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Three kinds of trading income
| Trade | Treated as | Return | Loss carry-forward |
|---|---|---|---|
| Delivery-based shares / equity funds | Capital gains (STCG 20%, LTCG 12.5% above ₹1.25 lakh) | ITR-2 (ITR-3 if any business income) | 8 years |
| Intraday equity | Speculative business — slab rates | ITR-3 | 4 years, only against speculative income |
| Futures & options | Non-speculative business — slab rates | ITR-3 | 8 years, against business income |
How F&O turnover is worked out
For tax-audit purposes, turnover is the sum of the absolute profit and loss of each trade — gains and losses added together ignoring the sign — as the ICAI Guidance Note on tax audit directs. The contract value is not turnover, and under the revised guidance the premium received on selling options is not added separately.
Three trades with results of +₹40,000, –₹25,000 and +₹10,000: turnover ₹75,000, net profit ₹25,000.
Do you need a tax audit?
- F&O is settled through banks, so the ₹10 crore audit limit (when cash transactions are within 5%) applies — most retail traders are far below it.
- Audit can still apply if you declared presumptive income under s.44AD→s.58 in any of the last five years and now show lower profit with total income above the basic exemption limit.
- Our Chartered Accountants conduct the tax audit and sign the report; the books and trade data are prepared in-house.
STT and expenses from 1 April 2026
- STT on futures rose to 0.05% (from 0.02%) and on options to 0.15%, from 1 April 2026.
- STT paid on F&O is a deductible business expense; STT on delivery trades is not deductible from capital gains.
- Brokerage, exchange charges, internet, advisory subscriptions and a reasonable share of device costs are deductible with proof.
Keeping your losses alive
- File ITR-3 by the due date (31 August for non-audit cases for AY 2026-27). A late return loses the right to carry forward business losses.
- F&O loss can be set off against any income except salary in the same year; the balance is carried forward for 8 years against business income.
- Speculative (intraday) loss can be set off only against speculative income, for 4 years.
Advance tax for traders
If your tax after TDS will be ₹10,000 or more, pay advance tax by 15 June, 15 September, 15 December and 15 March. Profits that arrive late in the year still attract interest under s.234C→s.425 if earlier instalments were short — the advance tax calculator shows the schedule.
Frequently asked questions
No. F&O is business income, so ITR-3 is needed even for a loss — and filing it on time is what lets you carry the loss forward.
It is added to your other income and taxed at slab rates — 30% applies only to the part of income in the top slab.
Founder, VJ & Associates, Jind — Taxation Lawyer & Legal Consultant, backed by the firm's Chartered Accountants, Company Secretaries and Tax Advocates. About the author · vinujaglan.com
General information as on 10 Nov 2026, not advice for your specific case. Laws, rates and dates change — see the disclaimer.
