Traders: Getting Audited is not really optional - Here’s why
Evidently, a lot of derivative traders don’t follow tax procedures due to lack of awareness or simply avoiding it due to the hassle involved. While audits are not required by law for trading turnover under Rs. 1 crore, in any case, if you’re claiming your income from trading activity to be <8% of your turnover/ want to claim losses and carry it forward to next year, you need to prepare and submit financial statements while filing your tax return — and opting for presumptive tax scheme(ITR-4) is not possible for Intraday/F&O Traders.
You need to be disclosing all income sources and be tax compliant, derivative trading being treated as a business.
If you’re getting your accounts audited, the Income Tax department has set the deadline of 30th September keeping the taxpayers' needs in mind.
Trading could become a thankless profession by means of bringing capital losses. If that is the case, it’s all the more reason to have your accounts audited, so you can carry over those losses to up to 4 subsequent years for speculative income sources like Intraday trading and non-speculative sources like F&O trades can have losses carried forward up to 8 years and this will also include your business expenses like electricity/telephone/broadband bills, rent, professional fees — hence the cost incurred for getting an audit can also be claimed as business expense, which makes the audit effectively cost you lesser.
For more context — read this article from MoneyControl that lays out everything in detail — most of it summarized in this post.
