Your Queries (Income Tax): Tax audit of income from derivatives trading if turnover above Rs 1 crore

March 30, 2021 1:30 AM

If income from futures & options trading is classified as business income and transacted on a recognised stock exchange, it is taxable as non-speculative business income and is subject to tax audit only if turnover is more than Rs 1 crore.

ITROnce filing is enabled, you can upload the same at e-filing portal

By Chirag Nangia

I am doing a FnO transaction in Bank Nifty Options Trading. Is audit required and do I need to file ITR for the same?
—Akshay Sharma
If income from futures & options trading is classified as business income and transacted on a recognised stock exchange, it is taxable as non-speculative business income and is subject to tax audit only if turnover is more than Rs 1 crore. Alternatively, one may opt to be governed on a presumptive basis, if turnover from derivative transactions is less than Rs 2 crore. In such a case, income is taxed at flat rate of 6% of turnover (or 8% of turnover, if electronic clearing system is not used) and there is no requirement for audit. Since turnover in your case is below the prescribed threshold, there is no requirement for tax audit.

For second question, an individual, who is not subject to tax audit during the financial year, is required to file ITR only if total income exceeds maximum amount not chargeable to tax (i.e. Rs 2.5 lakh). This total income is to be computed without giving effect to deductions under chapter VI A and Sections 54/ 54F, etc.

My service with company A was six years, company B was five months and company C for three years. There was a gap of three months between the employments in company B and C, and 27 days gap between company A and B. All the EPF accounts have been transferred to the latest employer. Will the EPF withdrawal be tax free?
—Nagarajan
Withdrawing an accumulated balance of provident fund at the time of retirement or termination of service is exempt in the hands of the taxpayer if he/she has rendered continuous service with the employer for a period of 5 years or more. For the purpose of calculating 5-year time-limit, service rendered with the previous employer is also included, if the previous employer maintained provident fund and the provident fund balance of the employee was transferred to the subsequent employer.

“Continuous service” means uninterrupted service and includes service which is interrupted by sickness, accident, authorized leave, strike which is not illegal or cessation of work due to any reason not related to employee’s fault. In your case, as the employment term with Company A itself was more than 5 years, the withdrawal of PF balance would not attract any tax liability.

The writer is director, Nangia Andersen India. Send your queries to fepersonalfinance@expressindia.com

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