u/chinmoypew

Tax audit u/s 44AB applicability — F&O loss, never used 44AD — which version of the rule applies?

Facts:

• Salaried individual, also trade F&O (futures & options) on a recognized exchange, settled entirely through broker/bank — no cash transactions.
• FY2025-26: F&O turnover (absolute sum of profit + loss across all trades) ≈ ₹ more than 1 crore.
• Net result this year: a loss of ~₹15.65 lakh (post brokerage/STT/exchange charges).
• Have never filed under Section 44AD / ITR-4 in any prior year — every past return has been ITR-3 with actual books and a real P&L, never presumptive.
• Total income across all heads (salary + other sources, after set-off) is well above the basic exemption limit — this isn't in question.
• Want to carry forward the F&O loss to future years.

Question:
Given I've never opted into Section 44AD, does the tax audit requirement under Section 44AB(e) (post the Finance Act 2016 amendment, which introduced the 5-year lock-out via Section 44AD(4)) apply to me this year? My understanding is that this specific audit trigger only fires for someone who previously used 44AD and is now declaring lower income within the resulting 5-year lock-out period — i.e., it shouldn't apply to someone who's never used 44AD at all, regardless of turnover being below ₹1 crore or the result being a loss.

Separately: is F&O trading even considered an "eligible business" for Section 44AD purposes in the first place (turnover is below the ₹2–3 crore 44AD threshold), or is presumptive taxation simply inapplicable to derivatives trading as a category, making this whole question moot?

Tax audit u/s 44AB applicability — F&O loss, never used 44AD — which version of the rule applies?

Facts:

• Salaried individual, also trade F&O (futures & options) on a recognized exchange, settled entirely through broker/bank — no cash transactions.
• FY2025-26: F&O turnover (absolute sum of profit + loss across all trades) ≈ ₹ more than 1 crore.
• Net result this year: a loss of ~₹15.65 lakh (post brokerage/STT/exchange charges).
• Have never filed under Section 44AD / ITR-4 in any prior year — every past return has been ITR-3 with actual books and a real P&L, never presumptive.
• Total income across all heads (salary + other sources, after set-off) is well above the basic exemption limit — this isn't in question.
• Want to carry forward the F&O loss to future years.

Question:
Given I've never opted into Section 44AD, does the tax audit requirement under Section 44AB(e) (post the Finance Act 2016 amendment, which introduced the 5-year lock-out via Section 44AD(4)) apply to me this year? My understanding is that this specific audit trigger only fires for someone who previously used 44AD and is now declaring lower income within the resulting 5-year lock-out period — i.e., it shouldn't apply to someone who's never used 44AD at all, regardless of turnover being below ₹1 crore or the result being a loss.

Separately: is F&O trading even considered an "eligible business" for Section 44AD purposes in the first place (turnover is below the ₹2–3 crore 44AD threshold), or is presumptive taxation simply inapplicable to derivatives trading as a category, making this whole question moot?

Tax audit u/s 44AB applicability — F&O loss, never used 44AD — which version of the rule applies?

Facts:

• Salaried individual, also trade F&O (futures & options) on a recognized exchange, settled entirely through broker/bank — no cash transactions.
• FY2025-26: F&O turnover (absolute sum of profit + loss across all trades) ≈ ₹ more than 1 crore.
• Net result this year: a loss of ~₹15.65 lakh (post brokerage/STT/exchange charges).
• Have never filed under Section 44AD / ITR-4 in any prior year — every past return has been ITR-3 with actual books and a real P&L, never presumptive.
• Total income across all heads (salary + other sources, after set-off) is well above the basic exemption limit — this isn't in question.
• Want to carry forward the F&O loss to future years.

Question:
Given I've never opted into Section 44AD, does the tax audit requirement under Section 44AB(e) (post the Finance Act 2016 amendment, which introduced the 5-year lock-out via Section 44AD(4)) apply to me this year? My understanding is that this specific audit trigger only fires for someone who previously used 44AD and is now declaring lower income within the resulting 5-year lock-out period — i.e., it shouldn't apply to someone who's never used 44AD at all, regardless of turnover being below ₹1 crore or the result being a loss.

Separately: is F&O trading even considered an "eligible business" for Section 44AD purposes in the first place (turnover is below the ₹2–3 crore 44AD threshold), or is presumptive taxation simply inapplicable to derivatives trading as a category, making this whole question moot?