transactions in commodities
This query is : Resolved
29 July 2009
If a trader in commodities with actual investment of Rs 1,00,000/- but with a turnover of Rs 1,00,00,000/- and loss of Rs 5,00,000/-. Will he have to get his books of accounts audited?
If not how will the sales be accounted for?
If not how will the sales be accounted for?
04 August 2009
If the turnover is 1 crore, then tax audit will apply. I hope I am correct in my understanding of the the question.
04 August 2009
Are you referring to a private limited company and applicability of CARO? In that case, if paid up capital and reserves is less than 50 lacs and turnover is less than 5 crores and there is no public accepted, then CARO is not applicable.
For all public limited, CARO is applicable.
For all public limited, CARO is applicable.
08 August 2009
Trader in commodities here refers to an investor who makes intraday transactions in commodities like some do in shares.
02 August 2025
Here's a quick breakdown for your query on **commodities trading and audit applicability**:
* **Turnover of Rs 1 crore with loss**:
Yes, tax audit under Section 44AB of the Income Tax Act is **applicable** if your turnover exceeds Rs 1 crore (for business other than trading in goods, it's Rs 1 crore; for goods, Rs 10 crore, but for commodities, it is treated like goods). Since your turnover is Rs 1 crore, tax audit is generally required.
* **Loss of Rs 5 lakh**:
Loss doesn’t exempt you from audit if turnover criteria are met.
* **How to account sales?**
Sales in commodities trading are recorded as **revenue from business operations** in your Profit & Loss account. Each trade's buy and sell are recorded as purchase and sale transactions, with profits or losses recognized accordingly.
* **Regarding CARO (Companies Auditor's Report Order)**:
CARO applies based on company type (private/public) and thresholds like paid-up capital and turnover. If it's a private limited company with turnover < 5 crores and capital + reserves < 50 lakhs, CARO may **not apply**.
* **Intraday vs. Delivery trading**:
Intraday commodity trading might be treated as speculative business. Tax audit rules differ slightly in such cases.
---
* **Turnover of Rs 1 crore with loss**:
Yes, tax audit under Section 44AB of the Income Tax Act is **applicable** if your turnover exceeds Rs 1 crore (for business other than trading in goods, it's Rs 1 crore; for goods, Rs 10 crore, but for commodities, it is treated like goods). Since your turnover is Rs 1 crore, tax audit is generally required.
* **Loss of Rs 5 lakh**:
Loss doesn’t exempt you from audit if turnover criteria are met.
* **How to account sales?**
Sales in commodities trading are recorded as **revenue from business operations** in your Profit & Loss account. Each trade's buy and sell are recorded as purchase and sale transactions, with profits or losses recognized accordingly.
* **Regarding CARO (Companies Auditor's Report Order)**:
CARO applies based on company type (private/public) and thresholds like paid-up capital and turnover. If it's a private limited company with turnover < 5 crores and capital + reserves < 50 lakhs, CARO may **not apply**.
* **Intraday vs. Delivery trading**:
Intraday commodity trading might be treated as speculative business. Tax audit rules differ slightly in such cases.
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