Audit of turnover of Futures and Options

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This discussion clarifies whether a client dealing in Futures and Options with a sales volume of Rs 5 crore, despite incurring losses, requires a tax audit under Section 44AB. The experts explain that the turnover limit for AY 2021-22 is Rs 5 crore, provided cash transactions are below 5%. Turnover is calculated based on the absolute profit, not the gross sales volume. If this absolute profit exceeds Rs 5 crore, a tax audit is mandatory; otherwise, ITR 3 can be filed to carry forward losses.

UBEIDULLA

UBEIDULLA (Querist)
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12 June 2021 My client dealt in Futures and Options and the sales volume was Rs 5 crore. But he only earned losses. Is his accounts to be audited u/s 44 AB?
Can the experts throw light on this please

Deepa B

Deepa B (Expert)
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06 July 2021 Tax audit limit for business for AY 2021-22 is Rs.5 crores subject to the condition that aggregate cash receipts and payments towards expenditure has not exceeded 5% of total receipts and total payments respectively. Irrespective of the fact that he has incurred only losses, turnover for the purpose of this section will be determined considering sum of positive and negative differences i.e. absolute profit. If the absolute profit exceeds Rs.5 crores then the client is liable for tax audit u/s 44AB

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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21 October 2021 Agreed, If your turnover calculated as specified above, is below 5 Cr. no tax audit applicable for AY 2021-22. File ITR 3 & carry forward losses, if not set off.

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