trading/demat accounts to separate my business and investment work or can one suffice?
Hi Jamna,
Let’s say I decide to classify my trading as a business income.
I have a couple of stocks that I have decided to hold over periods of 1 year +. They would classify as LTCG – Yes, you can classify it as LTCG but is suggested to have 2 different demats; one for business income and another for investment income i.e capital gains.
While all the trading I do in F/O and in the capital markets would come under business income correct? – Yes, gains or profits will be treated as Business Income.
Do I need to make 2 different trading/demat accounts to separate my business and investment work or can one suffice? – It is better to have two different demat accounts to separate your business and investment income.
Hello Sir,
My capital is currently fixed.
So If I have one demat for investment can I pledge the shares and use that margin in my other demat for trading??
Is it bad to keep everything in one Demat acc? Will it be a problem for ITR??
I plan to invest in 5-10 scripts hold them for long term and pledge those stocks and use the margin for F/O trades.
Question 1 -Suppose if I write an option and square off same day.. i.e i have not received any premium since it is squared off same day.. will that again be counted in turnover??
Question 2 – Suppose i sold options of Rs. 10 lacs and buy of around Rs. 9 lacs. Booking profit of 1 lac.. should i show 1 lacs as gross receipt or Rs. 10 lacs??
Hi Jamna,
So If I have one demat for investment can I pledge the shares and use that margin in my other demat for trading?? – Margin from the pledged shares can be used in the same demat where the shares are pledged.
Is it bad to keep everything in one Demat acc? Will it be a problem for ITR?? – There is no problem. Please go through this circular regarding taxability as Capital gains or Business Income…https://www.incometaxindia.gov.in/communications/circular/circular-no-6.pdf
I plan to invest in 5-10 scripts hold them for long term and pledge those stocks and use the margin for F/O trades – You can do this.
Applicable for FY2019-20 and onwards.Please note the if the individual has made a loss in F&O trading and the turnover is less than 5 crores then there is no need for Tax Audit.
Respected Sir, I want to ask you that my future & options turnover is 56.28L & have gained loss of 21000/- & charges 20000/- equity intraday turnover is 1500/- & loss is 238/- so plz tell me..balance sheet and audit is applicable or not..?
Hi Ajay,
I want to ask you that my future & options turnover is 56.28L & have gained loss of 21000/- & charges 20000/- equity intraday turnover is 1500/- & loss is 238/- so plz tell me. balance sheet and audit is applicable or not..?
FNO Turnover = 56.28 Lacs; Loss = 21K; Charges = 20K; Net Loss = 41K
Intraday Turnover = 1500/- ; Loss = 238/-
Answer is two fold:
A] Audit is applicable if you had FNO income in the previous year and you had declared such FNO income under presumptive taxation scheme. Further, you can avoid audit in the current year by again opting for presumptive taxation scheme i.e declaring 6% FNO Income on turnover of ₹ 56.28 Lacs which is ₹ 3.37 Lacs (approx).
B] Audit is not applicable if are having FNO Income for first time or you had FNO income in the previous year and you had declared such FNO income under regular taxation scheme.
This year; if you want to carry forward loss – you need to prepare Balance Sheet and PL.
Also, you can opt for presumptive taxation scheme to avoid preparation of BS and PL and also carry forwarding of loss.
Hello Nitin Sir,
I am holding few hundred shares of a company A from 5-6 months and its in loss since then.As i have learned the market little bit now and have understood it,so i think i can take my loss from that stock and invest the money in other stock and make some return.
If after sometime that stock moves up i’ll buy it again if there seems any upside potential in future.
So my question to you sir is that if i take my loss in that stock and my profit for this year is less than 1lakh and i dont have any other source of income and i come under zero percent tax slab (income<2.5lakh)will i be able to differentiate this loss with any profit made next year,and for this do i need to file an itr ?
Hi Ashish,
So my question to you sir is that if i take my loss in that stock and my profit for this year is less than 1lakh and i dont have any other source of income and i come under zero percent tax slab (income<2.5lakh)will i be able to differentiate this loss with any profit made next year, and for this do i need to file an itr ?
If your income is less than 2.5 Lacs before Chapter VIA deductions and deductions under Section 54 to 54 GB; then filing of income tax is optional.
Tax is paid on net income (which means profit earned in one share will be added with the loss incurred in another share); setting off between STCG and STCL is compulsory.
Nithin Kamath Ji,
I am really wondering how sincere you are in your Service. You are one of the best persons and a GEM of India. I recently opened an account with Zerodha and feel safe. Thanks & appreciations for your Honest service.
Hello Nitin,
I would like to clarify my doubt regarding my transaction I opened my demet account on zerodha in month of Feb 2020.
I started trading and delivery both in finance year my reports are for feb 2020 to 31 March 2020
Intraday profit= -22.15K
Short term profit = 10.57K
Intraday Turnover = 57.2 K
In next year 1 April 2020 to 31 March 2021
Intraday profit = -17.31K
Short term profit = 99.67K
Intraday Turnover = 1.19L
Do I required audit?
My annual Income is nothing. I sm housemaker only I invested my saving in demat account of Zerodha their value is 5.5L.
Plz help me and guide me.
Regards
HI Rachana,
I started trading and delivery both in finance year my reports are for feb 2020 to 31 March 2020
Intraday profit= -22.15K; Short term profit = 10.57K; Intraday Turnover = 57.2 K
In next year 1 April 2020 to 31 March 2021
Intraday profit = -17.31K; Short term profit = 99.67K; Intraday Turnover = 1.19L
Do I required audit?
For FY 2020-21, Audit is not applicable if turnover is less than the threshold limit applicable for audit and one has not opted for presumptive taxation scheme in the previous year(FY 2019-20).
Your turnover is less than the threshold limit and if you have not opted for presumptive taxation scheme – Audit is not applicable.
You need to file ITR-3 and you can carry forward the loss.
Sir my turnover was rs 4.37 cr for fy 2020-21 and loss was rs 10lakhs. I also need to do tax audit? Or will it do if I don’t fill return?
Hi Rakesh Kumar,
Sir my turnover was Rs 4.37 Cr for fy 2020-21 and loss was Rs 10lakhs. I also need to do tax audit? Or will it do if I don’t fill return?
You have incurred a loss of INR 10 Lacs – it is suggested to file the income tax return and carry forward the loss.
Your turnover is less than threshold limit applicable for audit.
Further, in FY 2019-20 – if you had FNO Income and you had NOT opted for presumptive taxation scheme ; then no AUDIT is applicable.
For FY 2020-21; if you want to carry forward the loss – you need to prepare books of accounts and file the return before the due date.
Sir, if any one incurred trading (F&0) loss of 5,00,000 and his Turnover is around 1.5 crores what will happen in this case because he receive all money through bank only. For the first time his total T.O crossing 1 cr in the Financial year 19-20 and this 5cr T.O limit will apply to which F.Y.
Sir, if any one incurred trading (F&0) loss of 5,00,000 and his Turnover is around 1.5 crores what happened in this case because he receive all money through bank only.
Hi Ravichandra Shetty,
Sir, if any one incurred trading (F&0) loss of 5,00,000 and his Turnover is around 1.5 crores what will happen in this case because he receive all money through bank only. For the first time his total T.O crossing 1 cr in the Financial year 19-20 and this 5cr T.O limit will apply to which F.Y.
5 Crore turnover limit shall apply from FY 2019-20 and the same has been increased to 10 Crore from FY 2020-21.
Hello sir,
I’m doing project on your company but I’m not getting your company’s Balance sheet and P and L . Please help me .
Our company is Private 🙂
Hi,
I want to know that in case my option selling turnover in the year is less than audit requirement (5cr) and profit is 50% of the turnover (as whole option premium i get as profit on expiry), so in this case i need to add whole profit in my income and not required audit? Also i can claim business expenses on top of this profit (like internet,etc). Pls confirm.
i am confuused whether the incurred expenses occured towards Brokerage charges, taxes, and all other trade-related expenses can be deducted from the net profit occured from buy and sell of the shares/scripts.
say my net profit is Rs. 40,000 and trade-related expenses are say Rs 5000/. in this case have i to pay IT on profir of Rs 40000/ or Rs35000 (40000-5000). please guide .
Hi Gautam,
I want to know that in case my option selling turnover in the year is less than audit requirement (5cr) and profit is 50% of the turnover (as whole option premium i get as profit on expiry), so in this case i need to add whole profit in my income and not required audit? Also i can claim business expenses on top of this profit (like internet,etc). Pls confirm.
Yes, you need to add net profit to your income and pay tax accordingly.
Audit is not required as your turnover is less than the threshold limit. You can claim all the expenses like internet, phone, depreciation on computer used for trading, any advisory fees etc.,
Also, if you are eligible for presumptive taxation scheme – you can opt for that scheme and pay tax (as per slabs) on 6% of the turnover.
Hi Vijay,
i am confused whether the incurred expenses occurred towards Brokerage charges, taxes, and all other trade-related expenses can be deducted from the net profit occurred from buy and sell of the shares/scripts.
say my net profit is Rs. 40,000 and trade-related expenses are say Rs 5000/. in this case have i to pay IT on profit of Rs 40000/ or Rs35000 (40000-5000).
If your profit is capital gains (STCG or LTCG) – you can deduct all the expenses attributable to sale except STT. As per the example – you need to pay tax on 35K (assumed 5K trade related expenses does not include STT)
If you are treating profit as business income – you can deduct all the expenses including STT.
Hello Sir,
I hope you are doing well.
Assuming Trading/Investing is my only income source.
I have already asked IT to consider my transactions as business income instead of STCG.
Should I trade in my personal account or create a company to trade as a business income?
Hi Jbanks,
I have already asked IT to consider my transactions as business income instead of STCG.
Should I trade in my personal account or create a company to trade as a business income?
Trading in your personal account is okay. There are no issues in that. Creating a company for the purpose of trading is not easy.
if total income (Salary + Business income + capital gain + FD Interest ) is less than Rs 5lks
Do I need to get the Audit done ?
My Turnover is 2.1 crores.
if total income (Salary + Business income + capital gain + FD Interest ) is less than Rs 5 lks
Do I need to get the Audit done ?
