Intraday audit requiremrnt

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This discussion clarifies when a tax audit becomes compulsory for individuals involved in intraday trading alongside a proprietorship business. It explains that audit requirements depend on aggregate turnover, cash transaction percentages, and whether Section 44AD was previously opted for. The key takeaway is that if your total turnover (including intraday) remains below certain thresholds and you maintain a sufficient profit margin (typically 6-8%), you may avoid a mandatory audit, potentially filing under ITR-3 or ITR-4 using Section 44AD.

Sidharth Raina

Sidharth Raina (Querist)
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23 June 2023 Background: I have a proprietorship business with Annual turnover of around 30 lakh and profit around 5L ( after business expense / depreciation and all other deduction).

This week i started doing intraday trades

Details
Absolute turnover: 13000
Loss: 200

what if i stop now? Is audit compulsory in that case?

Also Let us suppose i make similar trade in 52 weeks in an year.

My absolute turnover would be : 6,76,000
Loss: -10,400

Is audit compulsory then?

where can i learn about this more ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 June 2023 1. Not applicable.
2. Even then audit will not be applicable.

Sidharth Raina

Sidharth Raina (Querist)
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23 June 2023 Hello,

Thank you for your response. Can you share when this tax audit becomes compulsory?

Is it when profit from my regular business and intraday activities becomes less than 8%?

Because everywhere it says if profit less than 6% for intrday ( ATO< 10cr),audit is compulsory. Is that for people who only do itraday or salaried employee plus intrday?.

Thankyou for your time and apologies for bugging you again. I am very confused.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 June 2023 There are different factors for tax audit to be mandatory like aggregate turnover exceeding Rs. 1Cr with cash transactions more than 5%; otherwise Rs. 10Crs would be the limit.
In case you had opted sec. 44AD in any preceding 5 years than it needs to be check whether 6/8% profit margin maintained or not. If not, tax audit liability arises.

Sidharth Raina

Sidharth Raina (Querist)
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24 June 2023 Hello ,

I check my last ITR and it was ITR 4 and as per my understanding the CA must have opted for sec44AD. Is this correct assumption?

As i have done intraday this month so next time I have to file return using ITR-3.

If my regular business turnover + intraday turnover is less than 1 cr, as per my understanding i can still opt for sec44ad but under ITR 3 now.

And if my total profit from business and intarday is greater than 6% (all my regular business payment are through cheque or neft) of total turnover, I need not worry about audit.

I dont have to consider intraday loss and turnover separately.

Plea

So if I am able to do similar regular businesses this year which i did last year which is

Turnover: 30L
Profit:5L
Profit percentage from regular business: 16.66%

and along with that this time by the end of year i have intraday turnover of 30 L , with zero profit or loss.

Net profit percentage: 8.33%

Still i can claim sec44ad, without any need for audit?

Thankyou for your patience

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 June 2023 You can file ITR 3 or 4 but need to file under sec. 44AD IT act. ITR 3 if there is any capital gains along with business income, otherwise ITR 4. Once you declare business+ intraday trading income under sec 44AD (till business TO 3Crs, cash transaction less than 5%, otherwise 2Crs.) tax audit will not apply.

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