How F&O and intraday trading income is taxed in India

F&O (futures and options) profit is business income, and intraday share trading profit is speculative business income. Neither is capital gains. Both are added to your other income and taxed at your normal slab rate, and both are reported in ITR-3. The two differ in how losses can be set off and carried forward, which this guide explains with examples.

This guide is for returns for the financial year 2025-26 (AY 2026-27), under the Income-tax Act, 1961.

F&O and intraday tax at a glance

Each row is explained below.

How F&O income is taxed

The Income-tax Act treats a deal in shares that is settled without actual delivery as a speculative transaction. But it makes an exception for eligible derivative trades on a recognised stock exchange. So F&O trading on a recognised exchange is a business, and it is not speculative.

That has three results:

1. The profit is business income, under the head "Profits and gains of business or profession". It is not capital gains, so the capital gains rates do not apply.
2. There is no separate F&O tax rate. Your F&O profit is added to your salary and other income, and the total is taxed at your slab rate under the regime you use. For AY 2026-27, the new regime slabs go from nil up to ₹4 lakh to 30% above ₹24 lakh.
3. You can deduct business expenses. The law allows expenses "laid out wholly and exclusively for purposes of business" (section 37(1)), and it allows securities transaction tax (STT) as a deduction when the income is shown as business income (section 36(1)(xv)).

If you have business income, choosing the old regime works differently from a salaried person. You file the option by the due date, it carries on to later years, and you can withdraw it only once. Our guide on late filing and the belated return explains what happens to this choice if you file late.

Commodity derivatives traded on a recognised exchange are also outside the meaning of speculative transaction, subject to the conditions in the law.

How intraday trading is taxed

Intraday share trading means you buy and sell the same shares on the same day, so no delivery happens. Because the deal is settled without delivery, it is a speculative transaction, and the income is speculative business income.

Intraday profit is also taxed at your slab rate. There is no separate intraday tax rate. The difference from F&O shows up only when you make a loss (see the losses section below).

What is speculative business income?

Speculative business income is income from deals in a commodity, including shares, that are settled "otherwise than by the actual delivery or transfer of the commodity or scrips". It is the way the deal is settled that decides it, not how long you held the position.

F&O and intraday losses: set off and carry forward

This is where F&O and intraday trading differ.

Can F&O loss be set off against salary? No. The law says a loss under the head "Profits and gains of business or profession" cannot be set off against income under "Salaries" (section 71(2A)).

Can F&O loss be set off against STCG? Yes, in the same year. A business loss can be set off against capital gains, short-term or long-term (section 71(2)). In later years, a carried-forward F&O loss can be set off only against business income.

Example 1: salaried person with an F&O loss. Salary ₹12,00,000. F&O loss ₹1,00,000. Short-term capital gain on shares held for a few months ₹40,000.

• Salary stays ₹12,00,000. The F&O loss cannot reduce it.
• ₹40,000 of the F&O loss is set off against the ₹40,000 short-term gain.
• The other ₹60,000 is carried forward, for up to 8 years, against future business income. This needs the return filed by the due date.

Example 2: intraday loss and F&O profit. Intraday loss ₹30,000. F&O profit ₹50,000. The intraday loss cannot be set off against the F&O profit, so ₹50,000 is taxed. The ₹30,000 intraday loss is carried forward for up to 4 years, against intraday (speculative) profit only.

Example 3: F&O loss and intraday profit. F&O loss ₹30,000. Intraday profit ₹50,000. The F&O loss can be set off against the intraday profit, so ₹20,000 is taxed as speculative business income.

Do you have to show an F&O loss in your ITR?

You must file a return if your income is above the exemption limit, or if a filing condition applies to you. One of those conditions is business turnover above ₹60 lakh.

Even when you do not have to file, you must file by the due date to carry the loss forward. A loss (other than a house property loss) cannot be carried forward if the return is filed late. If you leave the loss out, you lose it.

The same applies to an intraday loss.

Which ITR form for F&O and intraday trading?

ITR-3. ITR-2 is for people with no business or profession income, and ITR-1 has no place for it either. ITR-3 is "for individuals and HUFs having income from profits and gains of business or profession", and it also takes your salary, capital gains, rent and interest. Our ITR-3 guide has the step-by-step filing process.

Do I need ITR-4 for F&O? ITR-4 is a short form only for presumptive income under section 44AD, 44ADA or 44AE. F&O and intraday income is reported in ITR-3. Whether trading income can use 44AD at all is not settled (see below).

Where to show F&O and intraday income in ITR-3

ITR-3 has separate lines for traders in its trading account (Part A-TA):

A loss goes on the same lines. Do not leave it out, or you cannot carry it forward.

Business code for F&O and intraday in the ITR

The ITR utility has separate nature-of-business codes for traders:

How to calculate F&O and intraday turnover

Turnover for a trader is not the value on your contract notes. The Institute of Chartered Accountants of India (ICAI) sets out how to work it out in its Guidance Note on Tax Audit (Revised 2025), and it says the method is "only and only for the purpose of computing 'turnover' for tax audit".