Hi Shashank,
My Turnover is 2.1 crores.
if total income (Salary + Business income + capital gain + FD Interest ) is less than Rs 5 lks
Do I need to get the Audit done ?
Audit is required/applicable
A] if your turnover crosses the threshold limit in the current year. (FY 2020-21) or;
B] if you are opting OUT of presumptive scheme in the current year(FY 2020-21) (meaning you had opted for presumptive scheme in the previous year) and your net FNO Income is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then you have maintain books of accounts and get the AUDIT done [Tax Audit is applicable].
Hello Sir,
I have been trading on my personal account for a while.
Should I create a partnership/proprietorship company as a holding company/trading company for stocks and MFs?
The company gets taxed according to the corporate taxes and then any income gets taxed again for me?
Why would people create holding companies then?
I am goverment employee and my account zerodha’s
I still not received FORM16 from my employer
For 2020-21
Salary
520000
Intraday trading on zerodha and
book this year a loss of
₹27500
Short term capital gain ((((
₹70000
My turnover is
₹150000
My savings as PPF is
₹40000
Pls calculate my tax
And which itr form should I need to fill
Pls reply dear sir
For the FY 2020-21, My STCG is 31000 but a loss of 105,000 in options. My Turnover is less than 2 crores. And My Salary income is more than 5 lakhs, and no tax liability on the Salary income. is CA audit needed?
Hi Sandeep,
I have been trading on my personal account for a while.
Should I create a partnership/proprietorship company as a holding company/trading company for stocks and MFs?
This is one’s individual choice. But incorporating a company for the purpose of trading is not easy in India.
The company gets taxed according to the corporate taxes and then any income gets taxed again for me?
Assuming you have incorporated the company; Yes, the company gets taxed according to the corporate taxes. Dividend received from the company is again taxable in the hands of the receiver as per the slab rates applicable.
Why would people create holding companies then?
It is usually created for the sole purpose of owning the controlling interest in other companies.
Hi Saurabh,
I am government employee and my account zerodha’s; I still not received FORM16 from my employer for 2020-21
Salary 520000
Intraday trading on Zerodha and booked this year a loss of ₹27500
Short term capital gain ₹70000
My turnover is ₹150000
My savings as PPF is ₹40000
Pls calculate my tax
And which ITR form should I need to fill?
Applicable ITR form is ITR-3.
Please use this…https://www.incometaxindia.gov.in/pages/tools/income-tax-calculator.aspx
Hi Mahroof,
For the FY 2020-21, My STCG is 31000 but a loss of 105,000 in options. My Turnover is less than 2 crores. And My Salary income is more than 5 lakhs, and no tax liability on the Salary income. is CA audit needed?
Audit is required/applicable
A] if your turnover crosses the threshold limit in the current year. (FY 2020-21) or;
B] if you are opting OUT of presumptive scheme in the current year(FY 2020-21) (meaning you had opted for presumptive scheme in the previous year) and your net FNO Income is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then you have maintain books of accounts and get the AUDIT done [Tax Audit is applicable].
If this is your first year in FNO; then no tax audit applicable for you as your turnover is below the threshold limit.
You can prepare books of account(BS and PL) and carry forward the loss.
Also, you can set off current year FNO loss with STCG.
Hello Sir,
You mentioned that people create holding companies to have a controlling interest in another company.
Why can’t a person do that from their personalized account? Why create a company for that?
Hello San,
I am a farmer and my current agricultural income is 10-12L per year.
I also swing trade in cash and trade in derivates from time to time.
My derivative trades are obviously business income.
If I were to convert my swing trades to business income I would incur 30% tax while if I leave to be STCG it would be 15%.
What should I do?
I trade with Zerodha A/C.am senior, 76 and my income all these years was hovering between 6 to 7 lakhs (deposit interest and rental income)
I have developed a call selling strategy which is sure to give me Rs 10lakhs on a turnover of 30 lakhs this year.
A no of queries
1.Will audit be required.?
2.P/L ,Balance sheet required?
3.I am prepared to pay tax as per slab rates on say 17lakhs(10+7)
4.What is this presumptive Scheme? and tax.Is this advantageous?
5.Should I go slow and derive profit to extent of some 4 lakhs and increase to 10 lakhs nex t year to avoid IT glare on sudden spurt in my income?
I do not want to maintain books of accounts separately as the same available in Zerodha.
Pl.reply on all points
Hi Purshottam,
I also swing trade in cash and trade in derivates from time to time.
My derivative trades are obviously business income.
If I were to convert my swing trades to business income I would incur 30% tax while if I leave to be STCG it would be 15%.
What should I do?
It is one’s individual choice. However if you treat is as STCG; you need to continue the same in future years as well.
Refer this circular…https://www.incometaxindia.gov.in/communications/circular/circular-no-6.pdf
Hi L KAMALAKSH RAO Sir,
I trade with Zerodha A/C. am senior, 76 and my income all these years was hovering between 6 to 7 lakhs (deposit interest and rental income)
I have developed a call selling strategy which is sure to give me Rs 10lakhs on a turnover of 30 lakhs this year.
AA] Will audit be required? = Assume you are doing FNO for first time. Audit is not required if your turnover is less than the threshold limit of Rs 10 Crore.
BB] P/L, Balance sheet required?
Answer is two fold – If you are willing to opt for presumptive taxation scheme, no PL and Balance Sheet are required. Otherwise it is required.
CC] I am prepared to pay tax as per slab rates on say 17lakhs(10+7) – Since, you will be having FNO Income this year and your tax liability crosses 10K – you need to pay advance tax.
DD] What is this presumptive Scheme? and tax Is this advantageous? – Presumptive taxation scheme has its own merits.
Under this scheme, you have an option to declare 6% of your turnover as your income and pay taxes accordingly. You declare more than 6% also.
No need to maintain books or prepare BS and PL.
You can opt for this scheme if your turnover is less than 2 Crores.
EE] Should I go slow and derive profit to extent of some 4 lakhs and increase to 10 lakhs next year to avoid IT glare on sudden spurt in my income?
I do not want to maintain books of accounts separately as the same available in Zerodha.
As long as you are paying tax correctly on the incomes earned – no need to worry.
Hi Sandeep,
You mentioned that people create holding companies to have a controlling interest in another company.
Why can’t a person do that from their personalized account? Why create a company for that?
It is one’s own discretion. Creating a holding company has its own merits.
Hello San,
I am confused whether I should place my Short term swing trades under business income or STCG?
I have read that circular earlier and seen the pros and cons.
Not sure what I should do assuming I already have an income of 10 L for year from another source.
Hello Sir,
Could you explain what are the merits of trading and investing via a holding company?
HI Purshottam,
I am confused whether I should place my Short term swing trades under business income or STCG?
I have read that circular earlier and seen the pros and cons.
Not sure what I should do assuming I already have an income of 10 L for year from another source.
If done frequently – better treat it as business income and pay tax accordingly.
On last friday at 10.15am ,I was about to short 15900ce at 22 premium but had to attend some job.Spot nifty was then 15812.When I returned at 1pm, I waited for nifty to come to 15812 only to see premium was only16.it never went up.I was thinking that for a given spot nifty premium will be almost same.
Is this because of the factor of time decay which I read but could not understand earlier.
Kindly reply
If Turnover is less than 5cr and income is more than 6% i.e, more than 30 lakhs, let’s say 60 lakhs, then Audit is not required plus taxes will be applied only on 6% of total turnover which would be 30lakhs (As per section 44AD) and not actual profit of 60 lakhs. Am I right sir?
Thanks.
Hi Anil,
If Turnover is less than 5cr and income is more than 6% i.e, more than 30 lakhs, let’s say 60 lakhs, then Audit is not required plus taxes will be applied only on 6% of total turnover which would be 30lakhs (As per section 44AD) and not actual profit of 60 lakhs. Am I right sir?
Audit is required/applicable:
AA] if your turnover crosses the threshold limit in the current year. (FY 2020-21) or;
BB] if you are opting OUT of presumptive scheme in the current year(FY 2020-21) (meaning you had opted for presumptive scheme in the previous year) and your net FNO Income in the current year is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then tax audit is applicable.
In order to use presumptive taxation scheme (44AD) – your turnover should be less than 2 Crores.
Hi,
I have a taxable salary income and profit from Options trading which is around 10% of the turnover. Turnover is less than 1cr.
Which ITR form should I fill ? ITR-3 or ITR-4 ?
Hi Anuj,
I have a taxable salary income and profit from Options trading which is around 10% of the turnover. Turnover is less than 1cr.
Which ITR form should I fill ? ITR-3 or ITR-4 ?
If you are opting presumptive scheme – file ITR-4; otherwise file ITR-3.
From AY 2021-21 tax audit limit has been increased to 5Cr if 95% digital transaction. Would this apply even if there is loss?
Ex. If my turnover is 3Cr and loss of 6L. Would I be required to get accounts audited ?
Hi, in my P&L for intraday my P&L is showing as 18K whereas the STCG is shown as 1L. Even when I filter by the difference between buy date and sell date by the number of days in the equity calculation for a particular FY, so that to derive the intraday realised gains, the numbers don’t add up to the intraday realised profit/loss for any particular stock.
HI Rajesh Ahuja,
From AY 2021-21 tax audit limit has been increased to 5Cr if 95% digital transaction. Would this apply even if there is loss?
Ex. If my turnover is 3Cr and loss of 6L. Would I be required to get accounts audited ?
Yes, condition of turnover limit will apply even if there is a loss. However, the limit has been increased to 10Cr.
Audit is applicable if your turnover crosses the threshold limit.
Also, if you are opting OUT of presumptive scheme in the current year(FY 2020-21) (meaning you had opted for presumptive scheme in the previous year) and your net FNO Income in the current year is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then tax audit is applicable.
Hi Bina Paul,
Hi, in my P&L for intraday my P&L is showing as 18K whereas the STCG is shown as 1L. Even when I filter by the difference between buy date and sell date by the number of days in the equity calculation for a particular FY, so that to derive the intraday realized gains, the numbers don’t add up to the intraday realized profit/loss for any particular stock.
