Applicability of Tax Audit

[ASHISH DESAI]

A person is a salaried professional having taxable salary of Rs.15,00,000/-. He also deals in shares, whereby his Capital gain is Rs.7,00,000/-(S.T.C.G.) & Speculation Profit is 5,00,000/. His cost/Sale Price of total shares purchased/sold during the year exceeds 40,00,000/-( say SP-42 lacs & cost 30 lacs plus cost of shares in stock worth Rs.4 lacs purchased during the year). Is provisions of  Section 44AB, Tax Audit applicable? If yes, under which criteria he is covered for Tax Audit? kindly advise.

[Markesh Antony]

There can not be two things at once. On the one side, you are stating that income from sale and purchase of shares is short term capital gain on the other side you discuss about section 44AB. Section 44AB is applicable on for business turnover. Once the sale and purchase activity is falling within the category of capital gains, the monetary limit of tax audit u/s 44AB can not apply. Now, therefore, you should ascertain the nature of your activity. Indeed, it is true that determination of correct category may be difficult. But given certain principles by the CBDT or case laws, you may determine the same and decide accordingly.

AI Summary

Does Section 44AB Tax Audit Apply to Share Trading Gains? Clarifying Business Turnover vs. Capital Gains. A salaried professional with a taxable salary of Rs. 15,00,000 also engages in share trading, resulting in a short-term capital gain of Rs. 7,00,000 and a speculation profit of Rs. 5,00,000. The total sale and purchase of shares exceed Rs. 40,00,000. The query seeks to determine if Section 44AB, concerning tax audits for business turnover, applies. The response clarifies that Section 44AB applies to business turnover, not capital gains, and advises determining the nature of the activity using principles from the CBDT or case laws to decide on tax audit applicability.