Tax Audit – Limits & Applicability, FnO cases

S-44AB of IT Act, 1961 (as amended through Finance Act, 2021)


1. Business where turnover exceeds Rs. 1 Cr in any PY
Limit is Rs. 10 Cr where aggregate receipts/ payments in cash do not exceed 5% of said receipts/ payments
(both Conditions satisfy individually)

Note- non-account payee cheque/ bank draft is treated as cash

2. Profession where Gross Receipts exceed Rs. 50 Lacs in any PY

Opting for Presumptive Tax Provisions?

Audit Required if:-

1. Business Income Claimed to be lower than Profits deemed u/s 44AE/ 44BB/ 44BBB in any PY

2. Income from Business/ Profession Claimed to be lower than Profits deemed u/s 44AD/ 44ADA in any PY & TI > Basic Exemption

Limits will be as under:-

Business – S-44AD – Rs. 2Cr
Profession – S-44ADA – Rs. 50Lac

Dealt in F&O transactions but have no Idea about the applicability of Tax Audit?

Normal business turnover is based on sales & thus reaching the limit takes time.

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But in F&O it reaches the limit easily as each lot is valued high, Limit is reached easily.

S-43(5) of the IT Act, 1961 has excluded transactions of F&O (Equity) from speculative transactions. However, the exemption is available only for equity.

F&O (commodities) are Speculative in Nature.

i.e. F&O (equity) income will be treated as Normal business Income

Any expense done in connection to this business will be allowed as an expense and can be claimed while preparing Tax computation.

Anchorage Infrastructure Investment Holding’s FDI request of Rs 15,000 crore has been approved by the CCEA.

For computing the T/O limit, the following things should be added:

  • a. Profits from the trade

  • b. Loss from the trade

  • c. Premium received from the sale of Options

  • d. In the case of Reverse Trade, the difference should also be added

(Limit as applicable in other cases discussed earlier)

NOTE: In the case of Delivery Based Transactions, Gains would be treated as Capital Gains.