I assume you are Zerodha user and taking about about Zerodha PL .
It should add up; Can you double check once.
Nithin Kamath Sir,
please provide the format of Pl. for example i had done 3 trade and make profit in 2 trade of Rs 10000/- and Rs 15000 and Loss of Rs 10000/- and my total expenses in the trading Rs 2000/- than turnover as per intraday Rs 35000/-.
1- net profit (10000+15000-10000-2000) =13000/-
my question is difference between turnover Rs 35000/- and Net profit Rs 13000/- (35000-13000=22000)
what i will do this Rs 22000/- in Profit and Loss A/c. and what is the purchase value in this case.
Hi Rohit Kumar Mandal,
Please provide the format of PL. For example i had done 3 trade and make profit in 2 trade of Rs 10000/- and Rs 15000 and Loss of Rs 10000/- and my total expenses in the trading Rs 2000/- than turnover as per intraday Rs 35000/-.
1 – net profit (10000+15000-10000-2000) =13000/-
my question is difference between turnover Rs 35000/- and Net profit Rs 13000/- (35000-13000=22000)
what i will do this Rs 22000/- in Profit and Loss A/c. and what is the purchase value in this case?
Please note turnover is only for the purpose of determining tax audit applicability.
You need to enter the actual purchase value and sale value under the respective item.
Since your income is pertaining to Intraday; you can enter the details in Schedule PL – Item# 65 the following details
A] Turnover from Speculative Activity
B] Gross Profit
C] Expenditure
D] Net Profit
Nithin ji,
Can you please explain the rationale behind adding the sale value to turn over calculation in the case of options contract only while the sale value is not considered in case of turn over calculation of futures contract.
Hi,
I hv started FO in Apr 21 and now my tax p&l report turnover shows 50L and loss of 56k. Should it requires to file income tax and should audit to be done
Hi Vijay,
Can you please explain the rationale behind adding the sale value to turn over calculation in the case of options contract only while the sale value is not considered in case of turn over calculation of futures contract.
It is the conservative approach for calculating the turnover for options contracts. You can consider the ONLY absolute profit also.
In the case of options contract, I believe there are two ways of opening a position … 1) sometimes we take or OPEN A POSITION by buying an option (be it call option or put option) and then we may CLOSE the POSITION prematurely before the option contract expires (for whatever reasons) by selling the option contract and booking a profit or loss… 2) Sometimes, we open a position by Selling an option (in other words “Writing” an option which is too risky) there by getting the premium upfront when the position is opened. In case, the option is not exercised till the expiry, then the seller of option keeps the premium as the gain. And there is NO corresponding “closing of position by buying an option” …
In BOTH cases, there is … Selling of an option contract …. But there are differences…in case 1 , there is both buy and self of options. In case 2, there is only selling of option and no corresponding buy of option ..
Case 1 … is less risky … As it results in limited loss and unlimited profit.
Case 2 …. Is very risky …. As it exposes the one who opened the position by Selling the option contract to limited profit (limited to the premium received) and unlimited loss if the market moves against in his favour.
For calculating business turn over… For CASE 1… still I don’t understand the rationale why we add both (i.e GROSS of all PROFITS and all LOSSES and the PREMIUM received on sale of options)… Like in the case of futures contract , should we not just take ONLY the Gross of all PROFITS & LOSSES.
May be the clause to “add the PREMIUM received on sale of options” applies to only case 2 mentioned here?
…. Hi Vijay,
Can you please explain the rationale behind adding the sale value to turn over calculation in the case of options contract only while the sale value is not considered in case of turn over calculation of futures contract.
It is the conservative approach for calculating the turnover for options contracts. You can consider the ONLY absolute profit also
Hi … Are you saying ” You can consider the ONLY absolute profit also” … For turn over calculation of options, consider ONLY the gross of all Profits and losses ?
Harishankar says:
August 25, 2016 at 4:39 pm
I am a bit baffled by the concept of adding in the selling value – especially when you have bought a options contract. Taxation philosophy is based on making sure that any income earned must be offered for taxation.
When dealing in options, the trade may end up in one of the 3 states:-
1. Trader squares off the options contract prior to expiry.
2. If the option is in money, the exchange squares off the options contract and issues a credit to buyer or debit to seller.
3. The option expires out-of-money – in which case, there is no square off of the contract done by the exchange.
Only in case 3), the seller of the option has earned the premium (as there is no squaring off of the out-of-money contract) – in cases, 1) and 2).
Nithin Kamath says:
August 26, 2016 at 1:00 am
Hari, turnover requirement is only to determine if audit is needed or not. It doesn’t affect taxation in any way. Also like I have mentioned earlier, the way I have explained, is probably the most conservative way. You can adopt for any method that you think is right.
Nithin Ji,
Are you saying for the case 1 mentioned by Harishankar, I need NOT add the Sale value of Option Contract ?
In case -2 & case-3 where the options are held by the buyer until expiry, there is NO explicit Sale Transaction & hence NO Sale value. So in all 3 cases mentioned in Harishankar case, are you saying there is no need to add transaction value for turn over calculation ? Is the Turn over calculation is left to the choice of Tax payer or the AO/Auditor? Can I choose to use ONLY THE GROSS OF PROFITS & LOSS FOR OPTIONS TURN OVER calculation?
I understand that turn over calculation does not affect taxation. But it influences the necessity of audit which is costly especially when I make losses with no other income other than trading and barely with income just above the taxable limit
Hi Audu,
I have started FO in Apr 21 and now my tax p&l report turnover shows 50L and loss of 56k.
Should it requires to file income tax and should audit to be done?
Since you have started FO in Apr 21 for the first time; [and also assume you are having business income/loss for previous years]
Audit is not applicable as your turnover is less than the threshold limit of 10 Crores.
Suppose I buy a stock 10 @ 100 /- (10 stocks at price of 100/-).
Then I add up at 10 % rise 10 @110/- (again 10 stocks at price of 110/-).
Again add at 20% rise 10@ 132/- (again 10 stocks at price of 132/-).
Now if I sell 5 stocks @ 132/- ……stocks bought at which price will be liquidated.
I assume it should be FIFO i.e. 100/-.
I have observed this not happening in two of my stocks selling that’s why the question.
What can be done to resolve this?
Hi Suman,
Suppose I buy a stock 10 @ 100 /- (10 stocks at price of 100/-).
Then I add up at 10 % rise 10 @110/- (again 10 stocks at price of 110/-).
Again add at 20% rise 10@ 132/- (again 10 stocks at price of 132/-).
Now if I sell 5 stocks @ 132/- ……stocks bought at which price will be liquidated.
I assume it should be FIFO i.e. 100/-.
Yes, it will be 100/- based on FIFO method.
Every broker follows FIFO method only. Pls once check your tradebook.
Hello Sir,
I hope you are doing well.
I am currently trying to maintain a portfolio for my Father, Mother, Grandmother and my self with 4 different accounts.
It is difficult to maintain all four.
Is it better to create a holding company?
What are the benefits of a holding company or just trading normally?
Hi Sir,
My annual income around 8 Lakhs
STCG Profits : 19482.65
Intraday equity loss : -10747.85
F&O loss : around -70k to -100k.
My total turnover is less than 1 crore. I need some clarity on below points:
1. 2020-2021 is the first year of my trading. So I hope tax audit will not be applicable. please confirm.
2. If I want to declare my losses and carry forward them, how can I do this? under which form? and in case of carry forward is tax audit applicable.
3. can F&O loss and intraday equity loss can be set-of with STCG profits of Rs. 19482 and can pending losses be carry forwarded?
Thanks.
* My annual income around 8 Lakhs.
By annual income I meant annual salary income
Hi Sam,
My annual income around 8 Lakhs
STCG Profits : 19482.65
Intraday equity loss : -10747.85
F&O loss : around -70k to -100k.
My total turnover is less than 1 crore. I need some clarity on below points:
AA] 2020-2021 is the first year of my trading. So I hope tax audit will not be applicable. please confirm – Yes, no tax audit is required as your turnover is less than the threshold limit and you are business income/loss for the first time.
BB] If I want to declare my losses and carry forward them, how can I do this? under which form? and in case of carry forward is tax audit applicable – You need to prepare balance sheet and PL under ITR-3 and file the return. The loss gets carry forward automatically.
CC] can F&O loss and intraday equity loss can be set-of with STCG profits of Rs. 19482 and can pending losses be carry forwarded? – Yes, but only F&O loss can be set off with STCG profits and balance can be carried forward.
Hello, my doubt is
1. If I don’t opt for Presumptive Taxation Scheme under Section 44AD – then condition of 6% will not apply, in this case only if Turnover goes above threshold limit only then audit is required.
2. In above situation if I don’t do audit then I cannot carry forward my losses. huh?
Hi Virendra Kumar Dhakad,
AA] If I don’t opt for Presumptive Taxation Scheme under Section 44AD – then condition of 6% will not apply, in this case only if turnover goes above threshold limit only then audit is required – Yes, Audit is not applicable if your turnover is less than the threshold limit and if you are opting OUT of presumptive scheme in the current year and your net FNO Income is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; Audit is applicable.
BB] In above situation if I don’t do audit then I cannot carry forward my losses. huh? – If audit is not applicable; you can file ITR-3 and carry forward the losses to next year.
Please Check if I am right or wrong
1. An Audit is require when you have an business income only if
○ Your business Turnover > 5 Crore for a FY (Digital Transaction) – even if your tax liability is 0 (Income < 2.5 Lac)
○ For Equity Traders : Under Section 44AD – where Turnover < 2 Crore + Profit 2.5 Lac
2. Now if I don’t opt for Section 44AD – is condition of 6% still applied?
3. And What is this Presumptive Taxation Scheme under Section 44AD? it is mandatory? if not, the should I opt for it or not? – Benefits?
Thank you—
Slight Correction in above comment
Please Check if I am right or wrong
1. An Audit is require when you have an business income only if
○ Your business Turnover > 5 Crore for a FY (Digital Transaction) – even if your tax liability is 0 (Income < 2.5 Lac)
○ For Equity Traders : Under Section 44AD – where Turnover < 2 Crore + Profit 2.5 Lac
2. Now if I don’t opt for Section 44AD – is condition of 6% still applied?
3. And What is this Presumptive Taxation Scheme under Section 44AD? it is mandatory? if not, the should I opt for it or not? – Benefits?
