What is Form 26AS?
Form 26AS, also known as the Tax Credit Statement, is a crucial document for taxpayers in India. It is a consolidated tax statement...
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From Confusion to Clarity How Taxbuddy Guided Atish Through the FnO Tax Landscape
About the Case:
Atish, a tech enthusiast, ventured into FnO trading. After learning the ropes from a reputable course and subscribing to charting apps, finance magazines, and algo traders, he achieved a significant turnover of 5.7 Cr with a 21-lakh profit. Despite his satisfaction, tax season brought anxiety.
Recalling his cousin's recommendation, Atish turned to Tax Buddy, a trusted portal. The user-friendly interface and clear navigation eased his worries. Entering details, he asked, "Turnover 5.7 crore, future & option income, audit required?" A Tax Buddy expert, drawing on profound knowledge and extensive experience, provided reassurance and guidance.
Issues faced By
Atish
Understanding Tax Audits:
Atish wondered if his 5.7 Cr earnings could lead to a tax audit. The internet had mixed opinions, leaving him confused. Seeking clarity, he turned to Tax Buddy for a straightforward answer to ease his concerns.
Claiming Cash Expenses:
Atish was unsure if he could deduct cash expenses. Seeking clarity, he reached out to Tax Buddy to understand if his expenses in cash could be claimed as deductions in a straightforward manner.
Tax Deductions for Skill Enhancement:
Atish invested in skill-building expenses like courses, finance magazines, and charting apps. He also spent on high-speed internet, a new PC, and mobile recharge. Wondering if these expenses could shield him from tax burdens, Atish sought guidance from Tax Buddy to understand if these costs could be claimed as deductions.
Deducting Trading Costs:
Atish wondered if everyday trading costs, such as brokerage and platform fees, could be claimed as deductions. Seeking clarity, he turned to Tax Buddy to understand if these charges could be considered as part of his deductions.
Trading Losses and Tax Audits:
Atish faced losses in F&O trading and wondered if a tax audit applied in this scenario. Seeking clarity on the potential implications, he approached Taxbuddy to understand if incurring losses in F&O trading would trigger a tax audit.
Setting off F&O Losses:
Atish incurred losses from F&O trading and wanted to know if he could offset these losses with other income or carry them forward to the next year. Seeking guidance, he turned to Tax Buddy to understand the options available for managing losses in F&O trading.
How TaxBuddy Helped
Navigating Tax Audit Thresholds:
As per regulations, a tax audit is mandated if the total turnover surpasses Rs. 1 crore. However, if cash transactions remain below 5% of total gross payments, the turnover threshold for a tax audit increases to Rs. 10 crore. Atish, engaged in FnO trading through bank channels, enjoys a 10 Cr audit limit. With his impressive 5.7 Cr turnover, he comfortably stays below the 10 Crore audit threshold, ensuring freedom from the tax audit scrutiny.
Deducting Cash Expenses:
Yes, Atish can claim deductions for cash expenses unless individual cash payments exceed Rs. 10,000 in a day. It's crucial to note that cash expenses or receipts should not exceed 5% of turnover to avoid triggering a tax audit. If cash payouts surpass this threshold, the audit limit reverts to Rs. 1 crore.
Maximizing Business Expense Deductions:
For FnO traders, all expenses directly related to trading qualify as business deductions. These encompass rent, membership fees, legal & professional fees, books & subscriptions, mobile & internet expenses, finance costs, office supplies, etc. Atish's specific expenses like course fees, magazines, charting apps, internet, and mobile recharge can confidently be claimed as deductions.
Eligibility of Deductions for Trading Charges:
Yes, Atish can claim deductions for charges such as brokerage, turnover fees, clearing charges, exchange transaction charges, STT, stamp duty, and GST incurred in trading. These expenses are counted as eligible deductions, contributing to a reduction in taxable income.
Exempting from Tax Audit with F&O Trading Losses:
No, a tax audit is only triggered if gross receipts, turnover, or sales exceed 10 Cr. Atish need not worry about a tax audit solely due to incurring losses from F&O trading.
Set Off and Carry Forward of F&O Trading Losses:
Yes, Atish can set off F&O trading losses with all other sources of income except salary. Additionally, he can carry forward the loss as a normal business income loss for up to 8 assessment years.
The Conclusion:
Atish
Tax saving Journey
Guided by Taxbuddy, Atish not only navigated the tax season successfully but also emerged financially enriched, thanks to strategic deductions. More importantly, he gained valuable insights, realizing that knowledge, beyond mere trading instincts, is the key to financial success. This newfound wisdom has empowered him to confidently face both the markets and tax challenges.
Atish's story is just one illustration of Taxbuddy's effectiveness. If you find yourself in a similar tax predicament, don't hesitate to connect with Taxbuddy Our team of experts is eager to assist you through the financial maze, ensuring you make informed decisions and achieve your financial goals with confidence.
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