Tax Query: Tax audit applicability – The Hindu BusinessLine*

Clipped from: https://www.thehindubusinessline.com/portfolio/personal-finance/tax-query-tax-audit-applicability/article66175655.ece

Books of account are required to be maintained where the turnover (total value of sale transactions) exceeds ₹25 lakh or if the net profit exceeds ₹2.5 lakh per annum

I would like to know about the tax audit applicability in my case.

I have a day job with a salary more than the basic exemption limit. I have a certain STCG Equity for this year with seven transactions of different companies amounting to ₹50,000 profit.

Here are my specific queries: A) Can I declare as STCG or do I need to go for business income?

B) In the case of business income all these transactions involve delivery based (Read cash ‘n’ carry) [No derivatives used]; turnover is calculated as a total sale value of ₹7 lakhand crosses the 6 per cent profit condition

C) Can I subtract certain expenses and in that case income becomes less than 6 per cent? Then Tax audit becomes mandatory? (Assuming I am not going for the presumptive income case)?

Vignesh

Response to A: Since these are delivery-based transactions, the profits from these transactions need to be reported as non-speculative business income.

Response to B: Section 44AD provides for presumptive taxation. Herein taxable profits will be deterred at the rate of 6 per cent on the transaction value. Since the transaction value is ₹7 lakh, a minimum of ₹42,000 needs to be declared as profits under Section 44AD, though a higher profit could also be declared.

Response to C: If presumptive rate of taxation is not opted for, then actual expenses incurred for this business could be claimed as a deduction. You may note that tax audit is required only if the turnover exceeds ₹1 crore during the tax year. Books of account are required to be maintained where the turnover (total value of sale transactions) exceeds ₹25 lakh or if the net profit exceeds ₹2.5 lakh per annum. 

The writer is Partner, Deloitte India

Send your queries to  taxtalk@thehindu.co.in

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