Slight Correction in above comment (Plz keep edit function open in comment section, i don’t, but i typed correctly but words got cut)
For Equity Trader Under Section 44AD – where turnover < 2 Crore and profit < 6% of turnover of all biz income and your total income is above 2.5 Lac
Thank You
hi nitin sir
My 2020-21 turnover is 14713703.5 ( one core fortyseven laks thirteen thousand seven hundred three rupees and fifty paisa)
And Loss is 41535(fourty one thousand five hundread thirty five) I should pay IT for this or if i not file no problem plz sugest me
my other income is 160000 ( one lack sixty thousand ) per annum
(turnover is Zerodha And astha trade )
Hi Virendra Kumar Dhakkad,
Please Check if I am right or wrong
AA] An Audit is require when you have an business income only if
○ Your business Turnover > 5 Crore for a FY (Digital Transaction) – even if your tax liability is 0 (Income < 2.5 Lac) – Yes, correct – irrespective of your income i.e even if it is less than 2.5 Lacs but if your turnover is more than the threshold limit – then Audit is applicable.
○ For Equity Trader Under Section 44AD – where turnover < 2 Crore and profit < 6% of turnover of all biz income and your total income is above 2.5 Lac – When you are opting for 44AD; you cannot declare profit < 6%; the system/software will not allow to declare so.
BB] Now if I don’t opt for Section 44AD – is condition of 6% still applied? – The condition of 6% becomes relevant when you are opting out of presumptive scheme. As explained if you are opting OUT of presumptive scheme in the current year and your net FNO Income is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; Audit is applicable.
If you had not opted for 44AD for any previous year and you are declaring income under normal provisions and your turnover is less than the threshold limit – condition of 6% is irrelevant here.
CC] And What is this Presumptive Taxation Scheme under Section 44AD? it is mandatory? if not, the should I opt for it or not? – Benefits?
44AD is optional. Benefits – no need to prepare your books and get your audit done.
Hi Prasad,
My 2020-21 turnover is 14713703.5 ( one core fortyseven laks thirteen thousand seven hundred three rupees and fifty paisa)
And Loss is 41535(fourty one thousand five hundread thirty five) I should pay IT for this or if i not file no problem plz sugest me
my other income is 160000 ( one lack sixty thousand ) per annum
No need to pay tax. It is suggested to file the income tax return.
Ok so from what I understand, I will summarize, please check
–> Under presumptive taxation scheme (Section 44AD) : my turnover should be less than my profit will be automatically considered 6/8% of turnover by govt, and have to pay taxes as per it. Regardless of profit or loss. But here I don’t need to maintain books of account and get them audited.
–> If I am out of this Scheme – then I have to maintain books of accounts. And, only needed to get them audited if
* My Turnover for a FY > threshold limit – regardless of my tax liability
* Profit 2.5 Lac
This chapter was the most confusing for me, hope you again give answer to my Queries. Thank you —
Sorry, Correction in above comment
Ok so from what I understand, I will summarize, please check
–> Under presumptive taxation scheme (Section 44AD) : my turnover should be less 2crore. Then my profit will be automatically considered 6/8% of turnover by govt, and have to pay taxes as per it. Regardless of profit or loss. But here I don’t need to maintain books of account and get them audited.
–> If I am out of this Scheme – then I have to maintain books of accounts. And, only needed to get them audited if
* My Turnover for a FY > threshold limit – regardless of my tax liability
* Profit for FY is less than 6% of turnover and income is greater than 2.5 Lac
This chapter was the most confusing for me, hope you again give answer to my Queries. Thank you —
Hello sir…pl guide me how to calculate turnover and profit in commodity trading.
Thank you in advance
HI S Radha,
Please guide me how to calculate turnover and profit in commodity trading.
Aggregate of both positive(profit) and negative(loss) differences in a transaction is to be considered as turnover.
HI
I am still confused, even after reading this article and previous articles on income tax.
Presently my only income is from Short term positional trade.
My realized profits are 30 lakh plus in a year and I do frequent trading. My turnover is above 5cr.
If I declare myself as Trader ( Normal business), I need to pay 30% + tax and my claiming business cost wouldn’t help much.
So, it make sense for me to continue as short term investor and pay 15% STCG.
My questions are,
1) Do I must declare my income as business income or it is ok to claim as Short term investor and Pay 15% tax?
2) Since, I am paying only STCG, do I still need to be Audited? ( As you mention, for STCG, no need for STCG irrespective of turnover)
3) Can I carry forward my STCG loss?
Your kind reply will be a great help
Hi Sir,
Please let me know if i need Tax audit for below:
F&O Turnover: 99,99,879
Equity Intraday Turnover: 97,430
F&O Loss: -2,76,642
Intraday Loss: -71,945
I haven’t opted for presumptive taxation before and my salary income is taxable.
HI Pushkar,
Please let me know if i need Tax audit for below:
F&O Turnover: 99,99,879
Equity Intraday Turnover: 97,430
F&O Loss: -2,76,642
Intraday Loss: -71,945
I haven’t opted for presumptive taxation before and my salary income is taxable.
Tax audit is not applicable as your turnover is less than the threshold limit and you have not opted for presumptive taxation scheme before.
Nithin sir, you should start campaign on Change.org now. You will get many more supporters compared to 7 years back. At that time situation was different and may not be those many traders compared to the latest pandemic period. We should push government to make tax filing easy for small scale traders. It will very difficult to manage complex requirements in ITR for people who work and do some small trades.
My intra-day trade income for the Year 2020-21 is Rs.80,000, whereas turnover(positive+negative profit) comes to Rs.12,00,000/.
Should I report the profit Rs.72,000 (i.e.@6% on turnover of Rs.12,00,000) or the actual realised profit of Rs.80,000/-
Hi Amsa,
My intra-day trade income for the Year 2020-21 is Rs.80,000, whereas turnover(positive+negative profit) comes to Rs.12,00,000/.
Should I report the profit Rs.72,000 (i.e.@6% on turnover of Rs.12,00,000) or the actual realised profit of Rs.80,000/-
If you are treating it as presumptive income – you can declare 6%; otherwise – you need to declare the actual realized profit.
I think turnover calculation as shown here is misunderstand and incorrect explained here it’s should be as follows :
Correct Turnover Calculation on Future & Option
1. The total of favourable and unfavourable differences shall be taken as turnover – it’s represent only Future Transaction Turnover
2. Premium received on sale of options is also to be included in turnover – it’s represent only Options Transaction Turnover
3. In respect of any reverse trades entered, the difference thereon should also form part of the turnover. – repetition of Sl.no.1 only for Future Transaction Turnover (no meaning)
My turnover is 8 crore but i made loss of 20lakhs and still salaried taxable income is 20Lakhs.
Please tell me :
Do i need audit
Any penalty
Charges of audit and ITR filing
and any needed details
Hi Akshay,
My turnover is 8 crore but i made loss of 20lakhs and still salaried taxable income is 20Lakhs.
Please tell me :
AA] Do i need audit? Any penalty?
Need for audit depends whether you had opted for presumptive taxation scheme in the previous year or not.
If you are not opting out of presumptive taxation scheme in the current year and you are having business/FNO income for the first time – then Audit is not applicable as your turnover is below the threshold limit. You can prepare books of account and carry forward the loss.
BB] Charges of audit and ITR filing?
check out https://quicko.com/
If on the last day of the FY, I bought an option of INFY and Sold an option of TCS then what I have to show in the Income Tax?
Bought INFY @100
Sold TCS @200
Hello sir,
I m options traders & account in zerodha . I want some information about future & options turnover and income tax return related .
Pl call or msg me on 8160874854
Thanks
Hi Nithin,
Section 44AB of IT Act was amended in 2016 and clause e) was added. In case the turnover is less than the notified amount and profits are lower than 6%, an audit is now required only if Section 44AD(4) is applicable in his case. So, someone with F&O losses on a turnover of under 10 crores should not need to get audited if he has not opted for the Presumptive Scheme in the preceding 5 years.
I hope you will update your article to reflect this change, since many people will use it as a standard reference.
In Console, when we check for Tax P&L, the profits are charges are reported separately. Are these profit on a gross or net basis (i.e. after deducting charges).
Thanks
HI Deepak,
In Console, when we check for Tax P&L, the profits and charges are reported separately. Are these profit on a gross or net basis (i.e. after deducting charges).
Profits shown in Tax P&L are gross profits(sell value – buy value).
You need to deduct charges to arrive NET profit.
Turnover considered by Tax consultants for delivery based transaction for equity is considered Purchase value or sales value which ever is higher. Something contradicting opinion against guidance note of icai. Please confirm what to follow
Hi Nithin,
Thanks for this module. I have an account with Zerodha and my turnover is Rs. 27lacs and P&L is Rs. 4lacs loss. My total income from other sources is below Rs. 2.5lacs. Will I still need an audit?
Hi Ankit B,
I have an account with Zerodha and my turnover is Rs. 27lacs and P&L is Rs. 4lacs loss. My total income from other sources is below Rs. 2.5lacs. Will I still need an audit?
Tax audit is NOT applicable as the turnover is below the threshold limit and your overall income is less than 2.5 Lacs.
Dear Sir,
I would like to know whether auditing is required for below mentioned case. I want to carry forward the option trading losses for next Assessment year & if required How much will be the tax auditing charges.
Gross Total Income (Salary)- Rs. 14,03,039
Option Trading – 44,625 (Loss) ,Total turn over=78000
Deductions 80C/80D/80G- 2,07,084
Long Term capital 6,722
Hi Kishore,
Gross Total Income (Salary)- Rs. 14,03,039; Option Trading – 44,625 (Loss) ,Total turn over=78000; Deductions 80C/80D/80G- 2,07,084
Long Term capital 6,722
If you are having business loss/income for the first time, then no audit is required as the turnover is below the threshold limit.
If you had business income/loss in the previous year and you had opted for presumptive scheme and further now if you are opting out of that scheme, then audit is applicable.
