When Should You Get Tax Audit Done In Case Of Day Trading of Shares?

I do only day trading. When am I required to get my accounts tax audited ? Renesh Jain

The day trading is definitely speculative in nature. The delivery is never taken or given.Therefore, confusion is created regarding what should be the turnover of day trading transaction .Should the value of purchase or sale or only difference between the purchase and sale be taken for computing turnover for the purpose of tax audit u/s 44AB of the I T Act.

The issue had come up in case of Babulal Enterprise vs ACIT before Mumbai bench of ITAT [IT Appeal No. 6031 (Mum.) of 1996 dated 12-2-1997] wherein it was held that where the actual delivery was not taken and difference in price was settled on the basis of contract note,the turn over can not include those transactions value. Another decision of Mumbai Tribunal expressing similar views was in case of Growmore Exports Ltd vs ACIT [78ITD 95] .

In case of day trading , a person does trade in margin i.e difference in purchase and sale transaction. The meaning thereby that the speculator squares off the trade without ever actual delivery. Therefore, if the difference amount of squared off deals , without taking into account the positive or negative figure ,exceed Rs 40 Lakhs , then tax audit has to be taken. For example , let us say following are the data of transactions of a day trader

The turnover for the purpose will be 47 lakhs (5 + 25 + 5 +12). The day traders has to get his accounts audited.

Note that only difference amount was taken and positive or negative sign were ignored.