Tax Audit for above 60 lakh Turnover

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deepak (Querist)
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22 October 2010 Dear Sir,

How to Calculate 60 Lakh turnover limit for tax audit under income tax who buy & sale shares ?

A buy 100 Shares @ 100 = Rs. 10,000 & sale 100 Shares @ 200 = Rs. 20,000. what will be turnover a) Rs. 10000/-(b) Rs. 20000/-& (c) Rs.30000/-.

Mr. A is doing cash market i.e. Delivery Base Buy & Sale & very frequently square off the position on the same day . For Calculation of Turnover Delivery & Trading taken together or what. Pls explain in detail.

CA Navin Jain

CA Navin Jain (Expert)
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22 October 2010 Rs. 20000

deepak

deepak (Querist)
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01 November 2010 Thanks for your prompt reply.

Sir can u clarify whether for the purpose of computing turnover Delivery Base buying & Intra Day trade can be merged together. or not

Thanks in advance.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 Great question! Here's a detailed explanation for calculating turnover for tax audit under Income Tax when dealing with shares, including both delivery-based and intraday trading:

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### 1. **Turnover for Tax Audit under Section 44AB for Share Trading**

The turnover is computed differently for:

* **Delivery-based trading (Capital Gains)**
* **Intraday trading (Business Income from Speculative Trading)**
* **Futures & Options (Business Income)**

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### 2. **For Delivery-based trading (Capital Gains)**

* Turnover = **Sum of sale proceeds** (i.e., sale value of shares sold)
* So, in your example:
Buy 100 shares @ Rs 100 = Rs 10,000 (purchase value)
Sale 100 shares @ Rs 200 = Rs 20,000 (sale value)

**Turnover = Rs 20,000 (sale value only).**

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### 3. **For Intraday Trading (Speculative Business Income)**

* Turnover = **Sum of absolute value of both buy and sale transactions**
* So, turnover = Rs 10,000 (buy) + Rs 20,000 (sale) = Rs 30,000.

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### 4. **If Both Delivery & Intraday Trading are done**

* **You must calculate turnover separately for each type and then add them up.**

Example:

* Delivery turnover = sum of sale proceeds of delivery trades
* Intraday turnover = sum of absolute values of buy and sale transactions of intraday trades
* Total turnover = Delivery turnover + Intraday turnover

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### 5. **What about frequent squaring off?**

* If you buy and sell on the same day (intraday), that is treated as **speculative business turnover**, and turnover is sum of both buy and sell amounts.
* For delivery trades, just consider sale proceeds.

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### **Summary Table**

| Trading Type | Turnover Calculation | Example (Buy 10,000, Sell 20,000) |
| ------------------------------- | ------------------------------------- | --------------------------------- |
| Delivery-based (Capital Gains) | Sale proceeds only | Rs 20,000 |
| Intraday (Speculative Business) | Buy + Sale (absolute values) | Rs 30,000 |
| Both (Add Separate Turnovers) | Delivery turnover + Intraday turnover | Rs 20,000 + Rs 30,000 (if both) |

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### **Important**

* For tax audit applicability, turnover thresholds include **aggregate turnover** combining business income & speculative income.
* For shares and securities transactions, you need to clearly segregate delivery and intraday trades.
* If your turnover crosses Rs 60 lakh (for AY 2010-11), tax audit may be applicable.
* Proper documentation is crucial to prove categorization.

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If you want, I can help you prepare a sample turnover calculation sheet or draft notes to maintain records clearly for tax audit. Would that be helpful?

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