To address all the queries being directed to me over DMs regarding the tax audit requirements for F&O traders for AY 2024-25, here is a summary for easy reference:
1. If you are only trading in F&O and are not offering your income to taxation under presumptive taxation, and:
a) if your turnover is below 1 cr - no audit is applicable regardless of whether the cash income/expense is above 5% of the respective total income and expenses.
b) if your turnover is between 1cr and 10 cr, then audit is applicable if the cash receipts/payments is above 5% of respective total receipts and payments.
c) if your turnover is between 1cr and 10 cr, but the cash receipts/payments is below 5% of respective total receipts and payments, then audit will not apply
d) if the turnover is above Rs 10 cr, audit is compulsory.
In case you have professional income in addition to trading activity.
2. If you have professional receipts in excess of Rs 50 lakhs, tax audit will apply regardless of any other condition. So if you are a professional ie doing any activity covered under professional income codes, then once your professional fee exceeds Rs 50 lakhs, audit becomes applicable compulsorily. Please note that in case you are taking benefits of 44ADA, then the limit for 44ADA is 75 lakhs provided your cash receipts do not exceed 5% of total receipts.
Thus if you have professional income the audit applicability shall be as under:
1. If your professional receipts > 75 lakhs, then audit will apply regardless of your F&O numbers.
2. If your cash receipts <5% of total receipts, your professional receipts< 75 lakhs, you have option of offering income under 44ADA, - no audit will apply.
3. If your cash receipts >5% of total receipts, your professional receipts> 50 lakhs, then audit will apply.
4. If your professional receipts are below 50 lakhs, you are free to not go for 44ADA and just file the return without audit. In case you choose 44ADA, audit will apply.
There is always this query that is audit compulsory in case we offer income below 50%, my opinion is that if your turnover is below 50 lakhs, the audit should not apply. But there are instances of people getting defective return notices. Therefore, we suggest doing audit in such cases only as a matter of precaution.
3. There are cases where people are offering income under 44AD and wish to shift out, in cases audit should apply as per the provisions of 44AD(5).
#taxudit #ay202425
1. If you are only trading in F&O and are not offering your income to taxation under presumptive taxation, and:
a) if your turnover is below 1 cr - no audit is applicable regardless of whether the cash income/expense is above 5% of the respective total income and expenses.
b) if your turnover is between 1cr and 10 cr, then audit is applicable if the cash receipts/payments is above 5% of respective total receipts and payments.
c) if your turnover is between 1cr and 10 cr, but the cash receipts/payments is below 5% of respective total receipts and payments, then audit will not apply
d) if the turnover is above Rs 10 cr, audit is compulsory.
In case you have professional income in addition to trading activity.
2. If you have professional receipts in excess of Rs 50 lakhs, tax audit will apply regardless of any other condition. So if you are a professional ie doing any activity covered under professional income codes, then once your professional fee exceeds Rs 50 lakhs, audit becomes applicable compulsorily. Please note that in case you are taking benefits of 44ADA, then the limit for 44ADA is 75 lakhs provided your cash receipts do not exceed 5% of total receipts.
Thus if you have professional income the audit applicability shall be as under:
1. If your professional receipts > 75 lakhs, then audit will apply regardless of your F&O numbers.
2. If your cash receipts <5% of total receipts, your professional receipts< 75 lakhs, you have option of offering income under 44ADA, - no audit will apply.
3. If your cash receipts >5% of total receipts, your professional receipts> 50 lakhs, then audit will apply.
4. If your professional receipts are below 50 lakhs, you are free to not go for 44ADA and just file the return without audit. In case you choose 44ADA, audit will apply.
There is always this query that is audit compulsory in case we offer income below 50%, my opinion is that if your turnover is below 50 lakhs, the audit should not apply. But there are instances of people getting defective return notices. Therefore, we suggest doing audit in such cases only as a matter of precaution.
3. There are cases where people are offering income under 44AD and wish to shift out, in cases audit should apply as per the provisions of 44AD(5).
#taxudit #ay202425
