Can F&O Loss Can be Set Off Against Profession. for Making this I need to Do Tax Audit of the Same, Because it is Less than 8% or 50%

Question BankCategory: Income TaxCan F&O Loss Can be Set Off Against Profession. for Making this I need to Do Tax Audit of the Same, Because it is Less than 8% or 50%
Narayan Dayama asked 9 months ago

Can F&O Loss Can be Set Off Against Profession.
for Making this I need to Do Tax Audit of the Same, as Profit(loss) from F&O is Less than 8% and after set off my Profit from Profession will be less than 50%.
Whether i Need to do audit of the same of Adjust the Same against Professional Income?

1 Answers
Rabindra answered 9 months ago

The question is about:-

  1. Set off losses of F&O business from other Profession’s Income.
  2. Requirement of audit u/s 44AB for person having F&O loss. 

 

  1. Set off losses of F&O business from other business/ profession:-

As per section 72 of Income Tax Act, losses of non-speculative business can be adjusted from any other business or profession and if still loss left unadjusted then It can be adjusted from any other head of income except salary. But losses of speculative business and specified business (u/s 35AD) can be adjusted only form gains of speculative and specified business respectively. 
Further as per section 43(5) A transaction of purchase or sale of a commodity including stocks and shares which settled otherwise than by actual delivery or transfer of the commodity or scrip is a speculative transaction. Hence intraday trading is speculative business but F&O is not speculative business. Hence your F&O loss can be adjusted from your Profession’s income.
2. Requirement of audit u/s 44AB for person having F&O loss. 
Assessee is having two business (1) F&O   (2) Profession   
Both of your business can be checked for audit required as follows:-
F&O Business:- 

  • As per section 44AB (a) & 44AD, If turnover of this business exceeds Rs. 2 crore in any previous year. Then assessee can not opt for 44AD and audit is compulsory. 
  • As per section 44AB (a) & 44AD , If turnover of this business exceeds Rs. 1 crore (but upto 2 crore) in any previous year. Then if assessee opt for 44AD and no audit is required, otherwise audit is required. 
  • As per section 44AB(e) & 44AD(4), If assessee declares profit of any previous year in  as per section 44AD and he declared profit of any of the five assessment year succeeding to the that previous year, not in accordance of section 44AD.

Except above three cases, audit is not required for F&O business, even if you claim your profit to be less than the limit of 44AD ie. 8%/6%.
 
Profession:-

  • As per section 44AB (b), If gross receipts for the profession exceeds Rs. 50 lakh in any previous year. Then audit is compulsory. 
  • As per section 44AB(d),  if the profits and gains from the [profession] are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than 50% and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year. Then audit is required. 

If you profession do not fall in any of the above criteria then audit is not required. 
No coming to your case…
Assuming that :-

  • you have not opted for 44AD for your F&O business in since FY 2016-17.
  • In this FY 19-20, your F&O profits may or may not be less than limit of 44AD ie. 8%/6%. (it does not matter after removed of word business from 44AD(d) from financial year 15-16, now it is only for profession then if lower income is declared then audit compulsory, it is not applicable for business)
  • your F&O turnover does not exceed 1 crore.
  • Your professional gross receipts does not exceed 50 lakh.
  • Before set off , your professional profit is not less than limit in 44ADA ie.50%.

Now you need to calculated profit/loss of both the business and profession separately…and then you need to adjust the loss of F&O business from profession and you are not required to go for audit u/s 44AB. if all above assumption hold good.
 
 
 
 

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