--- title: "How is F&O turnover calculated, and when is a tax audit" description: "For the audit test, F&O turnover is the sum of the favourable and unfavourable differences on each trade." source_url: "https://www.rupeecase.com/learn/questions/fo-turnover-and-tax-audit" --- F&O turnover adds up every trade, so many small trades can cross the audit line How the ICAI guidance builds F&O turnover for the audit test, with the 2025 edition changes described in the text. A method, not an audit of any one person. Source: ICAI Guidance Note on Tax Audit, 2022 and 2025 editions; Income-tax Act, 1961, section 44AB; Income-tax Act, 2025, section 63. As of 16 Oct 2026. 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](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) How is F&O turnover calculated, and when is a tax audit required?For the audit test, F&O turnover is the sum of the favourable and unfavourable differences on each trade, plus premium received on options sold unless that premium already sits in net profit. Compare that figure with the business thresholds in section 44AB of the old Income-tax Act and section 63 of the 2025 Act. LGo deeper ## Where Learn teaches this. [Module 11.2Tax Treatment: MFs, ETFs, SGBs, Bonds & F&O11 min, Path 11](/learn/path-11/module-11-2-tax-treatment-mfs-etfs-sgbs-bonds-and-fno) SSources ## Go to the source. 4 sources, Income Tax the most cited The publisher of each source listed below. Source: Module undefined source list. 1. [ICAI, Guidance Note on Tax Audit, 2022 edition (turnover from F&O, paragraph 5.14)](https://resource.cdn.icai.org/71267dtc200822-gn44ab.pdf) Paper 2. [ICAI, Guidance Note on Tax Audit, revised 2025 edition (turnover from F&O, paragraph 5.11)](https://resource.cdn.icai.org/87317dtc-aps1808gn-tax-audit2025.pdf) Paper 3. [CBDT, FAQs on Interplay and Transition (transition from the Income-tax Act, 1961 to the Income-tax Act, 2025)](https://www.incometaxindia.gov.in/documents/81799/11848482/FAQs-on-Interplay-and-Transition.pdf) Income Tax 4. [Income-tax Act, 2025, section 63, tax audit](https://www.incometaxindia.gov.in/w/section-63-130) Income Tax ?Questions people ask ## Related questions. 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