Turnover in f & o
This query is : Resolved
24 May 2018
In case of F&O turnover is sum of negatives and positives i.e. in one case I have 50000 profit and in other case 10000 loss then turnover is Rs.60000/- for the purpose of tax audit. However the question rises in my mind is whether this figure is to be shown in P & L account of ITR-3 (old ITR-4) and if this figures is to be shown as turnover in P & L then how we can reach the actual profit from F& O which only Rs.40000/-. Please guide
Thanks
Thanks
24 May 2018
There is no need to show "Turnover" in PL. You can just show the profit/loss in the Profit & Loss A/c as other income.
24 May 2018
Sir, then how will an officer or software understand that the case is an tax audit case ?
02 August 2025
Great question! Here’s how it works for F\&O turnover and tax audit reporting:
---
### 1. **Turnover for Tax Audit (u/s 44AB):**
* For **tax audit purposes**, turnover = **sum of absolute profits + absolute losses + premium received** (if any) on F\&O trades.
* So if you have Rs. 50,000 profit and Rs. 10,000 loss, turnover = Rs. 60,000.
### 2. **Profit & Loss Account in ITR:**
* In the **P\&L account** and in **Income Tax Return (ITR-3)**, you **don’t show the turnover figure** (i.e., sum of profits and losses) as income.
* Instead, you **show the actual net profit/loss**, i.e., Rs. 40,000 (profit of Rs. 50,000 - loss Rs. 10,000).
### 3. **How does the Tax Officer or Software know it’s a Tax Audit case?**
* The **turnover figure is disclosed separately** in the tax audit report (Form 3CD).
* The tax audit report is submitted along with the return and is reviewed by the assessing officer.
* In the ITR form, you report net profit/loss under **“Profit and Gains of Business or Profession.”**
* The turnover itself isn’t part of the P\&L income but is part of the audit documentation.
---
### Summary:
| Purpose | Figure Reported |
| ----------------------------- | --------------------------------------- |
| Tax Audit Turnover (u/s 44AB) | Sum of absolute profits + losses |
| P\&L Account & ITR | Net profit or net loss from F\&O trades |
---
---
### 1. **Turnover for Tax Audit (u/s 44AB):**
* For **tax audit purposes**, turnover = **sum of absolute profits + absolute losses + premium received** (if any) on F\&O trades.
* So if you have Rs. 50,000 profit and Rs. 10,000 loss, turnover = Rs. 60,000.
### 2. **Profit & Loss Account in ITR:**
* In the **P\&L account** and in **Income Tax Return (ITR-3)**, you **don’t show the turnover figure** (i.e., sum of profits and losses) as income.
* Instead, you **show the actual net profit/loss**, i.e., Rs. 40,000 (profit of Rs. 50,000 - loss Rs. 10,000).
### 3. **How does the Tax Officer or Software know it’s a Tax Audit case?**
* The **turnover figure is disclosed separately** in the tax audit report (Form 3CD).
* The tax audit report is submitted along with the return and is reviewed by the assessing officer.
* In the ITR form, you report net profit/loss under **“Profit and Gains of Business or Profession.”**
* The turnover itself isn’t part of the P\&L income but is part of the audit documentation.
---
### Summary:
| Purpose | Figure Reported |
| ----------------------------- | --------------------------------------- |
| Tax Audit Turnover (u/s 44AB) | Sum of absolute profits + losses |
| P\&L Account & ITR | Net profit or net loss from F\&O trades |
---
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