Nithin Kamath says taxation around trading income an ‘overkill’

“IT Dept has access to all trading activity, P&L, & accounts linked to a bank. Requiring all traders to get an audit is maybe an overkill & is against the idea of ease of doing business,” Kamath said in a post on microblogging site Twitter earlier today.

Currently, individuals who earn profit from trading that is less than 6 per cent of their annual trading turnover are required to undertake an audit from a Chartered Accountant. The audit is necessary if the turnover of the trader is greater than Rs 10 crore per annum.

An individual who earns more than Rs 2.5 lakh per annum and has trading income needs to declare the latter as business income and consequently file Income Tax Return 3 along with ITR 1. For a retail trader, getting an audit done for a trading account of an average size of Rs 1 lakh is over Rs 5,000, which is expensive, Kamath said.

“There are around 1.5 lakh CAs in India. So even if all CA’s just did tax audits for traders, it won’t be enough to cover for tens of lakhs of traders who might need tax audit last FY. So it’s anyway impossible to comply if all traders decide to reach out to CA’s for help,” Kamath said.

Kamath suggested that the government introduce a new ITR business code for those whose business income is only through trading in the stock market and individuals using this code to file returns should be exempt from audit.

“…exempt those using this new ITR business code from GST registration to avoid getting automated GST notices as well,” Kamath said.