Tax audit applicability
This query is : Resolved
24 August 2015
Hi,
If there are more than one crore sales or redemptions made in equity shares and debt instruments,is tax audit applicable to that person.
Thanks
If there are more than one crore sales or redemptions made in equity shares and debt instruments,is tax audit applicable to that person.
Thanks
24 August 2015
If the intention was not to hold shares as an 'investment' or trading is done frequently, tax audit applies.
24 August 2015
HI sir,
Yes there are frequent redemptions so is he liable to tax audit as you said.Please quote the relevant section or any link to refer.
Yes there are frequent redemptions so is he liable to tax audit as you said.Please quote the relevant section or any link to refer.
26 July 2025
Sure! Here’s the relevant info you can refer to:
**Applicability of Tax Audit for Share Trading (including frequent redemptions):**
* As per **Section 44AB** of the Income Tax Act, tax audit is applicable if the total turnover/gross receipts exceed Rs. 1 crore (Rs. 10 crores if eligible under presumptive taxation).
* For trading in shares and securities, **the turnover is calculated as the sum of the sale value of shares and securities (including redemptions).**
* If the person is **engaged in frequent trading and the intention is trading (business) and not investment, then turnover will be considered for tax audit.**
**Relevant Sections & Guidance:**
* **Section 44AB** - Audit of accounts of certain persons carrying on business or profession.
* **CBDT Circular No. 2/2014 dated 27-01-2014** clarifies that frequent purchase and sale of securities will be treated as business turnover for the purpose of tax audit.
* Also, the turnover includes **sale and redemption proceeds** from shares and debt instruments if business turnover criteria exceed Rs. 1 crore.
**Summary:**
If your client has frequent trading and the total value of sales/redemptions exceeds Rs. 1 crore, tax audit under Section 44AB is applicable.
---
**Applicability of Tax Audit for Share Trading (including frequent redemptions):**
* As per **Section 44AB** of the Income Tax Act, tax audit is applicable if the total turnover/gross receipts exceed Rs. 1 crore (Rs. 10 crores if eligible under presumptive taxation).
* For trading in shares and securities, **the turnover is calculated as the sum of the sale value of shares and securities (including redemptions).**
* If the person is **engaged in frequent trading and the intention is trading (business) and not investment, then turnover will be considered for tax audit.**
**Relevant Sections & Guidance:**
* **Section 44AB** - Audit of accounts of certain persons carrying on business or profession.
* **CBDT Circular No. 2/2014 dated 27-01-2014** clarifies that frequent purchase and sale of securities will be treated as business turnover for the purpose of tax audit.
* Also, the turnover includes **sale and redemption proceeds** from shares and debt instruments if business turnover criteria exceed Rs. 1 crore.
**Summary:**
If your client has frequent trading and the total value of sales/redemptions exceeds Rs. 1 crore, tax audit under Section 44AB is applicable.
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