Tax Audit if loss in F&O

Tax Audit if loss in F&O


The income/loss arising from trading in F&O transactions would be treated as a Business Income / Loss for the purpose of taxation and the normal provisions of the Income Tax Act will apply in this case

The rules as applicable to tax audit as stated in section 44AB will be applicable in the case of F&O trading also.


Tax Audit u/s 44AB

Section 44AB(a) Every person carrying on business shall get his accounts audited if the total turnover exceeds Rs. 10 crores.
( in the case of F&O 95% or more are digital transactions, hence a threshold of Rs 1 crore is not applicable )
Section 44AB(e) The audit is required to be done If subsection (4) of section 44AD is applicable & taxable income exceeds the basic exemption  limit



Presumptive tax scheme u/s 44AD

Section 44AD(1) An assesse whose turnover is up to Rs 2 crores can opt to declare taxable income  @ 6% of total turnover in the previous year
44AD(4) An assesse opted for a presumptive tax scheme under sec 44AD (1) cannot opt-out from the scheme for subsequent five years.

In case, he wants to opt-out and declares losses or income at less than the presumptive rate in the current year, the audit is required to be done under section 44AB (e )



Mr. Anuj started trading in F&O for the first time during FY 2019-20. He OPTED for presumptive taxation scheme and declare income @ 6% of the turnover.


In fY 2020-21, His income from salary is Rs 6 Lakhs, turnover from F&O is 10 lakhs & losses from F&O are Rs 2 Lakhs.

If he wishes to report & carry forward F&O losses, he is required to get a tax Audit in fy 2020-21. Further, he will be ineligible for the presumptive taxation scheme for the next 5 years i.e. up to 2025-26.

In the above example, if Mr. Anuj started trading in F&O for the first time in FY 2020-21 and has not opted for PTS in any of the last 5 years, the tax audit is not required to be done.

Tax Audit if loss in f & O


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