Income Tax Audit u/s 44AB(e)

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This discussion clarifies the applicability of income tax audit under Section 44AB(e) for a client with salaried income and Futures & Options (F&O) trading losses. If an audit was conducted under 44AB(e) for the past two financial years due to F&O losses, it must continue for the next three years, regardless of profit or loss. This is because the conditions of Section 44AD(4) & (5) become applicable, preventing the filing of a normal return.

akshay maloo

akshay maloo (Querist)
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10 July 2023 One of my client has salaried income and doing F&O trading. In the last two FY i.e. FY 2020-21 & FY 2021-22 he has loss in F&O and asked to do Audit. So I audit him under sec 44AB(e).

Now, in the current FY 2022-23 he still have loss in F&O. Is audit applicable or we can file normal return.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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10 July 2023 As the business was audited u/s. 44AB(e) for last two years, you have to continue the audit till next three years if there is loss or profit less than 6% of TO.

akshay maloo

akshay maloo (Querist)
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10 July 2023 Aren't we file return under normal provisions?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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10 July 2023 No, as the condition of sec. 44AD (4) & (5) are already applicable over it.

akshay maloo

akshay maloo (Querist)
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10 July 2023 Ok Sir, Thank You So much.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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10 July 2023 You are welcome.