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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.

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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.

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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.

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The Conclusion: 

Mr. Anil

Tax saving Journey