How to Find and Assign a CA for Your F&O Tax Audit (AY 2026-27)
ICAI Guidance Note on Tax Audit (Revised 2025) — turnover formula update. The ICAI Direct Taxes Committee’s Tenth Edition (Revised 2025) of the Guidance Note on Tax Audit under Section 44AB updates the F&O turnover method. For tax audits of FY 2025-26 (AY 2026-27) onwards, the turnover formula is:
- Sum of favourable and unfavourable differences on squared-off trades; plus
- Premium received on sale of options — with anti-double-count proviso: if your broker P&L already nets the option-sale premium into the per-trade profit/loss, do not add the premium separately.
- Differences on reverse trades also count.
- Open positions at year-end are picked up when squared off.
- Delivery-settled derivatives use the trade-vs-settlement price difference; if you held the underlying as stock-in-trade, the entire sale value is business turnover.
For AY 2026-27 onward, use the Revised 2025 edition. Earlier assessment years should be checked against the ICAI guidance applicable to that year.
Source: ICAI, Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 (Revised 2025), Direct Taxes Committee, Tenth Edition, para 5.11(b).
Source basis: This guide is source verified against the official documents listed below. It is educational guidance, not personalized tax advice.
Official sources used: Income-tax Act, 1961 (India Code consolidated PDF); Income-tax Act, 2025 — CBDT (official landing); CBDT: 1961 ↔ 2025 provisions concordance utility; CBDT Notifications (official index); CBDT FAQs on Interplay & Transitions — Income-tax Act 2025; ICAI Guidance Note on Tax Audit under Section 44AB (Revised 2025), Direct Taxes Committee, Tenth Edition, para 5.11(b); Income Tax e-Filing Portal: individual business/profession help.
Short answer
Identify a practising CA in the ICAI directory or through trusted referrals. On the e-Filing portal, add the CA under My CA, assign the relevant form, and accept the uploaded audit report. The CA must hold a valid Certificate of Practice and be eligible to sign the audit report.
For F&O traders, audit applicability is a sequence, not a slogan. First calculate turnover using the ICAI F&O method. Then test Section 44AB(a). Then test whether Section 44AD(4) and Section 44AB(e) create a separate audit route.
The audit threshold that is safe to state
Under the 1961 Act (AY 2025-26 and earlier), s.44AB(a) starts with the general rule: a person carrying on business must get accounts audited when total sales, turnover, or gross receipts in business exceed Rs. 1 crore in the previous year. The applicable ICAI guidance quotes the s.44AB(a) cash-condition proviso: where aggregate cash receipts and aggregate cash payments each do not exceed 5% of the relevant totals, the clause works as if “one crore rupees” were substituted by “ten crore rupees”.
Under the 2025 Act (AY 2026-27 onwards), s.63(1) carries the same thresholds — ₹1 crore base, ₹10 crore where both cash tests are satisfied, ₹50 lakh for profession — into the new statute. Form 3CA/3CB/3CD is replaced by Form 26 under the Income-tax (No. 2) Rules, 2026, and the first audit cycle under the new Act covers TY 2026-27 with a 30 Sep 2027 specified date.
That is why the Rs. 10 crore number should never be written as a blanket exemption. It depends on the cash receipt and cash payment conditions, and the underlying statutory anchor changes from s.44AB to s.63 from 1 Apr 2026. Listed F&O trades normally settle through broker and banking systems, but the filing position should still be checked from the ledger and books, not assumed from a headline.
Section 44AD route
Section 44AB(e) applies where Section 44AD(4) applies and total income exceeds the maximum amount not chargeable to income-tax. Section 44AD(4) is the opt-out lockout rule after a taxpayer has used Section 44AD and later declares profit outside Section 44AD(1) within the relevant five-year period.
This is why a low turnover or a loss does not answer every audit question. A taxpayer with a Section 44AD history may need a different analysis from a taxpayer who never used the presumptive scheme.
F&O turnover comes first
The ICAI method for derivatives is based on favourable and unfavourable differences. Full contract value is not the turnover. Broker charges do not reduce the turnover figure, although they may belong in the wider profit-and-loss computation.