Dear Sir,
I have taxable income. (12 Lac)
Intraday trading loss is -25000.
Scriptwise Turnover is 1.5 L .
Tradewise Turnover is 4.2 L.
STCG – 5500
As per CA – no audit required as audit is for f&o only.
And i have done intraday trading only, which falls under speculative income which is no account case. So here no need to maintain book and audit not required.
Could you please provide clearity on this?
Tax audit is required or not?
If not under which clause?
Which turnover should be used for itr- scriptwise or tradewise?
Is it compulsary to carry forward my intraday (speculative) losses or we can simply igore it if dont want to carry forward?
Thanks.
Dear Sir,
I have taxable income. (12 Lac)
Intraday trading loss is -25000.
Scriptwise Turnover is 1.5 L .
Tradewise Turnover is 4.2 L.
STCG – 5500
As per CA – no audit required as audit is for f&o only.
And i have done intraday trading only, which falls under speculative income which is no account case. So here no need to maintain book and audit not required.
Could you please provide clearity on this?
Tax audit is required or not?
If not under which clause?
Which turnover should be used for itr- scriptwise or tradewise?
Is it mandatory to carry forward my intraday (speculative) losses or we can simply igore it if dont want to carry forward
Hi Sir,
My taxable income is 6.5 Lakh
Options turnover : 48 Lakh
Options Losses around 70K to 100K
STCG : 20 K
LTCG : 40 K
Is Audit needed here? I have never opted for presumptive taxation earlier and this is my first year of trading.
I believe Audit is not needed here, but CA is telling Audit is needed here as I have losses in options OR i have to declare 6% profit, if i want to avoid audit, he said.
He told there is no other option to it…
Can you please guide what is correct..
Adding to above query, Also please let me know what should I tell CA.. i mean under some section or anywhere is it mentioned that no Audit will be needed for my case to convince him..
HI Sam,
My taxable income is 6.5 Lakh
Options turnover : 48 Lakh
Options Losses around 70K to 100K
STCG : 20 K
LTCG : 40 K
Is Audit needed here? I have never opted for presumptive taxation earlier and this is my first year of trading.
Since your turnover is less than the threshold limit and you are doing trading for first time; no tax audit is required.
Thanks Sir for your reply. I will speak to CA about it.
He was telling i have to go for an Audit as that is required.
One more thing, what is the exemption limit for Taxation on LTCG.
Hi Sam,
One more thing, what is the exemption limit for Taxation on LTCG.
Upto 1 Lacs; it is exempt.
Intraday income is considered as business income, if my turnover is less than 2Cr ( for example my turnover is 1.80 crore and suppose my profit is 1.50 Crore) then can i file my ITR in 44AD??? If i do so, my taxable income will be 6% of 1.50 crore and tax will be paid according to slab??? Right??? Pls note i dont have any other income…my pure income of 1.50 crore is from Intraday Trading…
Hi Sir,
Please help me with below points as well:
1. When are we required to maintain books of account?
2. This year (2020-2021) was my first year of trading, and my turnover less than threshold, so am i needed to maintain books of account?
Or only filling balance sheet and p&l in ITR 3 would be good, as you suggested?
And do I get books of account from Zerodha, or have to do it manually?
Sir,
I have one question regarding FNO open positions as on 31st march, a) do we need to consider M2M of open positions as Profit/Loss to show in Income Tax Return ? OR b) we don’t require to show Profit or Loss of any open positions as on 31st March & we can show it in next year’s Income Tax return as per actual Profit or Loss ?
If a) then how to calculate P&L for open position of Options, since there is no M2M in options.
Thanks
Umesh Dharavat
Hi Umesh Dharavat,
I have one question regarding FNO open positions as on 31st march,
a) do we need to consider M2M of open positions as Profit/Loss to show in Income Tax Return ?
OR b) we don’t require to show Profit or Loss of any open positions as on 31st March & we can show it in next year’s Income Tax return as per actual Profit or Loss ? I have one question regarding FNO open positions as on 31st march, a) do we need to consider M2M of open positions as Profit/Loss to show in Income Tax Return ? OR b) we don’t require to show Profit or Loss of any open positions as on 31st March & we can show it in next year’s Income Tax return as per actual Profit or Loss ?
If a) then how to calculate P&L for open position of Options, since there is no M2M in options.
No need to declare M2M profit or loss for open positions as on 31st March 2021. You need to declare the actual profit or loss in the next year.
Dear Sir,
Please guide on following mater. if i have intraday profit Rs 1000/- and loss Rs 500/- than Turnover is Rs 1500/- which i have to show in P/L Statement on Credit and Rs 500/- net profit on Debit side but what about of Difference between Rs 1000/- (1500-500), whether it should treat as Purchase value or whatever else. if Tax Audit Applicable.
Hi
1. If I make net loss in Intraday or in F&O, the amount will be less than zero (less than 6% profit). Should I have to declare in ITR 3 and claim carry forward or not to declare to avoid tax audit.
2. If I am a F&O buyer , I will be paying the premium. Even in this case is the turnover get calculated by PROFIT+LOSS+SALE VALUE(Premium).
@Nithin Kamath Sir, Thank you so much for the useful information in such a simple way. I am very happy to be a Client of Zerodha.
A small request sir, Could you please write an article or explain about claiming presumptive taxation on Options trading. What is the Eligibility, Limit, and all? I have tried Googling but it is just more confusing.
Hi I have future & option turonver is 3crores . For me actually there is loss Rs.25lakhs .pls advise me how to prepare PL there is no expenses
Hi Chaitanya Kumar,
I have future & option turnover is 3crores . For me actually there is loss Rs.25lakhs .pls advise me how to prepare PL there is no expenses.
Download Tax PL.
Under F&O Sheet, you will get the buy value and sell value for Futures and Options.
From that, you will get Gross Profit/Net Profit.
Further, you can include all the expenses such as GST, brokerage, STT etc., on Debit Side; you will get net loss/profit.
Hi Nithin,
For futures trading should Profit/Loss be calculated based on the completed trades only or should we consider the Lots held on 31st March too?
If only completed trades are considered, does it mean we can do Tax harvesting for Futures transactions too?
Hi Haas,
For futures trading should Profit/Loss be calculated based on the completed trades only or should we consider the Lots held on 31st March too?
If only completed trades are considered, does it mean we can do Tax harvesting for Futures transactions too?
You should consider only completed trades.
Hi.
How to calculate the purchase cost against the turnover calculated as absolute. anyone please?
I have some gains from Options trading in the USA. I am OCI holder and I am a resident here. I am declaring all my global income in India. The gains from Options are considered as Capital gain/loss the USA where as it is considered as business gain/loss. My only income in India is from stock market investment in the USA . My India income is from bank deposits interest only. My Short term capital gain from selling shares in the USA , after converting to rupees is around 8 lakhs. My Long term loss is around 15 lakhs after deducting long term gains.
My gains are around 3% of my turnover. My bank and brokerage account is in the USA. I have not maintained books of accounts. I am told to file form ITR3 and get it audited by CA as my gains are less than 6%. I can opt for presumptive tax and declare the flat 6% of the turnover.
My first question is – can OCI chose presumptive taxation policy? if yes would it be 6% or 8% ? It is all digital mode of payment from/to USA bank to/from USA based brokerage account.
Would there be any issue if I declare presumptive taxation even though I have actually 3% gains?
Another doubt is about presumptive taxation is declaring flat 6% irrespective of actual gains. Hypothetically if a trader makes 100% again , he/she can opt presumptive taxation and pay only 6% taxes ? Is my understanding correct? Please suggest! Thanks !
Please confirm what is the audit fees for this type of audit.
Thanka
I have been working in a public sector company for the last three years as a Maintenance Engineer. My basic income is from Selary income. My FY 20-21 Gross Selary have ₹ 5.8 Lakh. I have been trading in the stock market for the last three years for capital gains. My Investment is done in options, cash and speculation segments for capital gains. I have suffered financial loss in three years. I have incurred a loss of approximately ₹ 1.25 Lakhs in FY 20-21. My turnover is below two crores. So I have to fill in the audited ITR? And which ITR form do I have to fill?
Hi nitin sir
My total turnover is 38lakh and total loss 1.8 lakh and I ma salaries person. I apply my ITR and didn’t show losses is ITR. What I do
Can I get any problems in future regarding this my mistake
Is this trunover require any audit ???
Dear sir,
The F&O /Intraday and other details are as follows.
Fin Year 20-21
Salary income = 20.60 lakh
Short term profit = 1.53 lakh
Long term profit = 0
Intraday/ speculative profit = 8,600
Intraday turnover = 8,600
Futures profit = -10.74 lakh
Futures turnover = 21.87 lakh
Option profit = 75,000
Option turnover = 32.30 lakh
Total F&O turnover = 54.17 lakh
If presumptive taxation scheme not opted,
Kindly suggest
1. Whether tax Audit is required for filing the return?
2. Whether Audit is required even when the F&O loss is not to be carried forward (for future years say 8 years)
3. Whether the Short term profit (of 1,53,000) be set off with F&O loss of (75,000 – 10,74,000) during filing current return 21-22.
4. Whether the lntraday profit (of 8,600) be set off with F&O loss of (75,000 – 10,74,000) during filing current return 21-22.
5. What are the charges for (a) tax audit and (b) return filing for ITR 21-22.
Fin Year 20-21
Salary income = 20.60 lakh
Short term profit = 1.53 lakh
Long term profit = 0
Intraday/ speculative profit = 8,600
Intraday turnover = 8,600
Futures profit = -10.74 lakh
Futures turnover = 21.87 lakh
Option profit = 75,000
Option turnover = 32.30 lakh
Total F&O turnover = 54.17 lakh
If presumptive taxation scheme not opted,
Kindly suggest
AA] Whether tax Audit is required for filing the return?
If you are having FNO for the first time; then Audit is NOT applicable as your turnover is below the threshold limit.
If you are opting out of presumptive scheme in the current year(meaning you had opted for presumptive scheme in the previous year and declared income under such scheme), then audit is applicable in your case.
