I have f&o turnover 5 crore but actual profit is only 1 %, that is around 4 lakh, i dont want opt for presumptive taxation. Is it book of acoount is enough for me or do i need to audit for it?
Note: all transaction is digital, no cash transaction.
Do You Need an Audit for F&O Trading?
Yes, in your case, tax audit under Section 44AB is applicable because:
- Your turnover exceeds ₹10 crore only if cash transactions are involved, but since you mentioned all transactions are digital, the limit is ₹10 crore.
- However, if you do not opt for presumptive taxation under Section 44AD and your declared profit is less than 6% of turnover, then audit becomes mandatory, even if your turnover is below ₹10 crore.
- Here, your profit is just 1% of turnover, which is below 6%. So, a tax audit is required.
Is Maintaining Books of Accounts Enough?
- You must maintain proper books of accounts since you’re not opting for presumptive taxation.
- But books alone are not sufficient in this case because your declared profit is below the prescribed limit.
- A CA audit report is mandatory to comply with Income Tax rules.
What Should You Do?
- Maintain complete digital records of all trades (broker statements, contract notes, P&L, balance sheet).
- Consult a Chartered Accountant (CA) to get the tax audit done.
- File your ITR-3 form along with the audit report (Form 3CA/3CB and 3CD).
Key Takeaway
With ₹5 crore F&O turnover and profit at only 1%, you cannot avoid tax audit if you don’t want presumptive taxation. Even though your transactions are 100% digital, the profit percentage rule triggers an audit.
As long as expenses in cash are less than 5%, audit is not mandatory even if the profit is less than 6% of the turnover?
Hi @gdshan,
Since your F&O turnover is ₹5 crore (all digital) and you’re not opting for presumptive taxation, you don’t need a tax audit. The ₹10 crore limit applies for fully digital transactions, so maintaining proper books of account is enough. The “profit <6%/8% rule” which means you declare a profit of at least 8% of your turnover (or 6% for digital receipts) is only relevant if you opt for presumptive taxation.
Hope this clarifies!
Thanks for expert advice @pranab63 @Diti_Savalia
It confused me Due to different opposite opinion.
As per @Pranab63 Audit is mandatory while as per @Diti_Savalia Audit not required.
Hi @dipak_Motivaras,
If you want to read more on tax audit applicability, you can read our detailed thread here.
Hope this will give you a clear idea!
In your case tax audit is not applicable.
Some people still get there accounts audited for other benefits.
What kind of benefit? How does helpful, would please some detailed information. Just learning perspective
In fy 23-24 filled return under 44AD scheme,
Hence tax audit applicable for me.
Correct me if any mistake.
Thaks
Hello @dipak_Motivaras,
Since you opted for presumptive taxation scheme i.e. 44AD in the last year, so tax audit is applicable to you.
Hope this clarifies!
Hi @dipak_Motivaras,
For consultants and business, the benefits of getting accounts audited are:-
- Getting loans from banks and investments from investors, audited accounts are helpful, for the proprietor.
- For partnership, to allocated partner share, for future dispute related, at the time of admission and at the time of retirement of partners.
- Also there is a limit to get your accounts audited as per Income-tax act.
And as you have opted for section 44AD earlier, and now declaring losses, as per normal provisions of the Act, so tax audit is applicable in your case.
Regards
CA Raman
WhatsApp 9999616874
I m not declaring losses, i have only 1% profit of turonver. Hence i confuses whether audit applicable for me or not.
Tax audit is applicable in your case Sir!