Presumptive taxation for intraday trading

Hi @csteja

Presumptive taxation scheme is aimed at reducing the tedious job of maintaining books of accounts for small businesses. It does not mean you can show income lesser than the actual income.

Can a person trading in FnO and opting for Presumptive scheme still get IT Notice?
E.G
Turnover for the year is 1.9 Crores… Gross Profits is 50 Lacs… Charges 5 lacs…Net profits 45 l acs.

Presumptive Scheme :- Declare 6% of 1.90 Crores as profits. so around 11.5 is declared as profits. and taxes paid.

Can IT department send notice and say your income is not 6% but more than that…you should pay Tax on 45 lacs and not on11.5 lacs ?

Hello @Rishu.dhawan03,

A person having F&O income should not opt for the Presumptive Taxation Scheme as the scheme is for a person who does not keep books of accounts. In case of F&O, you will have the details of all the trades and transactions in form of broker reports.

In case you have opted for presumptive taxation scheme then you are required to declare the 6% of turnover as profit or actual profit whichever is higher. So, there are chances that you might receive a notice if you don’t declare the actual profits in case they are higher.

Hope this helps!

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Dear @CA_Niyati_Mistry ,
Thanks for the super quick response!

Just a follow up question, Year 1 , it was 20% profit and we declared it at 6%
year 2, loss of 5% but since presumptive is opted so tax is being paid on 6% of turnover.
Despite losses, dept will still get tax on turnover!

Now, if IT department comes back with question that for year 1 it should be 20%- expenses. Would it not defeat the purpose of whole scheme as it says opted for 5 year and a flat rate of profits on turnover!
Now if this scheme is not applicable to FnO trader then I feel, presumptive scheme should not be applicable /available for FnO.

I fail to understand the logic then why it is made available by IT department for FnO traders.

Thanks!

Hello @Rishu.dhawan03,

In case of losses in the subsequent year of opting into Presumptive Taxation Scheme, you can opt out of the same and get the tax audit done by a CA. You have to continue for 5 years, but if the turnover crosses the limits or have losses you should opt out of the scheme.

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Can I also claim this benefit of Presumptive Income under Section 44AD for my Income in F&O?

Hello @INDTAT

We do not recommend opting for Section 44AD for Income from F&O.

Section 44AD is for those businesses where books of accounts are not maintained. In case of F&O, all the statements are made available by the brokers and thus actual profit can be calculated. Thus, we recommend to prepare books of accounts and file ITR 3 in case of Business Income from F&O.

Thank you.

Thank you for your reply. However, I forgot to mention that in my books of accounts, I have business income from multiple sources, one of which is income from F&O trading. Under such circumstances, would you advice to opt for Presumptive Tax under Sec 44AD?

Hello @INDTAT

You can opt for Section 44AD for other businesses other than F&O Business Income.

Thus, you can prepare books of accounts for F&O and for other business opt for Presumptive tax scheme.

Thank you.

@Divya_Singhvi
@Yash_Kaviya
@Nireka
@AkashJhaveri

for the stock share traders professionals filing itr4 presumptive ; what is the maximum turnover limit ?
and if the turnover limit is crossed ; can continue to file in itr4 or have to mandatorily choose the ITR3 ?

The turnover limit for opting into presumptive taxation scheme is ₹3 crore for businesses (provided not more than 5% of transactions are in cash). If the turnover crosses this limit, you will have to opt out of the scheme and file ITR-3.

this limit is also applicable to the business of nifty index options intraday trading business ?

: Itr4 : presumptive : for the business profession of share market nifty options intraday trading .
The taxpayer has to declare the turnover , revenue , expense , profit , transactions etc . in good faith
There is NO need to maintain any books or papers or documents !
What if the taxpayer by mistake or deliberately ; declares false data ?
How will the taxman would come to know ?
Taxman can re-open the files of previous how many years ?
And what is the punishment if caught ?

QUERY 2 : I know if someone opt for the presumptive scheme for current year then he has to follow the scheme for next 5 years . BUT , what will happen if opt out in the 2nd or 3rd year ? Then , for next 5 years he would be barred from opting this scheme ! QUERY QUESTION : BUT , is Audit would be mandatory if opt out on that year or on every year till 5 years ?

As has been pointed out earlier , presumptive taxation scheme is not meant to be used for business where all the data needed to compute P&L is easily available. If the actual profits are higher than 6% of turnover, one cannot use the presumptive scheme to reduce the amount of tax as the scheme is meant to reduce the burden of compliance and not to give tax relief. Most people will probably get away with this and not have to face scrutiny assessment , but for one’s peace of mind, it is better to report actual profits.

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if the assessee choose itr3 then the balance sheet is mandatory . so . to avoid this ; the assessee choose the itr4 .

in the itr4 there is no need of any document records . .

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if the assessee match the information as per the AIS and try to show lower turnover than the actual or lower profit than the actual but greater than 10% ; QUERY QUESTION. :

how would the taxman come to know the actual turnover or the actual profit in the speculative business income of intraday share market fno derivative ? .

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you said : after opt in itr4 ; if opt out ; then ; the assessee has to do audit for all the next each 5 years if the income is more than basic exemption of Rs .2.50~3 lakhs !

am i right ?

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What is the turnover limit for opting for itr4 for fno business ?

Hi,

The turnover limit for businesses for opting into presumptive taxation scheme is 3 crores in case more than 95% of the transactions are cashless.

If more than 5% of the transactions are in cash, the limit is reduced to 2 crores.

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