Quicko I beg to differ with your following statement . According to you ,
"turnover as per ICAI guidelines mentions in point (ii) that Premium should also be included in turnover. It must be added to the Absolute profit as per point (i). Thus, Turnover is Absolute Profit + Premium on Sale of Options. This is the most conservative method to determine trading turnover"
No where Institute has stated point no 1 and 2 will be added together to determine the Turnover, IF we take sales premium along with favorable and Unfavorable differences , we are actually taking sales side Twice, Moreover according to ZEORODHA’S conservative approach ( which is also not established as correct method to determine turnover) we , the client of ZERODHA , may face problem because if we follow your method then many traders will come under TAX AUDIT on the other hand if we take point 1 (where buy and sell both took place ) and point 2( only for option sold but not covered) to determine the turnover then many traders will not fall under the requirement of Tax audit . But If Income tax officer calls for Brokers record to verify the turnover then obviously a difference will arise and will go against us because** turnover as per Zerodha 's Turnover statement ** will be much more for their conservative approach , the approach which is also doubtful.
(2) I also beg to differ with your 2nd point –
" Further, please note that calculation of turnover is only to determine the applicability of tax audit as per the Income Tax Act. It does not have any effect on your tax liability "—
In my opinion, Profit depends on turnover @ 6% which obviously increase or decrease according to the definition of TURNOVER and TAX depends on Profit, if Profit Increases because of Conservative approach of turnover, Tax will also increase. Moreover If tax audit is applicable for any body but he fails to do so will face a good amount of penalty. It may happen that if any body follows conservative approach of ZERODHA , TAX AUDIT is applicable for him however if he follows other method (same as future trading ) then he may remain far away from the requirement of TAX AUDIT . Moreover Brokers record matters lot , it is not just to determine whether Tax audit is applicable or Not , it is a third party confirmation on which Income tax will rely, so Brokers statement should reflect the actual fact , not just because it is conservative approach.
I have just placed my view , hope you wont mind. Just request that Zerodha should once again go through the provision to determine turnover. Their Turnover statement is very vital because that we have to place before Incometax Officer to convince them.