Clarification on Tax Audit Applicability and Reporting of F&O Transactions in ITR-3

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This discussion clarifies tax audit applicability and reporting for Futures & Options (F&O) transactions in ITR-3. Even if your total traded value exceeds ₹20 crore, a tax audit under Section 44AB is likely not applicable if your absolute net profit is ₹7,13,000, as F&O turnover is calculated differently. When filing ITR-3, you should report your F&O turnover or net income directly in Schedule BP, rather than entering gross contract values in the Sales and Purchases fields of the Trading Account.

Suresh S. Tejwani

Suresh S. Tejwani (Querist)

15 July 2026 I have a query regarding the reporting of Futures & Options (F&O) transactions in ITR-3 and the applicability of tax audit under Section 44AB.

The facts are as follows:

I am engaged in F&O trading.
The total traded value (purchase + sale contract value) exceeds ₹20 crore.
The absolute net profit from F&O transactions is ₹7,13,000.
I have filed / intend to file ITR-3.

My queries are:

Since the ₹20 crore represents only the total traded value and not the F&O turnover as per ICAI guidance, is a tax audit under Section 44AB applicable?
While filing ITR-3, should the purchase and sale figures represent the gross contract values, or should only the F&O turnover (computed as per ICAI guidance) be reported?
If the Trading Account schedule in ITR-3 contains fields for Sales and Purchases, what amounts should be entered for an F&O business?

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

15 July 2026 A tax audit under Section 44AB is not applicable because F&O turnover is calculated using absolute profits/losses (ICAI Guidance), not the ₹20 crore gross traded value, keeping it far below the digital business audit threshold of ₹10 crore. When filing ITR-3, do not report the ₹20 crore contract values in the standard Sales/Purchase fields; instead, report your F&O turnover/receipts or declare the net income directly under Schedule BP as Non-Speculative Business Income.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

04 November 2026 For F&O transactions, tax audit applicability depends on the absolute profit/loss turnover rather than gross trade value, meaning no audit is required here, and net business income should be reported directly under Schedule BP without inflating standard Sales/Purchase schedules with total contract values.

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