Tax on F&O and Intraday Trading Income FY 2025-26: ITR-3, Turnover and Audit

Audit threshold (digital)

₹10 crore

Turnover, with 95% digital receipts and payments

Loss carry forward

8 years

F&O (non-speculative). Intraday: 4 years

ITR-3 due date

31 Jul 2026

31 Oct 2026 if tax audit applies

Advance tax trigger

₹10,000

Tax liability after TDS for the year

Why F&O and intraday income is business income

Section 43(5) of the Income-tax Act 1961 defines a speculative transaction as one settled without actual delivery. Intraday equity trades are exactly that, so intraday profit or loss is speculative business income. Futures and options traded on a recognised stock exchange are carved out by proviso (d) to section 43(5), which makes F&O income non-speculative business income.

The practical consequence is that a trader is treated like a proprietor running a business. You report income under the head Profits and Gains of Business or Profession, you can deduct expenses, and you file ITR-3. Delivery-based equity investments held for even a day are capital gains, and these can sit in the same ITR-3 alongside trading income.

How to compute F&O turnover the ICAI way

Turnover matters for two decisions: whether you can use presumptive taxation under section 44AD and whether a tax audit under section 44AB is required. The ICAI Guidance Note on Tax Audit is the accepted method. Contract value, which can run into crores even for small traders, is not turnover.

• Futures: add the absolute value of profit and loss on each trade. A profit of ₹30,000 and a loss of ₹20,000 give a turnover of ₹50,000, not ₹10,000.
• Options: add the absolute value of profit and loss on each trade in the same way.
• Premium received on options you sold: include it in turnover only where the trade was not squared off, so that the premium is not already inside the profit or loss figure. Where the trade was squared off and the premium is already part of the realised P&L, do not add it again.
• Intraday equity: the absolute sum of profits and losses, computed separately as speculative turnover.

Reading your broker tax P&L report

Every major broker gives a tax P&L for the financial year. Download it for 1 April 2025 to 31 March 2026 and look for four things: realised profit or loss split by segment, turnover, charges, and the opening and closing position statements. Segment-wise separation matters because intraday and F&O are taxed differently and cannot be merged.

• Realised P&L by segment: futures, options, intraday equity, delivery equity, commodity, currency.
• Charges: brokerage, STT, exchange transaction charges, SEBI fees, stamp duty and GST on brokerage. All of these are deductible expenses for business income, including STT.
• Other deductible expenses not on the broker report: internet, a share of phone and electricity, data subscriptions, advisory fees, depreciation on a laptop used for trading, and interest on borrowed trading capital.
• Open positions on 31 March 2026: mark-to-market on open futures is generally recognised only on settlement, but be consistent from year to year.

Should you opt for presumptive taxation under 44AD?

Section 44AD lets an eligible business with turnover up to ₹2 crore (₹3 crore if at least 95% of receipts are digital) declare 6% of digital turnover as profit and skip books of account. F&O is an eligible business, and because all trading receipts are digital the ₹3 crore limit and the 6% rate apply.

The catch is that 44AD works only when you have a profit. If your real profit is lower than 6% of turnover, or you have a loss, you cannot declare the loss under 44AD. Declaring a loss means filing with regular books, and if you opted for 44AD in any of the previous five years and now declare less than 6%, section 44AD(4) bars you from the scheme for five years and section 44AB(e) makes a tax audit compulsory if your total income exceeds the basic exemption limit.

When is a tax audit required?

Section 44AB requires a tax audit when business turnover exceeds ₹1 crore. The limit rises to ₹10 crore when cash receipts and cash payments are each 5% or less of total receipts and payments. Since trading flows entirely through bank and broker accounts, almost every trader qualifies for the ₹10 crore limit.

A tax audit under section 44AB can only be signed by a Chartered Accountant. The audit report in Form 3CB and 3CD is due by 30 September 2026 and the audited ITR-3 by 31 October 2026. Books of account are separately mandatory under section 44AA when business income exceeds ₹2.5 lakh or turnover exceeds ₹25 lakh, even without an audit.

Setting off and carrying forward trading losses

The rules differ for the two kinds of trading loss, and mixing them is the most common error in self-filed trader returns.

Computing tax and advance tax on trading profit

Trading profit is added to your other income and taxed at slab rates. Under the new regime for FY 2025-26 the slabs are 0% up to ₹4 lakh, 5% from ₹4 to ₹8 lakh, 10% from ₹8 to ₹12 lakh, 15% from ₹12 to ₹16 lakh, 20% from ₹16 to ₹20 lakh, 25% from ₹20 to ₹24 lakh and 30% above, plus 4% cess. The section 87A rebate of up to ₹60,000 makes tax nil where total income is up to ₹12 lakh. The ₹75,000 standard deduction applies only to salary, not trading income.

Advance tax applies whenever the tax liability after TDS exceeds ₹10,000. Traders using 44AD pay the whole amount in one instalment by 15 March. Missing an instalment attracts interest at 1% per month under section 234C, and a shortfall at year end attracts 1% per month under 234B until the balance is paid.

ITR-3 schedules a trader must fill

ITR-3 looks intimidating because it is designed for every kind of business. A trader touches only a handful of schedules. Fill them in this order so the figures flow correctly.

1. Part A-GEN: tick that you are liable to maintain books under 44AA if applicable, and answer the 44AB audit question.
2. Part A-BS and Part A-P&L: the balance sheet and profit and loss account. Traders without books use the "no account case" rows to report gross receipts, gross profit, expenses and net profit.
3. Schedule BP: separate speculative (intraday) and non-speculative (F&O) income. This is where losses first appear.
4. Schedule CYLA: current year set-off of F&O loss against other heads.
5. Schedule BFLA and CFL: brought forward losses adjusted and the balance carried forward, year by year.
6. Schedule CG: delivery-based equity and mutual fund gains, if any.
7. Schedule AL: assets and liabilities, mandatory when total income exceeds ₹50 lakh.
8. Schedule TDS and IT: TDS from Form 26AS and advance tax challans, reconciled with AIS.

Common mistakes traders make

• Filing ITR-1 or ITR-2 and ignoring F&O because it was a loss. AIS now carries derivative data from exchanges, and a 139(9) defective return notice or a 143(1)(a) adjustment follows.
• Reporting contract value as turnover, which pushes small traders over the audit limit on paper.
• Setting off intraday losses against F&O profit, which is not allowed.
• Claiming the ₹75,000 standard deduction against trading income.
• Choosing 44AD in a profit year without planning for the opt-out consequences in a loss year.
• Filing after 31 July 2026 and losing the 8-year carry forward.

What to do next

Download the FY 2025-26 tax P&L from every broker you used, list your other income, and compute turnover the ICAI way before deciding on 44AD. If turnover is under ₹10 crore and you have never opted for 44AD, you can file ITR-3 with a loss and no audit. If you are unsure, an expert-assisted trader return gets the turnover, set-off and schedules right the first time, and audit-tier work goes to an empanelled Chartered Accountant.