BB] Whether Audit is required even when the F&O loss is not to be carried forward (for future years say 8 years)
Yes, If your turnover has exceed the threshold limit; then AUDIT is applicable.
CC] Whether the Short term profit (of 1,53,000) be set off with F&O loss of (75,000 – 10,74,000) during filing current return 21-22.
Yes, current year FNO Loss can be set off against all incomes except Salary.
DD] Whether the lntraday profit (of 8,600) be set off with F&O loss of (75,000 – 10,74,000) during filing current return 21-22.
Yes, Intraday Profit can be set off against FNO Loss.
EE] What are the charges for (a) tax audit and (b) return filing for ITR 21-22.
Check this…https://quicko.com/
hello sir,
i need turnover for short term capital gain so from where i will be able to download it.
Hi Sunil,
I need turnover for short term capital gain so from where i will be able to download it.
Download Tax PL from console Zerodha; in Equity Sheet under Short Term Trades – you need to total the sell value column – you will get the turnover.
Hi Nithin
my salary is 10lak and i have done F&O trading .
my turnover is less than 1 crore and i have profit of 2% .
Do i need to go for audit ?
I have to pay extra for auditing . (5k+)
i have to pay tax on my 2% profit which comes in 10% slab.
basically salaried person has to earn more than 6% otherwise dont do f&o trading at all
Hi Nithin
My question is quit different
I am doing all Mf investment, stock trading, and stock investment for the short term and long term in all my family account. We are falling under audit since 2 years and we are doing it. This year (FY 2021-22) we have heavy transactions in intraday and incurred a huge loss but have short term gain in stock also. My CA says you should have to file it under business income, and also said that once you choose you can not shift the nature of business to capital gains so my question is if I stop intraday (speculation) from the next year and I do only short term or long term will I have choice to file in capital gains in future please guide me I am tensed
Hi team zerodha ,
As per section 44Ad limit of turnover is only 2 crore, in f.y. 21-22 also.
But the limit of 5crore which has now increqsed to 10 crore is falling under section 44AB.
So, plz don’t misguide people, saying that if profit is equal or more then 6 % of digital transactions above 2 crore then audit is not necessary.
I mean to say that, please don’t mix THE LIMIT OF TURNOVER of section 44Ab with Sec. 44AD
I don’t think you need to provide details of all your assets and liability for business income. you only need to provide it for the business that you are carrying on. If you are only trading in F&O, all you need is to show the balance with broker at then end of the year (including margin for any open position) as asset and the same amount will show up as capital. That’s it.
Can you share a P&L Format of a F&O trading Business and an Intra day trading business.
Hi Nithin, I m a salaried employee with income <5 lakh and have no tax liability.
I did option trading where turnover is ₹437000 and loss is ₹80000, now if I file itr 3 to carry forward the loss, do I need audit as the total income is over exempted limit of ₹250000 or there is no need for audit as I have no income from business? Thanks in advance.
Hi Nithin, I m a salaried employee. My income is ₹4.5 lakh, I did option trading with turnover ₹4.3 lakh and had losses of ₹80,000, does audit is required as my income is more than the exempted limit of ₹2.5 lakh?
In financial year 2020-2021 I transferred ₹2 lakhs from my salary account to trading account, while filling ITR in balance sheet should I show these ₹2lakh only as source of fund or I have to show all the balance that I have in my accounts and received as salary?
Thanks
Hi Arvind Verma,
Hi Nithin, I m a salaried employee. My income is ₹4.5 lakh, I did option trading with turnover ₹4.3 lakh and had losses of ₹80,000, does audit is required as my income is more than the exempted limit of ₹2.5 lakh?
In financial year 2020-2021 I transferred ₹2 lakhs from my salary account to trading account, while filling ITR in balance sheet should I show these ₹2lakh only as source of fund or I have to show all the balance that I have in my accounts and received as salary?
Audit is required if you had FNO Income in the previous and you had declared such income under presumptive scheme 44AD and now (for current year) if you want to declare loss and carry forward loss.
If you are having FNO income for first income, then not required as your turnover is less than the threshold limit.
S says:
December 27, 2021 at 10:25 am
Hi Arvind Verma,
Audit is required if you had FNO Income in the previous and you had declared such income under presumptive scheme 44AD and now (for current year) if you want to declare loss and carry forward loss.
If you are having FNO income for first income, then not required as your turnover is less than the threshold limit.
Hi S, Thanks for your kind response, but in this article Mr Nithin has written “Section 44AD – If the turnover is less than Rs 2 crore, and if profit less than 6% of turnover and total income exceeds basic exemption limit (this section applies only if person’s taxable income other than the loss from trading is more than the taxation slab) An audit is not required if turnover is less than Rs 5 crores but your total income is within the taxable limit of Rs 2.5lks.”
so I have doubt, my turnover is less than the threshold limit but my income is more than the exemption limit of 2.5lks (althoug after applying 80C dedcutions & HRA, I have no tax liability). Still can I proceed without audit? If you have reference to any section or other information please share. Thanks once again.
Could you please provide a template of
Account books
PL statement
Balance sheet
While filing balance sheet part of ITR 3, what should I show in proprietor’s capital, the total balance in my accounts that I earned from salary or only the money that I transferred from salary account to trading account and the balance I have in trading account?
I still find there is a discrepancy in calculating Speculative Turnover – Intraday Equity Trading.
I found Zerodha to Quicko making this turnover as the absolute values of the difference in buy/sell amount.
But I found this is different in Sharekhan: adding buy and sell value of each share is what Sharekhan calculates as Speculative [Intraday Equity] Turnover
Is there any rule defined for calculation on same by Tax Department of India?
1) Sold Option @ 100 and expires useless. a) Profit 100 and Premium on sell is 100. Hence as per the theory here the TO = 100 + 100 =200 (DOUBLE)
2) Bought Option @150 and expires useless. -ve difference or loss =150 + Premium on sell =0 hence TO = 150 +0 =150
3) Reverse Trade>> Buy OPTION @ 100 then sell @150. -ve difference or loss = -50 and premium on sell =150. Hence TO =ABS(Loss) + Prem = 50 + 150 =200
4) Short sell OPTION @ 400 then buyback @ 600 >> Loss = -200 and prem on sell = 400. Hence TO = ABS(P&L) + prem on sell = 200+400 = 600
Are the above correct. Pls guide.
If a person has professional income and future and option income. Can he opt 44ADA for profession and audit for future and option business.
How to offset loss in auction trade of stock options ??
Hi Ritesh,
If a person has professional income and future and option income. Can he opt 44ADA for profession and audit for future and option business.
Yes you can.
In your article, conditions attached to 44AD for turnover up to 5 crore not mentioned such as cash receipt or cash expenses should not be more than 5% . As also what if profit is above/below 6 or 8%. Requirement of audit. Or when no such audit is required . It needs eleborate discussion for better understanding for 44AD for increased eligibility from 1 crore to 5 crore.
Arvind 9425157452, 9340500061
If a delivery based equity is purchased and sold the same day, what is it intraday or short term capital gain.
Hi Dines Kumar Sarda,
If a delivery based equity is purchased and sold the same day, what is it intraday or short term capital gain.
It is Intraday and will be treated as speculative.
Hey, my query is, regarding intraday trading
T/O from speculative buss. : 11 lacs
Profit/(loss) : -170000
Exps. : 150000
Net loss : 320000
plz tell me the treatment regarding above data ? the data attracts tax audit, tell me how would i consider the data regarding pur. & sales ?
Hi Rahul,
T/O from speculative buss. : 11 lacs
Profit/(loss) : -170000
Exps : 150000
Net loss : 320000
plz tell me the treatment regarding above data ? the data attracts tax audit, tell me how would i consider the data regarding purchase & sales?
There is no tax audit applicable as the turnover is below the threshold limit.
You can fill the below details in Schedule PL #65
a] Turnover from Speculative Activity
b] Gross Profit
c] Expenses
1. CALL OPTION SOLD TOT VAL 100 AND LEFT UNDISTURBED TO EXPIRE USELESS ON EXPIRY DAY. HERE THERE IS NO REVERSE TRADE. WHAT IS THE DIFFERENCE?? PREMIUM RCVD IS 100. Hence the turnover will be only 100? or P&L posted 100. Hence Turnover is 100 + 100. Which is correct.
1. PUT OPTION BOUGHT tot val 200 and left undisturbed. It expired useless on expiry day. Reverse Trade was not done to square off the position. Premium rcvd was zero. What is the difference?? P&L posted is Loss -200.
What will be the Turnover. Zero or 200
Pls give your valued guidance.
My f&o turnover is 90 lakhs and profit is 20 thousand I need audit
Hi Abhinash,
My f&o turnover is 90 lakhs and profit is 20 thousand I need audit??
If you are having FNO Income for first time in the current year, then no audit is required as your turnover is less than the threshold limit.
If you had FNO Income in previous year and you had declared such FNO Income under presumptive taxation scheme(44AD) and now in the current year if you are opting out of presumptive scheme; then audit is required if your profit is less than 6% of turnover and overall income is more than the basic exemption limit.
If sir I bought 100 nifty @120 rs on 12 dec 2021 and sold @150rs same day ,profit-3000 and turn over-3000.
In 5 jan22 I also bought 100 nifty @130 rs and sold at 100 rs ,loss-3000, turnover-3000.
Financial year 21-22 turnover will be ????
Any update on the change.org petition you filed ? It looks like if one has a small turnover (less than 1Cr ) and small profit , even then he is required to have audit done. The CA fees will eat up the meagre profits
WHAT IS TURNOVER TO BE SHOWN IN P & L STATEMENT, WHETHER IT IS ACTUAL SALES VALUE OR TURNOVER CALCULATED FOR TAX AUDIT PURPOSE, A LITTLE BIT CONFUSION, PL. CLARIFY
Hi MV Sastry,
WHAT IS TURNOVER TO BE SHOWN IN P & L STATEMENT, WHETHER IT IS ACTUAL SALES VALUE OR TURNOVER CALCULATED FOR TAX AUDIT PURPOSE, A LITTLE BIT CONFUSION, PL. CLARIFY
You have to declare actual sales value.
