Question ID : 41137

income tax on derivative income(future & Options)

my client earned a profit of Rs 90 lakhs from Derivate section on a turnover of 210 lakhs (turnover arrived considering sum of positives and negatives in trade). whether this to be considered as speculative or normal business. if treated as normal business whether can we opt for presumptive taxation and arrive at a profit of 6% on 210 lakhs.

Answer ID : 81309

To consider as normal business per proviso (d) to section 43(5). Cannot opt 44AD per explantion (b) (ii) to section 44AD.

Answer ID : 81313

If turnover from derivative transactions exceeds Rs.2 Crore, tax audit is applicable. Presumptive taxation cannot be adopted for turnover exceeding Rs.2 Crore. It is applicable to both speculative and non-speculative business.

Answer ID : 81320

1. Not a speculative business. Any derivative transactins on futures and options through an authorised is not a speculative transactions. 2. As the turnover exceeds 2 crores you cant opt for presumptive tax. Even if you are allowed to use presumptive the client find it hard to explain the source of income for the excess of 6%. 3. Also as the IT Department has access over stock market transactions it can easily arrive at the profit and ask you to pay tax on actual profit. Presumptive is allowed only if books are not kept or the actual profit is less than the presumptive profit. Hence you cannot opt for presumptive

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