Tax audit requirement

My mother is a housewife with no earning. I gave her 6lakh in 20-21. She traded fno and lost 3lakh. As per my understanding gifts from relatives are non taxable., which means she does not have any income. Is an audit required?

Hey @Ashutosh_Pandey

In this case the total income of taxpayer is less than basic exemption limit. So if the turnover from FO trading does not exceed 10 crore then tax audit is not applicable.

You can also check the tax audit applicability using this tool.

Thank you mam for clarification
One more doubt mam
My total turnover is 50 lakhs and profit 80k (excluding deduction like brokerage internet etc)
Which itr should I file
Am salaried and trading in fno

Hi @Ashutosh_Pandey

Since you have trading in F&O you are required to file ITR-3 form.
Income/Loss from F&O is treated as a business income/loss and is shown under the head PGBP (Profits & Gains from Business and Profession)

hi,
will audit will be applicable in my below case ?

  1. i have f&o loss, (f&o turnover below 25L)
  2. have profit in other business

So, after I adjust the profit of other business with f&o loss, so, my earning is above 2.5L limit,
So, will I need to do an audit, even after adjusting the f&o business with other businesses?

if, audit is applicable, than can i show this turnover of f&o as 6% gain, to avoid audit?

@Divya_Singhvi @Kaushal_Soni @Laxmi_Navlani @Saad_C @AkashJhaveri can you help?

Hi @Kp3,

Audit u/s 44AB shall be applicable when turnover exceeds the limit INR 10 Crores from AY 21-22 if the cash receipts and payments don’t exceed 5% of total cash receipt & payments.

As regards, F&O Trading, it shall be considered non-speculative business income and the turnover of the same needs to be considered. The turnover from F&O shall be calculated as follows:

  1. Total of Profits & Losses (Add both of them, ignore negative)
  2. Premium received on Sale of Options.
  3. Difference of Reverse Trades.

Also, you have mentioned you have profit in other business, so you need to add the turnover of that business also as the turnover limit is “Assessee wise” & not “business-wise”.

If the total turnover exceeds the threshold, then the Tax Audit u/s 44AB shall be applicable.
However, if the profit declared is below 6% of the turnover, then the assessee having a business income is mandatorily required to get his books of accounts audited u/s 44AB.

suppose combine all turnover is 20L,
so, should the combined profit needs to be above 6% (loss in f&o+other business profit)
or
Does each individual one have to be above 6% like, like fn0 profit above 6% as well other business profit above 6% ?

to not fall under compulsory audit? @Saad_C @Divya_Singhvi

pls reply for my above query @Saad_C @Nireka

Hi @kp3,

As the combined turnover of all businesses is checked and if the same exceeds limit u/s 44AB, then audit shall be mandatory.

Also, when section 44AD is opted i.e. Presumptive Scheme for Taxation, the profits in totality should be above 6%/8% in relation to the combined turnover of all businesses and not the individual profit of single business.

thanks for the clarification, its helps.

My salary income 9lakh, f&o loss 21000 on turnover of 27000, intraday profit is 22000 on turnover of 75000. Is tax audit required?

Hey @Sharta,

Tax audit is applicable in case there:

  1. Turnover is above the threshold
  2. Profit is less than 6% of the turnover and total taxable income is above the basic exemption limit.

Read more

Hii I want to know whether I need audit or not
My conditions

  1. Turnover is greater than 2 crore in f&o
  2. loss is above 4 lakh
  3. no other source of income
  4. money taken from parents

Hi @Chandra,

Is the tax audit clause of section 44AD applicable to all eligible assessees or only to those who opt for the presumptive taxation scheme?

Hey @NotAtAllSatwik, Section 44AD is the presumptive taxation scheme for business. A business with turnover up to INR 2 Crore can take the benefit of presumptive taxation under Section 44AD. You can read up about it from this article:

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Hi am a housewife and i have been learning option trading in banknifty so here my question is if my turn over is crossed 1cr and my profits are less than 6% and salary is above 2.5lk as per i know tax audit is required so why it is required. What i have to focus if i under tax audit. What are the consequences i am going to face. Am i doing any thing wrong because of that tax audit is required. See i am learning option trading from online source what i have understood that am doing. Like a spectulative kind. Is it illigal in terms of income tax point of view. Please answer my questions. Am really worried about it? Because i may earn good profits in option trading before investing my precious time and foucs i need to know whether am doing right or wrong?

Hey @Hanuma_Soumya, Tax Audit under Section 44AB of the Income Tax Act is the examination and review of the books of accounts of a taxpayer having income from business or profession. The taxpayer should appoint a practicing CA i.e. Chartered Accountant to audit the books of accounts. The tax auditor would ensure that books of accounts have been maintained correctly, report observations, and required information in the tax audit report. The applicability of tax audit depends upon the turnover/sales/gross receipts of the business or profession.

Furthermore, if you do not have your books of accounts audited as per requirements of Section 44AB, the Assessing Officer may impose a penalty under Section 271B. The penalty is lower of the following:
(a) 0.5% of Sales / Turnover / Gross Receipts OR
(b) INR 1,50,000
However, if the assessee can provide a valid justification and prove a reasonable cause for not getting a tax audit, the Assessing Officer may not impose any penalty.

You can read more about tax audit from the below article:

You can also reach out to us at help@quicko.com for any further help you may need.