When Is a Tax Audit Required? Intraday and F&O traders need to determine audit applicability by checking their turnover against the thresholds set under Section 44AB. For F&O traders, the basic threshold is Rs 1 cr; however, if cash receipts or payments exceed 5 % of total receipts or payments, the threshold rises to Rs 10 cr. If a trader has opted for presumptive taxation under Section 44AD and later declares income outside the presumptive scheme, the taxpayer becomes ineligible for Section 44AD for the next five assessment years and must undergo audit if total income exceeds the non‑taxable limit.
Intraday equity trading is treated as speculative business income. A tax audit is required only when turnover surpasses Rs 10 cr, irrespective of profit or loss. If turnover is below Rs 1 cr, no audit is needed even without presumptive taxation. For traders with 95 %+ digital transactions, the threshold may be Rs 3 cr, but this only applies if the trader files ITR‑3 under Section 44AD and meets the 6 % profit condition.
How Turnover Is Calculated for Intraday & F&O The Income Tax Act does not prescribe a specific method for F&O turnover, so the ICAI Guidance Note on Tax Audit is followed. Turnover equals the aggregate of all absolute profits and absolute losses. Premiums received on options are included unless already counted in net profit, and reverse trades add to turnover. Open positions are recognised in the year they are squared off, while delivery‑based settlements count the difference between trade price and settlement price.
For intraday trading, turnover is simply the sum of absolute profits and absolute losses; the buy‑sell values are not added separately. This absolute method ensures that even if a trader experiences net loss, the total turnover can still trigger an audit if it exceeds the Rs 10 cr limit.