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Exclude Business of trading in securities and derivatives from Section 44AD

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Section 44AD requires books to be audited if the profit made in a financial year is less than 8% of turnover while trading on Indian exchanges. This causes unnecessary burden and an eventual non - compliance by most small retail traders and investors 

Firstly, turnover in reality is not the contract turnover but the sum of settlement profit and losses. So if 100 x Nifty is bought at 8500 and sold at 8510, the turnover is Rs 1000 ( the profit made on this trade) and not Rs 1710000 ( 8500x100 + 8510x100). Sum of all such profits and losses make up for the total turnover in a financial year. 

Trading on exchanges is unlike other businesses. It is not a mainstream profession, and most people who participate have other businesses or jobs.
Unlike other businesses, turnover and profits are not co-related. A significant majority of traders (over 95%) make profits lesser than 8% of the turnover generated.

Problem

Because of Section 44AD, 95% of the trading population who are mainly middle class and below, and who don't trade the markets professionally are forced to maintain books of accounts and have them audited by a CA. The cost of auditing paid to the CA (between Rs 10,000 to Rs 50,000) is a further burden to the investor/trader.
Ignorance of Book keeping, and not being able to afford the audit fees, most people end up not declaring their trading activity while filing Income tax returns, taking an even bigger risk without realizing the repercussions in case of an IT scrutiny.

Petition

Section 44AB (audit required if turnover more than Rs 1 crore) ensures that anyone trading the markets professionally has to maintain books and have it audited by a CA.

But Section 44AD is causing unnecessary burden to the retail, small investor and trading community, further shrinking the already minuscule retail participation in capital markets.

By excluding trading in securities and derivatives market from section 44AD, you will not only be helping grow the Indian capital markets, but will also help exponentially increase compliance of the small investor/trader while filing IT returns.

#changeforgood



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