Section 44AD is for calculating profit and gains on presumptive basis. An individual can opt for payment of tax on presumptive basis under clause 44AD. which can not be changed for next 5 years. Only in such a case audit applicability as clarified in clause 6.2 above is applicable.
In case an individual does not want applicability of 44AD, then audit requirements depend only after limit of Rs 10 cr.
Pl clarify whether it makes sense
In P&L Account where to show the F&O turnover ? And how the Net Profit Is to be shown ?
i buy & sell of share on delivery basis.
i want to file ITR As Capital Gain. for short term & long term.
if my turnover in STCG & LTCG is more than 5cr. shall i need to do Audit.
i intension is only Capital Gain.
Dear Sir, my doubt is how to account a F&O transaction in accounts,whether purchase value and sale value separately account or net profit/loss is only to account.In 3CD form in ration calculation which amount is to be specify as a turnover, whether full sales value or turnover as per calculation to find a tax audit
what turnover amount to be specified in 3CD ratio part.
Kudos to you for making available the turnover information is respect of intraday and F&O 0n Zerodha > Console. This information, as far as I know, is not furnished by other broker outfits. However, I wish to point out some of the lacuna in Tax P&L Report in Zerodha>Console>Reports:
1. The Tax P&L provides gross profit SEPARATELY for Intraday, Short Term and Long Term trades. However, the expenses viz. STT, GST, Exchange and SEBI levies, brokerages etc, are SUMMARIZED and not provided separately for Intraday, Short term and Long term trades. Hence, it is not possible to arrive at separate net profits for different categories of trades. This is essential as the tax treatment for Intraday, Short Term and Long Term trades is different. I took up the matter with your team. They responded that no other customers has pointed out this and presently they are unable to provide this info. Hope, Zerodha will look into this issue, as otherwise, Tax P&L report is of no use at all.
2. There appears to be no link to download STT – 10B Form regarding STT paid during a financial year.
I sold i.e., one lot put option of a particular scrip and also sold one lot future of the same scrip, now on expiry day the put option closes in the money. For above F&O transaction on expiry day my positions got converted in cash delivery (one lot buy and one lot sell) i.e., intraday in equity segment @ closing price of cash market. In above trade profit booked in F&O segment whereas intraday loss in equity segment. Now my question is how can I treat the P&L for IT and accounting purpose.
As per my opinion the audit is required to be done for future and options business, in the following cases for the FY 2021-22: –
(a) The businesses whose turnover exceeds 10 crores. (Cash receipts and payments do not exceed 5% of
total receipts and payments respectively in case of such transactions, hence threshold limit of 10 crores is
applicable)
(b) A person engaged in business who has OPTED for presumptive taxation- 44AD (8%/6%) in any of the last 5
years but does not opt for the same in the current year.
I think updation required in 6.1 for tax audit clairty as per section 44AD.
My income from salary, commission, CG and other Head is 4.5 lac and my loss in F&o and Intraday is 10k with Turnover 89k , I don’t wanna opt for presumptive tax ….what should I do?…will audit be required,?
If yes , how can I avoid audit?
Hi Dheeraj,
My income from salary, commission, CG and other heads is 4.5 lacs and my loss in F&o and Intraday is 10k with Turnover 89k , I don’t wanna opt for presumptive tax ….what should I do?…will audit be required? If yes , how can I avoid audit?
If this is the first time if you are incurring F&O and Intraday loss – then no Audit is required as turnover is below the threshold limit of 10 Cr.
Hi, if my business P&L is loss (<6%) and turnover less than 5 Crores, if my total income (Salary + Capital gains + Business Income) is less than 2.5 Lakhs, I need not get audited – Does this total income after all deductions like 80C, 80D or before all deductions?
I want IT year 1=4=2021 To 1=3=2022 P&L.
Share Balances
[email protected]
.
My f&o turnover is 3cr
And my net loss is -3 lakh
No othersource of income
Previous year adopt 44AD
So this year i required audit my itr or not?
I think Zerodha should open a CA wing to help traders in filing F&O tax returns. No need of unnecessary discussions. They can charge the premium, as I found many other CA does not have the knowledge of F&O turnover and lot effort is required to search suitable CA.
Have income from pension and interest from deposits. NO other business
I do intraday and short term trading
Please advise
How to calculate turnover for these two
How turnover is relevant to these two
Which schedules of ITR 3 to fill
And
How to fill the schedules
Please guide
Thanks and regards
Hi,plz provide ur opinion –
Last year (FY20-21) Sale of shares trading shown under section 44AD and the sales was Rs.25 lakhs.
As on FY21-22,the sale of shares is Rs.1.8 Crs and the profit is Rs.18 lakhs( intra day -1 lakh and Short Term Capital Gain is Rs.17 lakhs.
Commission,Rent, Salary,Interest paid in the Fy21-22.
Whether the tax audit is applicable,if not applicable which ITR 3 or 4 to be filled and can the provision of expenses can be done.
Considering the expenses the net profit comes to Rs.6.5 lakhs.
For filing income tax returns I downloaded the P&L statement for shares purchased and sold in FY 2021-22 from Console.
The income tax template in .csv format requires the ‘Expenditure wholly and exclusively in connection with transfer(12) ‘.
But the downloaded P&L statement from Console does not contain any details about the expenditure incurred on transfer of shares.
How to go about filling in this missing detail?
For FY 2021-22 I have a loss of 7 lacs in F&O trading.
Under what circumstances will be the tax audit applicable if I want to carry forward the loss ?
Also, I have read the articles on how to calculate turnover. For options it is the premium on sale of options + the profit /loss.
I think premium on sale of options is only when u short the options ? Or it is also applicable when u buy the option and than sell it ? (This is not actually short)
Thanks
Hi Harish,
For FY 2021-22 I have a loss of 7 lacs in F&O trading.
Under what circumstances will be the tax audit applicable if I want to carry forward the loss ?
Audit is applicable in below situations:
A] if your turnover crosses the threshold limit of 10 Crores in the current year. (FY 2021-22) or;
B] if you are opting OUT of presumptive scheme in the current year(FY 2021-22) (meaning you had opted for presumptive scheme in the previous year) and your net FNO Income is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then you have maintain books of accounts and get the AUDIT done [Tax Audit is applicable].
Not able to modify the last post.
Adding more details here so that it is possible for the responder to consider all facts and give advice.
F&O turnover – 3.5 crores
Loss – 7 lacs
This is the first year of trading in F&O
Apart from the above have taxable salary income.
Please suggest if tax audit is applicable.
Thanks!
If I show my F&O income in ITR 4 as business income which business code should I Quote in ITR.
Please mention here that Tax Audit under section 44AD is only applicable when the Tax Payee is opting for calculation of tax based on Presumptive Taxation Scheme, either in current current FY (for which the ITR is being filed) or in previous 5 FYs.
Hi,
Please amend the article. This is misleading. In case of a loss from trading or profits less than 6% of turnover, the audit requirement will be applicable only if the assessee had opted for the presumptive taxation scheme under section 44AD in the previous 5 years. In case he has not opted for the presumptive scheme then audit requirements under section 44AD are not applicable and only in case the turnover exceeds the threshold amount the audit will be required to be done.
can all the brokerage charges and taxes, be deducted while calculating the “net profit” for STCG from equity and F&O
Hi, nitin, kindly clarify that, if intraday total buy and total sell contribute to turnover maximum than 5cr than fo i need to audit the books, can i claim all expenses of zerodha,
Hi Nithin,
I am not sure if you are still going to reply on this. I have questions just out of curiosity to understand the system, why do we need to get the trade book audited if your turnover is less than 5cr and you have a loss (profit less than 6%). It seems a like a double blow as we are retail traders and mostly have profit less than 6% or even loss in their initial days of trading mostly, doesn’t it sound an unnecessary burden on them to get it audited as well by a CA. I personally don’t trade much and this audit stuff’s is not encouraging for me. Can you or anyone enlighten me why is that or am I missing some bigger picture in it?
I also have another question, if I declare my profit more than 6% despite having a loss of 10%(turnover 1L), won’t there be any issue for me later on?
Thank you so much for your time!
if i have outstanding buy position in option and carrying it in next year
in that case what will be my p&L of that option . because when we buy option we have to pay premium upfront and we will receive premium when we will sell it
either we will consider the whole premium value in p&L or we will consider notional loss profit basis on the closing value
In 2021-22 i had an F&O loss of around 47000
And my option turnover is showing Rs 1 crore
What are the guidelines for audit and tax ???is it mandatory for me to get audited ….
The turn over limit has been changed since this article is published. Kindly update the limit as per the current structure for the year 2022
Sir, It is mentioned on varsity that “audit is not required if turnover is less than 5 Crore and profit is more than 6%.(2 Crore for F Y 19-20)”. However the limit is still 2 crore only for FY 2020-21 and 2021-22. You can check latest version 44AD section on the income tax website. It still considers turnover limit of 2 Crore.
Request you to update on this, and correct me if i am wrong.
hi team,
I’m not able to understand the points which are in double quotes. Can you please clarify what do they mean by “On Aug 19th 2022, ICAI clarified that however where the premium received is included for determining net profit for transactions, the same should not be separately included” and “In respect of any reverse trades entered, the difference thereon should also form part of the turnover”.
It would be great, if you can explain with an example for Point 1 to 3.
Below is the excerpt,
For all non-speculative transactions, the article says that turnover to be determined as follows –
The total of favourable and unfavourable differences shall be taken as turnover
Premium received on sale of options is also to be included in turnover. “On Aug 19th 2022, ICAI clarified that however where the premium received is included for determining net profit for transactions, the same should not be separately included.
In respect of any reverse trades entered, the difference thereon should also form part of the turnover.”
So if you buy 25 units or 1 lot of Nifty futures at 8000 and sell at 7900, Rs.2500 (25 x 100) the negative difference or loss on the trade is turnover.
In options, if you buy 100 or 4 lots of Nifty 8200 calls at Rs.20 and sell at Rs.30. Firstly, the favourable difference or profit of Rs 1000 (10 x 100) is the turnover. So total turnover on this option trade = Rs 1000.
The above calculations (points 1 to 3) are fairly straight forward; the next important thing to decide though is if you want to calculate turnover scrip wise or trade wise.
