Retail traders who booked losses in futures and options (F&O) this year should not assume they are off the tax radar. If your turnover crosses ₹10 crore, the Income Tax Act mandates a tax audit—even if you made zero profits.
F&O trading counts as non-speculative business income under “Profits & Gains of Business or Profession.” Traders must maintain books of accounts and comply with audit rules if certain thresholds are met.
Section 44AB focuses on turnover, not profit. Losses do not protect traders from audits, warns Sujit Bangar, founder of TaxBuddy.com. Turnover includes the sum of all gains and losses from squared-off trades plus option premiums.
Key thresholds:
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Turnover above ₹1 crore: Audit required if cash transactions exceed 5%
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Turnover above ₹10 crore: Audit mandatory regardless of profit or loss, if cash transactions are within 5%
Missing the September 30, 2025 audit deadline can trigger penalties of ₹1.5 lakh or more. Bangar advises traders to calculate turnover correctly using ICAI guidelines, track digital vs. cash transactions, and ensure compliance under Section 44AB to avoid penalties.
