/ Foreign Exchange Management Act

APPLICABILITY OF SECTION 44AD ON SPECULATIVE BUSINESS

APPLICABILITY OF SECTION 44AD ON SPECULATIVE BUSINESS

Section 44AD-

In the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

Explanation.—For the purposes of this section,—

A. “eligible assessee” means,—

 (i)  an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and

(ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. – Deductions in respect of certain incomes” in the relevant assessment year;

B. “eligible business” means,—

 (i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and

(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of one crore rupees.

The above mentioned sections are clear evident that of assessees, falling under specified criteria, may take advantages of Sec.44AD whether it is of speculative nature or not.

Turnover considered for the purpose of Sec.44AD-

Since, a number of transactions in speculative business are involving intra-day transactions, futures and options etc, turnover is based upon the following two situations-

  • If delivery of Goods is made-

Turnover = Value of Scrips sold

  • If delivery of Goods isn’t made-

In this case profit/loss is booked through increased/decreased value of scrips in future conditions as compared to present ones.

Turnover = Amount of Profit/Loss

Note- In this case even amount of even loss will be taken in positive sense while computing turnover.

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