Hello Sir,
I have a intraday turnover of 25.56k and my loss is -8.83k, and my salary income is 200k should i have to file Income tax return. If i don’t file income tax is their any problem.
Hi..excellent explanation. I just want to know that how is income or revenue to be shown in pl account to be calculated in case of f& o trading. Is it the same as turnover as explained above or is it to be calculated in some other manner…
Thanks
Suppose my F&O Turnover is Rs 1,00,000 and Profit is Rs 0 than what is my Purchase (debit to P&L) for preparing my Profit & Loss Account ? And how this (Turnover and Purchase) will be reconciled with F&O ledger of Broker.
How calculate turnover for trading and intraday
Can I declare 6% of turnover as my profit in FnO trading even if my profit is less, say for example 2%, and avoid audit.
Sir,
1- I want to know how manage account book.Please guide me with colome and example & perfoma.
2- If you have any service about manage account book( I have three zerodha accounts ) please guide me and send me contact information With charges.
My ca told me sale value is considered as intraday turnover.. Is it right
Hi nithin Namath Sir My ca told me sale value is considered as intraday turnover.. Is it right?
Please update this material as per new changes….
Sir,
It is good that Zerodha is providing all required information to investor/trader, including trade wise gain/loss statement. Honestly specking I don’t think calculating turnover script wise is correct, because in case of gain in one trade and loss in other will give net turnover which will be lower than actual if we do it trade wise.
Please share your thoughts.
In case i have turnover less than 5 Cr, net profit more than 6% of turnover and income from salary greater than 2.5 lakh, i am still not liable to get an audit, right?
Also if i am not liable to get an audit, can i show my business expenses and adjust them in profits to lower my tax liability? Or in that case an audit will be mandatory?
This article is great!
NIthin Sir,
my intraday turn over is 7,07,000 and and my profit on intraday is -1.04 L and my profit on short term is 22.24 k showing on Q-office.plz confirm wether audit is required or not is any tax will be applicable for me.
Reply
Hi
My trunover is 36,00000. My Profit -550000. please guide me.
Hi Pradeep Kumar,
My turnover is 36,00,000. My Profit -550000. please guide me – Since your turnover is less than 10 Crores, no tax audit is applicable. Please file ITR-3 and carry forward the loss.
Which ITR Option seller needs to be file and how to calculate turnover for option seller?
Hi Natarajan,
Which ITR Option seller needs to be file and how to calculate turnover for option seller? – Applicable Tax Form is ITR-3; Turnover will be the absolute difference between selling price and purchase price.
when it is mandatory to maintain books of accounts and audit for option traders?
Hi Natarajan,
When it is mandatory to maintain books of accounts and audit for option traders?
Tax Audit is mandatory if your turnover in the current financial year is more than 10 Crores and you have to mandatorily maintain books of account.
Suppose, if you had FNO Income for any previous years and you were declaring under presumptive scheme under section 44AD; (meaning currently you are in presumptive scheme upto FY 2021-22)
now if you are opting OUT of presumptive scheme in FY 2022-23 and your FNO Income is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then you have maintain books of accounts and get the AUDIT done [Tax Audit is applicable].
Since, all the data is available in Tax PL and Equity Statement – it is easy to maintain books of account.
I have a turnover of less than 5cr. My profits from F&O trading is more than 6% of my turnover. My Income from Salary is greater than the basic exemption limit of 2.5L. Do I need a tax audit in this case?
Hi Amit,
I have a turnover of less than 5cr. My profits from F&O trading is more than 6% of my turnover. My Income from Salary is greater than the basic exemption limit of 2.5L. Do I need a tax audit in this case?
I assume this is your first year of trading; if yes Tax Audit is not applicable because turnover is less than 10 Crore.
tax audit is applicable only if 1- turnover is more then rs. 10 crores, and 2- assessee has declared his profit on presumptive basis u/s 44(AD) in any of 5 previous year and wishes to declare profit less then 6% (loss as well).so if assessee has not used section 44AD in previous years and his turnover is less then 10 crores there is no need for tax audit irrespective of profit/loss.
Hi Sandeep,
tax audit is applicable only if 1- turnover is more then rs. 10 crores, and 2- assessee has declared his profit on presumptive basis u/s 44(AD) in any of 5 previous year and wishes to declare profit less then 6% (loss as well).
so if assessee has not used section 44AD in previous years and his turnover is less then 10 crores there is no need for tax audit irrespective of profit/loss – Yes, there is no requirement of tax audit if the turnover is less than 10 Crores and if he has not used presumptive taxation in last 5 years.
I have a Loss of around 8 Lakhs in F & O. Now I Want to Leave Trading. I am a Government Employee. And I don’t fall under the Tax Slab. I also don’t want to Carry forward it as I want to leave trading. So should I need to file ITR 3.
Or ITR1( as I don’t want to show trading as my Business income as i don’t want to carry forward it)?
Hi Bravo,
I have a Loss of around 8 Lakhs in F & O. Now I Want to Leave Trading. I am a Government Employee. And I don’t fall under the Tax Slab. I also don’t want to Carry forward it as I want to leave trading. So should I need to file ITR 3 Or ITR1 (as I don’t want to show trading as my Business income as i don’t want to carry forward it)?
Suggest you to declare this time and set it off against your other incomes except Salary.
Thank you so much for all the details and it is informative too..
I am in thinking of opening an trading account under partnership firm..
Can you provide me some details about the taxation process for firm…
Also want to know that can i open corporate account with Zerodha…
If my profit is more than 6 percent of turnover then can I opt for 44AD and do I need audit and Do I have to deposit tax on only 6 percent
Hi Deepak Saini,
If my profit is more than 6 percent of turnover then can I opt for 44AD and do I need audit?? – Yes, if can opt for 44AD and declare profit of more than 6%. Audit is applicable if your turnover as per ICAI Guidance (i.e sum of absolute differences of all the FNO transactions) is more than 10 Crores and if you are opting out of 44AD in the current year and FNO Income is less than 6% of the turnover and overall income is more than the basic exemption limit.
Do I have to deposit tax on only 6 percent? – No, you have pay tax on profits declared and it is not restricted to 6%.
This is old article. In your screenshot there is Note on right side saying that they calculate and sum up “Absolute pofit or loss PLUS premium received “. BUT now after clarification rfom ICAI. It should be only “sum up of Absolute pofit or loss”.
Nitin sir your way of expressing the accounting things of trading is awesome. Even though I am an mechanical engineer understand clearly the logic of tax calculation and ITR selection of trading business. Thanks a lot.
It explains in detail for all categories of business with specific reference to intra day transactions. My single doubt is as an individual day trader with profits around 1000/-, where is the need to files the Balance sheet which seems unnessary. Even if it is shown as zero validation takes place. I personally feel that day traders in equity can file in IT2 2 itself if the Govt brings in the change. Second intra day CNC , I feel should not be considered as intra day since I normally buy back using the High and low of the day. Further full margin is given inCNC trades.
Being a retired bank I do maintain Balance sheet, P&L account of all transactions using BS1 ledger (double entry system). But why is it necessary to show how much i spent on vegetebles, fruits, sundry provisions, rent, loan, bank accounts, eb charges, et al for the simple reason that it is not a business. As a retired banker I am maintaining it for the past 25 years.
First i would like to thank you for clering the concept of taxation for F&O, Intraday and delivery base trading of shares. Plase clear the same things for Goverment Securieties ie Treasury Bills and Central/State Goverment Bonds. It is imposible to get 4-5% profit of tournover. Then is it necessary to get audited every year? Please clear the concept.
Can a government employee do f&o trading
Hi Pankaj,
Can a government employee do f&o trading?
No Government servant shall speculate in any stock, share or other investment: Provided that nothing in this sub-rule shall apply to occasional investments made through stockbrokers or other persons duly authorized and licensed or who have obtained a certificate of registration under the relevant law.
More in the link..https://support.zerodha.com/category/trading-and-markets/trading-faqs/articles/can-government-servants-trade-in-stock-markets
Hi
For example profit from Option selling 1Cr
Loss from option selling and buying 30 laks
Can this person opt 44AD?
HI Sanjay,
For example profit from Option selling 1Cr
Loss from option selling and buying 30 lakhs
Can this person opt 44AD?
Yes, you can opt for 44AD if the turnover of FNO transactions is less than the threshold limit of Rs 2 Cr (FY 2022-23)/ Rs 3 Cr (FY 2023-24)
Hi Nithin
I have short selling positions as on 31st march
How do I depict it in my balance sheet as trader
I have short selling positions as on 31st march
How do I depict it in my balance sheet as trader?
You can declare the open positions under Current Assets.
Thanks dear and God bless you
My total sell side value in short term trading is 35 lakh
And
Short term gain is 17000
As per clause if profit is less than 6 % of turnover (35 lakh)
Which is the case here
Do I have to get audit done
Thanks and regards
How to Show open positions of Futures as on 31-03-2023 in Balance sheet?
Hi Nithin,
My querry is i have placed a intraday sell order below the 1rs of the upper circuit limit of the stock but it continued to limit in circuit till the end. The stock went for auction My question is whether we declare the losses in speculative income or STCG.
Hi,
Have decent unrealized LTCG. Can I gift shares to my wife and son in a way that they earn 5 Lacs Cap Gain tax and take benefit of rebate?
Thank you
Hi Pueeth,
Have decent unrealized LTCG. Can I gift shares to my wife and son in a way that they earn 5 Lacs Cap Gain tax and take benefit of rebate? – please note rebate is not available in respect of LTCG taxable @ 10% in excess of Rs 1 Lacs.
What is the percentage of taxation on income from options trading?
Is it according to the slab rate?
AND
What is the percentage of taxation on income from TRADING etf?
Is it according to the slab rate?
Hi Santosh,
What is the percentage of taxation on income from options trading? Is it according to the slab rate? – Yes, Income from Options Trading is taxed as per slab rates.
What is the percentage of taxation on income from TRADING etf?Is it according to the slab rate? – Equity ETFs are charged at 10% in case of LTCG and 15% in case of STCG. Other ETFs are taxed as per slab rates irrespective of holding period.