Trading in equities is becoming common among the salaried class. More and more of salaried employees are seeking to invest in stock markets to gain inflation-beating returns over the long run. Stock trading activities during the day happen in cash, derivatives and futures and options segment.
However, not all stock traders are aware of the taxation implications and the awareness at what point tax audit is needed for their trading activities. “Since many salaried people now have started investing in equity/derivatives/F&O, they are actually unaware about the term tax audit itself and they are in an assumption – “since it is loss, there is no need for tax audit” and they file their Income Tax Returns (ITR) showing only salary income,” says Sudhir Kaushik, Co-Founder & CFO, TaxSpanner.com.
The due date for filing of Tax audit cases is October 17,2016 unless extended further by any notification. With the help of Kaushik, FeMoney brings you the circumstances which should force you to seek tax audit in case of Derivatives/speculative trading. You would need tax audit in the following circumstances:
Tax audit means that the accounts and transactions will be audited by a Chartered Accountant, the Income tax return will be prepared by a Chartered Accountant, your financial statements will be prepared by a Chartered Accountant wherein the CA and you will be signing and a ‘Tax Audit Report’ will be prepared by a Chartered accountant and will be uploaded along with the Income tax return on the Government website. The Tax audit report will contain the issue and observations of the CA.
- If the options and futures total turnover is more than Rs 1 crore, then tax audit is mandatory as per the income tax rules.
- If the options and futures total turnover is less than Rs 1 crore and there are losses which needs to be carried forward, then tax audit is mandatory as per the income tax rules.
- Digital Signature is mandatory for tax audit cases and the income tax return/tax audit report needs to be digitally signed by you.
- If the Tax Audit is not done, then as per the Income tax rules, there is mandatory penalty of Rs 150,000 or 0.5 per cent of the total turnover whichever is less for non-compliance.