If you’re into Futures & Options (F&O) trading, chances are you’re confused about income tax rules. Should you file returns even if you made a loss? Is audit required? Which ITR form applies?
In this blog, we answer the top 15 income tax doubts faced by F&O traders, intraday traders, and beginners — with practical solutions.
- Is Income from F&O Trading Taxable?
Yes! F&O income is treated as business income, not capital gains. It must be reported under “Income from Business & Profession.”
- I Had a Loss. Still Need to File ITR?
Yes. Filing is mandatory even for losses — only then can you carry them forward to offset future profits.
- Which ITR Form Should Use for F&O Trading?
You must file ITR-3 for reporting F&O income — not ITR-2 or ITR-1.
- Is Tax Audit Required?
- Yes, if turnover > ₹10 crore
- Also needed if turnover is low but you declare a loss or opt out of presumptive tax
- What is Turnover in F&O?
It’s not buy/sell amount.
Turnover = Total of absolute profits and losses.
- Can Use Section 44AD (Presumptive Scheme) in the F&O Trading?
It’s possible, but professionals often advise against using 44AD for speculative or F&O business.
- What Expenses Can Claim in the calculation of Future and Options Income?
You can deduct:
- STT, brokerage, platform charges
- Internet, mobile used for trading
- Subscription tools like ChartIQ, TradingView
- How to Carry Forward F&O Losses?
You must:
- File before due date
- Report correctly under business income
Then you can carry forward for 8 years.
- Need to Maintain Books in case of F&O Trading?
Yes, especially if:
- You opt out of presumptive tax
- Or your turnover is above ₹50 lakhs
- Is Advance Tax Applicable to Traders?
Yes — if your total tax due exceeds ₹10,000/year, you’re liable to pay in quarterly instalments.
- Can the F&O Loss Adjust Against Salary?
No. Business losses can’t be adjusted against salary income.
- Can Claim Depreciation on Laptop?
Yes, if it’s used for trading, depreciation is allowed as expense.
- What Happens if I Don’t Report F&O Trading?
- You can’t carry forward losses
- Might get income tax notice
- May incur penalty for non-compliance
- Audit Required Even for Losses?
Yes — especially if you’re not under presumptive tax and show loss or income <6% of turnover
- Is GST Applicable to F&O Transactions?
No. F&O is classified as securities, not goods or services — GST not applicable.
Final Words
Taxation on Futures & Options (F&O) trading can seem complex, especially with changing compliance norms and reporting formats. However, staying informed about the applicable ITR forms, audit requirements, presumptive tax options, and advance tax obligations helps traders avoid scrutiny and penalties. It’s crucial to reconcile your trades with Form 26AS and AIS data and maintain proper records for each transaction. Remember, even if you incur losses, reporting them correctly can help in future tax planning. Filing your return accurately is not just a legal obligation—it’s a step toward responsible wealth management. When in doubt, always consult a tax professional.
“Thank you for reading. If you have any questions or need further assistance, feel free to reach out — we’re here to help!”