F&O turnover adds up every trade, so many small trades can cross the audit line
Turnover for the audit test is not your profit. Each squared off trade adds the absolute difference between its buy and sell values, so a trade that makes money and one that loses both add to turnover. Reverse trades count too, and premium received on options you sell is included unless it already sits in net profit.
The 2025 edition of the ICAI guidance narrows the first rule to squared off trades, adds open positions in the year they are squared off, and for delivery settled derivatives uses the trade price against the settlement price. The method applies only to the audit threshold test, not to your taxable income.
Audit is required when business turnover is above Rs 1 crore. The limit is Rs 10 crore when cash receipts and cash payments are each 5% or less. A trader with many small trades can cross the first limit with a modest profit, because turnover adds up every trade. A second trigger applies to people on presumptive taxation who claim a profit below the deemed rate.
CBDT's transition FAQs say the old Act's audit report goes in Form 3CA or 3CB, with the statement in Form 3CD, by 30 Sep 2026 for AY 2026-27. Under the 2025 Act the audit form is 26, due 30 Sep 2027 for Tax Year 2026-27.
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study