Is Tax Audit applicable for F&O Trading?

For certain taxpayers, apart from filing returns, additional compliance for Tax Audit is required to be fulfilled if the turnover exceeds specified limits. Tax Audit is mandatory when the turnover from the F&O Trading business crosses the threshold limit of ₹10 Crores.

Tax Audit is the review of books of accounts by a Chartered Accountant (CA).

Let’s say, you are involved in the F&O Trading business, and the turnover from the same is ₹11.5 Crores. In this case, you are required to get the books of accounts audited as it crosses the limit of ₹10 Crores.

Also, in certain cases, even if you incur losses in the F&O Trading business, you are required to fulfill the compliances of Tax Audit. For example, if your turnover from the F&O Trading business is ₹54 lakhs but you have incurred losses of ₹15 lakhs, then you have to get a tax audit conducted.

Let’s understand if tax audit is applicable to you or not by referring to the below table:

From the above table, one can determine according to the Turnover and Income situation whether Tax Audit is applicable or not. If one has opted for Presumptive Taxation Scheme and incurred losses then one needs to get Tax Audit conducted.

Use the calculator to Check the Tax Audit Applicability

If Tax Audit is applicable, there are some additional compliances that need to be fulfilled:

  • Get your books of accounts related to the F&O trading business audited by a CA in Practice.
  • Get the audit report uploaded by the Chartered Accountant and approve the same before 30th September of the immediate next financial year, failing which a penalty will be levied.
  • File your Income Tax Return before 31st October of the immediate next financial year.

Have questions? Shoot’em here!

1 Like

Last year I filed a return under Presumptive Taxation for my F&O business. This year I have losses. Is audit applicable to me?

Hi @Zainab_Hawa1,

Yes, since you have losses from F&O business in this year, audit is applicable to you.

Hope this clarifies!

Hello
If Turnover is between 2 to 10 Cr and there is loss, then Tax audit is applicable or not ?

Hi @rajat_goyal1,

No, a tax audit is not applicable if the turnover is ₹2 crores - ₹10 crores and the profit is less than 6% of the turnover (including loss).

Hi @CA_Niyati_Mistry,

I had an Intraday Trading in the FY22-23 and Total Turnover is -6 P&L is -217 as per Zerodha.

Now, when I’m filing my return it’s asking for a Tax Audit. Do I need to do a tax audit only for on trading?

Hey @Saurav_Gupta,

Yes, tax audit is applicable on the Intraday Trading only.

Hope this clarifies!

@CA_Niyati_Mistry

Even if I have done it mistakenly :smile: ? I mean it’s just one trade that too a very small amount. Can I file without having it audited?

Thanks for you response.

Hey @Saurav_Gupta,

The amount of turnover is small but there might be a certain situation specific to you, because of which it is asking for Audit. I cannot give a view based on incomplete information.

However you can Ask an Expert and get your queries answered.

Hope this helps!

Hi Team,

In F.Y. 2022-23 I started my job and have salary of 10 lakh, and started doing F&O trading (turnover 70k), with a loss of 50k. Is Tax audit applicable to me for this AY 23-24 filing?

Hello @NavalKabra9

Since you have not opted out of presumptive tax scheme in any of last 5 years and turnover is below 1 crore, tax audit is not applicable.

You can prepare P & L, Balance sheet and file ITR 3.

In case you need any expert assistance for filing ITR 3, you can book a MEET using the below link:

Book a MEET

Thanks.

1 Like

is ITR3 started for the current year ?

Hi @HIREiN
ITD have not yet enabled filing of ITR 3.

However, you can prepare ITR on Quicko (DIY) as well as book a MEET where tax expert shall prepare the ITR and keep JSON ready! As soon as ITD enables filing, we can go ahead and file the same.

Thanks