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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Tax Savings for F&O Traders with Business Expenses
About the Case
Anil, a former salaried employee turned full-time F&O trader, faced challenges managing his tax liabilities due to a lack of record-keeping for business expenses. His trading activities resulted in a substantial profit of Rs 20,00,000 during the financial year, but miscalculations in advance tax and incomplete expense documentation led to unexpected tax burdens.
Issues faced By
Mr. Anil
Maintenance of Books of Accounts:
Volume and complexity of F&O trading transactions made bookkeeping challenging.
Broker's accounts lacked proper summarization and provided complex reports.
Inadequate Knowledge on Allowable Business Expenses:
Traders often overlooked legitimate business expenses, leading to higher taxable income.
Lack of awareness on claiming reasonable expenses to reduce trading income.
Tax Compliances:
Challenges in understanding and adhering to complex tax compliance issues.
Issues included advance tax payment, tax regime selection, applicability of tax audit, and managing business losses.
How TaxBuddy Helped
Maintenance of Books of Accounts:
Advised Anil to maintain essential records as per Income Tax Act, ensuring compliance.
Recommended record-keeping, including cash and bank books, ledger statements, and invoices.
Inadequate Knowledge on Allowable Business Expenses:
Conducted a detailed discussion to identify allowable business expenses.
Calculated and considered various expenses like subscriptions, utility bills, loan interest, depreciation, repair costs, staff salary, consultancy fees, and books/journals, significantly reducing taxable income.
Tax Compliances:
Assisted in the calculation and timely payment of advance tax, avoiding penalties.
Provided guidance on selecting the optimal tax regime based on Anil's business.
Explained the process and requirements of tax audit as per Income Tax Act.
Clarified provisions related to setting off and carrying forward business losses.
The Conclusion:
Mr. Anil
Tax saving Journey
TaxBuddy's strategic planning empowered Anil to:
Reduce Tax Liability: Anil significantly decreased his business income and tax liability.
Ensure Compliance: Services like maintaining books of accounts and managing tax compliances relieved Anil from statutory burdens.
Enhance Trading Focus: With reduced tax obligations, Anil could concentrate more on trading activities.
With TaxBuddy’s suggestion Anil reduces his Business income by Rs 5,26,000 and avail tax benefit of Rs 1,61,400 each.
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