IndiaFree Tool

F&O audit eligibility checker

Three sections of the Income Tax Act can require an F&O trader to get a tax audit: 44AB (turnover over ₹10 cr), 44AD (profit below 6% of turnover under ₹2 cr), and the less-known 44AB(e) loss-year trap (income above exemption + F&O loss + prior 44AD opt-out). Enter your numbers to see which applies, with transparent reasoning.

Total income this year (all sources)

Salary + F&O net P/L + any other income. Use a negative number if overall income is negative.

₹

F&O turnover (ICAI absolute-sum method)

Sum of absolute realised P/L across all F&O trades. Not the contract value.

₹

F&O net profit or loss

Positive for profit, negative for loss. e.g. -120000 for a ₹1.2 lakh loss.

₹

Did you opt for 44AD presumptive scheme for this year?

You opt for 44AD by declaring at least 6% deemed profit instead of maintaining full books.

Did you opt out of 44AD in any of the preceding 5 assessment years?

If you used regular books (not 44AD) in any of the last 5 AYs, answer Yes.

No mandatory audit based on these inputs

1.F&O turnover (₹50,00,000) is under ₹10 crore. Section 44AB does not apply on turnover alone.

2.F&O turnover (₹50,00,000) is within the ₹2 crore 44AD limit but you did not opt for the presumptive scheme this year. Continuing to check 44AB(e).

3.You have not opted out of 44AD in the preceding 5 years. The 44AB(e) trap does not apply.

4.Based on your inputs, no mandatory tax audit appears to apply. Confirm with your CA.

Estimate for your reference, not tax advice. Audit applicability depends on your full facts, prior years, and jurisdiction. Verify with a qualified Chartered Accountant.

The three audit triggers for F&O traders

44AB(a): Turnover over ₹10 crore

If your F&O (ICAI absolute-sum) turnover exceeds ₹10 crore, a tax audit is mandatory under Section 44AB(a). No exceptions. Note: the ₹1 crore limit that existed before FY 2021-22 no longer applies. The current threshold is ₹10 crore.

44AD: Profit below 6% of turnover (under ₹2 crore)

If you are within the ₹2 crore presumptive limit but declare an actual profit below 6% of turnover (or a loss), you exit the presumptive scheme and 44AB applies.

44AB(e): The loss-year trap (different from the all-digital exception)

Income above the basic exemption limit + F&O business loss + opted out of 44AD in any of the past 5 years. All three together require an audit regardless of turnover. This is not the same as the 44AB(a) digital exception described below.

The 44AB(e) loss-year trap explained

Section 44AB(e) is the clause that catches salaried traders who lost money on F&O. If your salary puts total income above the basic exemption limit (₹3 lakh in the new regime for FY 2025-26), and your F&O business shows a net loss, and you opted out of 44AD at any point in the last 5 assessment years, a tax audit is mandatory. Full explanation in the 44AB(e) loss-year trap guide.

The 44AB(a) all-digital exception: what it covers and what it does not

What it covers: turnover between ₹2 crore and ₹10 crore

Under Section 44AB(a), the standard audit threshold is ₹10 crore. For turnover between ₹2 crore and ₹10 crore, no audit is required if all receipts and payments are through digital or banking channels (less than 5% cash in and out). This is straightforward for most exchange-traded F&O: all broker transactions are digital by default.

What it does not cover: the 44AB(e) loss-year trap

The all-digital exception applies only to the Section 44AB(a) turnover threshold. It has no bearing on Section 44AB(e). A trader with F&O turnover of, say, ₹30 lakh (well under ₹2 crore, no 44AB(a) question at all) can still face a mandatory audit under 44AB(e) if they have a net F&O loss, total income above the basic exemption, and a prior 44AD opt-out on record. The two clauses are independent. Being fully digital does not protect against the loss-year trap.

Aktai Tax · for Indian F&O and equity traders

Know your trading tax position all year, not just in July.

Import your broker P&L, get ICAI-correct turnover across every broker, an honest audit-applicability check, an old-vs-new regime estimate, and advance-tax nudges. A clean, tax-ready report your CA can use. No bank linking, no e-filing access.

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Estimates for your reference, verify with a qualified CA. For Indian traders.