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Business News › Markets › Stocks › News › Draconian tax audit and retail equity traders

Draconian tax audit and retail equity traders

ET CONTRIBUTORS Last Updated: Mar 03, 2020, 10:35 AM IST
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Synopsis
Even a small retail investor is subject the requirements of a business while ling IT
returns.

Getty Images
By Nithin Kamath

Anyone who actively invests in the stock market

has to le income ta returns showing trading as
a business income using the ITR-3 form.
This also means that a small trader
has to comply with tax audit
requirements — maintain books of What this means is that even a small retail
accounts, get a chartered
accountant to audit, etc. — of a investor trading completely digitally is now
mid-sized business.
subject to all the requirements of a full- edged
business while ling income tax returns. This also
means that a small trader has to comply with ta audit requirements —
maintain books of accounts, get a chartered accountant to audit, etc. — of a
mid-sized business.

CALCULATING TURNOVER HEN TRADING

When trading and investing, the Institute of Chartered Accountants of India
guidelines say that turnover is the sell value of equity delivery trades and the
absolute sum of P&L for all other types of trades. As you would imagine, this
turnover can rack up quite fast for someone who is actively trading the
markets.

Currently, the audit requirement is mandatory when turnover is over Rs 2

crore (increased to Rs 5 crore in Budget 2020). While this increase from next
year will help avoid an unnecessary audit for some traders, almost all active
traders will reach this Rs 5 crore number quite easily. Hence, almost all of
them are forced to get an audit, which is overkill for someone just buying and
selling stocks digitally. An easy way to x this anomaly would be to consider
turnover as the gross sum of credits and debits on the ledger, as it should IN THE SPOTLIGHT
OPPO Reno4 - This phone's fast
ideally have been, and not really of the P&L on every trade to determine the charging is the fastest in
audit requirement. industry

AUDIT HEN PROFIT IS LESS THAN 6% OF TURNOVER

https://economictimes.indiatimes.com/markets/stocks/news/draconian-tax-audit-and-retail-equity-traders/articleshow/74452067.cms#:~:text=Secti… 1/5
8/22/2020 Draconian tax audit and retail equity traders - The Economic Times

Section 44AB requires that even if turnover is less than Rs 2 crore and if pro t
WHAT'S YOUR MARKET
less than 6 per cent of turnover, you would need an audit. As explained earlier, SCORE?
turnover can stack up quite easily when trading, and hence, generating pro ts
QUESTION: 1/3 HIGHEST SCORE: 30
more than 6 per cent of turnover is quite tough. 0

This audit requirement might hold good for normal businesses, but trading Which of the following in not
works di erently. Almost all traders earn a pro t of less than 6 per cent of a direct tax?
turnover. This essentially means almost everyone who trades the market Wealth Tax
(including those making losses) require a tax audit.
Sales Tax

The added burden of nding a CA, maintaining the book of accounts, the audit
fees, etc., leads to non-compliance during tax ling. If there was no need for an Income Tax

audit, almost everyone trading would declare their trading activity when ling
Estate Duty
income tax returns. Ideally, this audit requirement clause of 6 per cent of
turnover if the business is all digital, shouldn’t apply when turnover is less
than Rs 2 crore (or Rs 5 crore from next year). So, essentially introduce a new Mid-cap Growth Stocks
code on ITR for those trading in securities and derivatives market which is
Mahanagar Gas Ltd. 969.00 -1.56%
exempt from Section 44AB.
MCX India 1671.60 -1.07%

Ajanta Pharma 1693.10 1.03%

This will bene t millions of traders; there won’t be any revenue loss to the
Laurus Labs Ltd. 1022.70 -1.02%
government, and also will ensure better compliance when ling tax returns.

(The writer is founder of Zerodha)

Why follow tips? Choose your winners
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions rationally in 3 simple steps!
expressed here do not re ect the views of www.economictimes.com.)

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DCB Bank Q1 results: Pro t down 2.5% to Rs 79 cr

Reuters Last Updated: Aug 08, 2020, 07:23 PM IST
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Synopsis
During the quarter under review, the bank made an overall provision of Rs 85 crore, it
said in a release. Of this, Rs 32 crore was additional COVID-19 provision while Rs 13 crore
was regular NPA provision.

Getty Images
NEW DELHI: DCB Bank on Saturday posted a
marginal decline of 2.5 per cent in net pro t at Rs
79 crore for the rst quarter of the current
nancial
year.
The private sector lender
registered a net pro t of Rs 81
crore in April-June, 2019-20. The private sector lender registered a net pro t of
Rs 81 crore in April-June, 2019-20.
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Container Corporation provision.
consolidated Q1 pro t
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Punjab & Sind Bank Q1 net

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loss widens to Rs 117 crore for COVID-19 as on March 31, 2020 taking the
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NSE BSE regulatory requirements," it added.

DCB Bank Ltd.

83.75 1.20 (1.45%) As on June 30, 2020, the bank had a oating
provision of Rs 99 crore and standard assets
provision of Rs 121 crore.

Total income of the bank in the quarter also fell by 2 per cent to Rs 384 crore
from Rs 392 crore in the year-ago same period, it said.
IN THE SPOTLIGHT
Save taxes on maturity amount
Interest income, however, was up 1 per cent at Rs 307 crore during the quarter with ULIP investments

as against Rs 305 crore earlier.

At June-end 2020, the net restructured standard advances stood at Rs 469 Growth at Reasonable Price

crore (commercial vehicle Rs 239 crore, mortgage Rs 147 crore, SME/MSME Rs

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8/22/2020 Draconian tax audit and retail equity traders - The Economic Times

65 crore, corporate Rs 11 crore and others Rs 7 crore), the bank said. Ipca Labs 2004.65 -1.28%

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The bank's gross non-performing assets (NPAs) rose to 2.44 per cent of the Alembic Pharma 999.40 1.84%

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net NPA increased to 0.99 per cent from 0.81 per cent.

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2020. The bank intends to support its customers within the guidelines in
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order to cope with the COVID-19 stress. The bank intends to make provisions
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