Portal workflow
Login to the e-Filing portal. Open Authorised Partners > My CA. Add the CA using their Membership Number. Assign the audit form for the relevant assessment year. The CA uploads from their portal access; the taxpayer accepts. Preserve the assignment screenshot and acceptance trail.
Audit-failure sanction: penalty (1961 Act) and fee (2025 Act)
For AY 2025-26 and earlier (1961 Act): If an audit is required under s.44AB and the audit report is not furnished as required, s.271B exposure can apply. The pinned wording supports a penalty equal to 0.5% of total sales, turnover, or gross receipts, or Rs. 1,50,000, whichever is less. The applicable ICAI guidance also notes that s.273B may protect a taxpayer where reasonable cause for the failure is proved.
For AY 2026-27 onwards (2025 Act, as substituted by Finance Act 2026, w.e.f. 1 Apr 2026): s.271B does not apply to returns filed under the 2025 Act. The successor is s.428(c), which classifies the sanction as a fee at a flat ₹75,000 (delay up to one month) or ₹1,50,000 thereafter. The 0.5%-of-turnover cap and the s.273B-style reasonable-cause defence are not carried into s.428.
Do not describe the AY 2025-26 position using s.428 language, and do not describe the AY 2026-27 position using s.271B language. The cut-off is the commencement of the 2025 Act on 1 Apr 2026.
What changes for AY 2026-27: audit failure becomes a FEE
For returns under the 1961 Act (AY 2025-26 and earlier), failure to get accounts audited or furnish the audit report attracts a penalty under s.271B equal to 0.5% of turnover or ₹1,50,000, whichever is less, with a possible “reasonable cause” defence under s.273B.
For returns under the 2025 Act (AY 2026-27 onwards), the position changes materially under s.428(c) (as substituted by Finance Act 2026 with effect from 1 Apr 2026):
- The sanction is reclassified as a fee, not a penalty.
- The quantum is flat: ₹75,000 if the delay is up to one month, ₹1,50,000 thereafter.
- The 0.5%-of-turnover cap is gone.
- There is no carried-over s.273B-equivalent reasonable-cause defence in the 2025 Act for s.428.
In short: the cheap end of the old penalty (small percentages of small turnover) is gone, and the cap survives only as a floor under the new fee. For most retail F&O traders required to audit, this raises the cost of missing the deadline.
Pinned official sources for the points above: CBDT Circulars (official index); CBDT: Income Tax Returns (notified forms); Income Tax e-Filing Portal: ITR downloads; Income Tax e-Filing Portal: individual business/profession help.
Dual-citation framing (AY 2025-26 vs AY 2026-27)
This guide cites two statutes side-by-side because India is mid-transition.
- AY 2025-26 (TY 2024-25) and earlier: the Income-tax Act, 1961 applies. Returns filed in 2025 follow 1961-Act section numbers (43(5), 44AA, 44AB, 44AD, 71, 72, 73, 74, 80, 139, 143, 271B).
- AY 2026-27 (TY 2026-27) onwards: the Income-tax Act, 2025 (Act No. 30 of 2025, assented 21 Aug 2025, commenced 1 Apr 2026 per s.1(3)) applies, with the 1961 Act repealed by s.536. Successor section numbers are 2(31), 2(33), 58, 62, 63, 110, 111, 112, 113, 117, 263, 270, 408, 428. Forms move from 3CA/3CB/3CD to Form 26 under the Income-tax (No. 2) Rules, 2026 (CBDT Notification 22/2026, in force 1 Apr 2026).
When a calendar date is not pinned to a CBDT circular below, treat the date as indicative and reconcile with the e-Filing utility before relying on it.
FAQ
1. Can any CA sign a tax audit? Only a practising CA with a valid Certificate of Practice and within audit assignment limits set by ICAI.
2. When should I assign the CA? As early as feasible before the audit due date — the assignment-upload-acceptance loop takes calendar time.
3. Does the form change under the 2025 Act? Yes. From AY 2026-27 onwards, Form 3CA/3CB/3CD is replaced by Form 26 under the Income-tax (No. 2) Rules, 2026.
Official sources
Source basis: This article is checked against the official documents listed below. It is educational guidance, not personalised tax advice.