For a trader who has no other income and whose income is below 2 lakhs, is filing a return still required? What happens about the audit requirements if profit is less than 8% of the turnover?
Its always best to file your returns regardless of whether you have any income tax obligations or not. Its of significant help for you in your future if you have to apply for a loan etc.
About the audit, if your turnover is less than one crore and profit is less than 8% then audit is required. If turnover is more than one crore audit is compulsory. Turnover is the sum of settlement profits and losses in your trading account.
There is excellent explanation about traders and taxation on z-connect. http://zerodha.com/z-connect/category/traders-zone/taxation-for-traders