Comment on Taxation for Traders - Introduction

Hello Nithin Sir,
Thanks for repying earlier queries .
May I take opportunity to ask answers for various cases with respect to 44AD. It will be highly appreciated if you can confirm and correct my understanding as it will not be useful only for me but all others.
Here I will be referring to ‘Trader’ and current tax free income limit is 250k.

1.
Salary income = 200k. other income(Interest income)=30k.
Turnover is 300k and loss is 20k.
Inference- As total income=230 is less than 250k and loss is incurred, trader need not do Audit. He is free not to file return.But it’s advisable to do and he can carry forward losses.
Query- Will ‘Without’ audit filling return be done to carry forward losses ?

2.
Salary income = 200k. other income(Interest income)=30k.
Turnover is 500k and profit is 25k= 5%
Total income = 200k+30k+25k=255k.
So trader has to file return and pay taxes.
In this case, as trading profit is <8%, hence audit is required. BUT if trader club other income(interest income) to trading profit and does he satisfies 8% criteria (30+25)/500=11% and bypass audit ? Is audit compulsory in this case ?

3.
Salary income = 200k. other income(Interest income)=10k.
Turnover is 500k and profit is 25k= 5%
Total income = 200k+10k+25k=235k.
Inference- Eventhough profit is <8%, no need to do audit as total income is less than 250k. It’s advisable to file return even though there’s no tax.

4.
Salary income = 300k. other income(Interest income)=0.
Turnover is 500k and profit is 25k= 5%
Total income = 300k+25k=325k.
Trader either to do audit or declare 8% as profit. He chooses second . So total income will be 300k+ 8% of 500k= 340k.
Now, can trader invest 90k ( 340k-250k=90k) in instruments permissible under 80/c to save tax ?

5.
Salary income = 300k. other income(Interest income)=10k.
Turnover is 500k and profit is 50k= 10%
Business Expernses incurred ( internet,electricity)=30k
Now, in this case which will be correct –
a. 50K/500K=10%. So no audit.
Income=300k+10k+50k-30k= 330k

b. Profit= 50k-30k (expenses)=20k
20k/500k=4%…hence audit required or need to forego some expenses.
Hence I can maximum count 10k as expenses so that net profit=50k-10k=40k comes as 8% of turnover.

thanks

View the full comment thread »