Important Keyword: Due date, ITR Form, Motilal Oswal Trader, P&L Statement, Tax Audit, Trading Income.

How to File ITR for Motilal Oswal?

For traders with Motilal Oswal, understanding how to file their Income Tax Return (ITR) is crucial, especially when income arises from trading in equity, mutual funds, or derivatives. Motilal Oswal provides a detailed Tax P&L Report summarizing all trading activities conducted throughout the financial year. This report serves as a pivotal tool, guiding traders to determine the appropriate ITR Form to file and whether a Tax Audit is necessary.

The Tax P&L Report simplifies the process by consolidating trading transactions into a comprehensive statement. This statement not only helps traders in assessing their taxable income but also aids in identifying deductions and exemptions applicable under the Income Tax Act.

Motilal Oswal: Tax P&L Statement Tabs Explained

For Motilal Oswal traders in India, the applicable Income Tax Return (ITR) form depends on the nature of income earned from trading activities:

1. ITR-2: This form is used if the income is from capital gains. Capital gains can arise from the sale of securities such as stocks, mutual funds, etc. Therefore, if you are trading and earning income primarily through capital gains (short-term or long-term), you would file ITR-2.
2. ITR-3: This form is applicable if the income is from business or profession. If your trading activities are substantial, frequent, and qualify as a business activity rather than just occasional investments, you would file ITR-3. Business income includes profits or losses from trading activities where there is regular buying and selling of securities with the intent to earn profit.

Key Points Motilal Oswal:

• Capital Gains (ITR-2): If you primarily earn income from the sale of securities and it qualifies as capital gains (whether short-term or long-term), use ITR-2.
• Business Income (ITR-3): If your trading activities are extensive, frequent, and you consider it as a business where you actively buy and sell securities, use ITR-3.

Due Date for Filing ITR:

The due date for filing Income Tax Returns for individuals, including traders, is typically:

• 31st July of the assessment year for non-audit cases (where audit is not required under any law).

Due dates for different category of taxpayers are as follows:

The above due dates can be extended by the IT Department via order.

Tax Audit Applicability

To determine whether a tax audit is applicable under Section 44AB of the Income Tax Act for traders engaged in activities like Equity Intraday, Equity F&O, Commodity Trading, and Currency Trading, you need to calculate the trading turnover. Here’s how you can approach it:

Calculation of Trading Turnover:

1. Equity Intraday, Equity F&O, Commodity Trading, and Currency Trading are considered as Business Income:
   • Income from these activities is treated as business income, not capital gains.
2. Definition of Turnover:
   • Equity Intraday: Total of positive and negative differences resulting from transactions in the financial year.
   • Equity F&O: Absolute value of sum of both positive and negative differences on settlement of contracts.
   • Commodity Trading: Absolute value of sum of both positive and negative differences on settlement of contracts.
   • Currency Trading: Absolute value of sum of both positive and negative differences on settlement of contracts.
3. Conditions for Tax Audit Applicability (Budget 2020 Amendment):
   • The turnover threshold for applicability of tax audit under Section 44AB has been increased from Rs. 1 crore to Rs. 5 crores, provided:
     • Cash payments do not exceed 5% of the total payments in the financial year.
     • Cash receipts do not exceed 5% of the total receipts in the financial year.
4. Calculation of Turnover:
   • Calculate the total of positive and negative differences from all trading activities (Equity Intraday, Equity F&O, Commodity Trading, Currency Trading) over the financial year.
   • This turnover figure is crucial for determining whether the trader exceeds the threshold requiring a tax audit.

Example Scenario:

Suppose a trader has the following turnover figures for the financial year from Equity Intraday, Equity F&O, Commodity Trading, and Currency Trading:

• Equity Intraday: Rs. 3,00,00,000 (absolute value of differences)
• Equity F&O: Rs. 1,50,00,000 (absolute value of differences)
• Commodity Trading: Rs. 80,00,000 (absolute value of differences)
• Currency Trading: Rs. 2,00,00,000 (absolute value of differences)

Total Turnover = Rs. 3,00,00,000 + Rs. 1,50,00,000 + Rs. 80,00,000 + Rs. 2,00,00,000 = Rs. 7,30,00,000

Since the total turnover exceeds Rs. 5 crores, a tax audit would be mandatory for this trader unless the conditions related to cash transactions (not exceeding 5% of total payments and receipts) are satisfied.

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Official Income Tax Return filing website: https://incometaxindia.gov.in/