Do you need a tax audit on your F&O trading?
The rules that decide it
Why F&O gets the ₹10 crore line, not ₹1 crore
The basic 44AB threshold is ₹1 crore, but there is a proviso: if cash receipts and cash payments are each 5% or less of the total, the limit rises to ₹10 crore. F&O settles entirely through the banking system, so it qualifies, and the practical audit line for turnover alone is ₹10 crore. The catch is that turnover here is the ICAI absolute-sum figure, not the contract value, so get that right first with the turnover calculator.
The loss-year trap, step by step
You are salaried, earning ₹14 lakh, and you trade F&O on the side. This year you lost ₹60,000 on a turnover of ₹2.4 crore. Your profit is below 6% (it is negative). Your other income is above the basic exemption. Your turnover is above ₹2 crore, so 44AD is not available. All three 44AB(e) conditions are met, so an audit may apply, even though you lost money. The upside: filing ITR-3 on time, with the audit if required, lets you carry that ₹60,000 loss forward for 8 years.
How Aktai checks it for you
Aktai Tax takes your imported trades, computes ICAI turnover and net profit, asks for your other income, and returns one of three results, Likely not required, Review with CA, or Likely required, each with the exact rule that fired and the numbers behind it. It never asserts a definitive answer; it shows the reasoning so you and your CA can confirm. Read the full guide on whether F&O tax audit is mandatory or start at the Aktai Tax hub.
Frequently asked questions
When is a tax audit mandatory for F&O?
F&O is fully digital, so the higher ₹10 crore turnover threshold under the proviso to Section 44AB applies (because cash receipts and payments are each under 5%). Below that, an audit can still apply through Section 44AB(e): if you report a loss or a profit below 6% of turnover, your total income excluding the F&O loss exceeds the basic exemption limit, and you cannot or do not use the 44AD presumptive scheme.
What is the 44AD presumptive scheme for traders?
If your F&O turnover is up to ₹2 crore, you can declare a deemed profit of at least 6% of turnover (digital) and skip maintaining books and getting an audit. The catch: if you opt out of 44AD in a later year after using it, you can be locked out for five years and pushed toward audit if your profit is low.
I made an F&O loss. Do I still need an audit?
Possibly, and this is the trap that catches salaried traders. A loss means your profit is below 6% of turnover. If your other income (salary, interest) is above the basic exemption limit and you are not covered by 44AD, the 44AB(e) condition can be met and an audit may apply, even though you lost money. The way to keep the loss and carry it forward is to file ITR-3 on time, with an audit if required.
Does turnover alone decide the audit?
No. Turnover above ₹10 crore is a clear trigger. Below that, audit applicability depends on the combination of turnover, your declared profit percentage, your other income, and your 44AD history. That is why a transparent rule-by-rule check beats a single number.
Aktai Tax produces estimates and computations for your reference, not tax advice. It does not file returns and has no access to your bank or the income-tax portal. Verify every figure with a qualified Chartered Accountant.