Intraday turnover: add up the profit or loss on each trade, ignoring the minus sign. ICAI calls this "the aggregate of both favourable and unfavourable differences".

F&O turnover:

1. Add up the profit or loss on each squared-off trade, ignoring the minus sign.
2. Add the premium received on options you sold, unless that premium is already part of the profit worked out on the trade.
3. Include the difference on any reverse trades.
4. A position still open on 31 March counts in the year you square it off.
5. Where a derivative is settled by delivery, the difference between the trade price and the settlement price is turnover.

Example: three F&O trades, all squared off in the year: profit ₹40,000, loss ₹25,000, profit ₹15,000. Turnover is ₹40,000 + ₹25,000 + ₹15,000 = ₹80,000. Net profit is ₹30,000.

Tax audit for F&O and intraday traders

A business must get its accounts audited under section 44AB if its turnover is above ₹1 crore. The limit is ₹10 crore if cash received and cash paid in the year are each not more than 5% of the totals. Our tax audit guide explains the full rules.

Is tax audit compulsory for an F&O loss? Not just because of the loss. In our reading, an audit is needed only if:

• your turnover (worked out as above) crosses the 44AB limit, or
• you declared income under the presumptive scheme of section 44AD in any of the last five years, then declared lower income outside it, and your total income is above the exemption limit (section 44AD(4) and (5)).

Books of account. An individual in business must keep books if business income was above ₹2,50,000, or turnover above ₹25 lakh, in any of the three years before. In a new business, the current year's figures count.

Due dates for AY 2026-27. Without an audit, the due date was 31 August 2026. For audit cases, CBDT has extended the audit report date to 21 October 2026 and the return date to 21 November 2026 (not for transfer pricing cases under section 92E), as of 2 October 2026.

Can F&O traders use presumptive tax under section 44AD?

This is not settled. Some tax guides say the law allows it. The ITR-4 utility does not accept the trading business codes, as reported by tax publishers, and we have not found an official page that answers it. If you are thinking about 44AD for trading income, speak to a chartered accountant first. Our guide on presumptive tax under section 44AD and 44ADA explains the five-year rule that applies once you opt in.

STT on F&O and intraday trades

Securities transaction tax (STT) is charged on the trade itself. The rates for F&O went up from 1 April 2026:

So trades in 2025-26 (the return you file now) carry the old rates, and trades from April 2026 carry the new ones. Because F&O and intraday income is business income, the STT you paid is allowed as a deduction.

Advance tax on F&O and intraday income

Your employer's TDS is worked out on your salary, so it may not cover tax on your trading profit. If the tax you expect to owe for the year is ₹10,000 or more, you pay advance tax in four parts:

If you pay less, interest is charged under sections 234B and 234C.

Shares you take delivery of: capital gains or business?

Shares you buy, take into your demat account and later sell are not speculative. The profit is either capital gains or business income.

• As capital gains: listed shares held for more than 12 months are long-term. For sales from 23 July 2024, short-term gains are taxed at 20% (section 111A) and long-term gains at 12.5% above ₹1,25,000 (section 112A), when the STT conditions are met.
• As business income: if you treat the shares as stock-in-trade, the profit is business income (business code 21011) and is taxed at your slab rate.

CBDT Circular 6/2016 lets you choose. You may treat listed shares as stock-in-trade. For listed shares held for more than 12 months, if you choose capital gains, the tax officer will not dispute it. Once you choose, you follow it in later years too.

Missed the due date with an F&O loss?

For AY 2026-27, the due date without an audit was 31 August 2026. You can still file a belated return by 31 December 2026, but an F&O or intraday loss in a belated return cannot be carried forward. You can still set it off in the same year, for example against short-term capital gains.

To carry forward a loss from a late return, you would need condonation of delay under section 119(2)(b). Under CBDT Circular 11/2024, the request is made to the tax department within five years from the end of the assessment year, and you have to show a reasonable cause for the delay.

If you filed your return on time but left out your F&O income or loss, you can correct it with a revised return. If the time for that has passed and you need to add income, see the updated return (ITR-U) guide. An updated return cannot be filed to show a loss.

Which law applies

This guide uses section numbers from the Income-tax Act, 1961, which governs the financial year 2025-26 and earlier. Trades from 1 April 2026 fall in tax year 2026-27, under the Income-tax Act, 2025, which uses different section numbers.

How FilingSetu can help

We file ITR-3 for F&O and intraday traders.

• We prepare your trading profit and loss account, and a balance sheet where one is needed, from your broker's statements.
• A chartered accountant checks every return before filing.
• We help you e-verify the return.
• You get a named manager, and the consultation is free.

If your trading turnover crosses the audit limit, our tax audit service covers the audit and the year's ITR.

See our ITR filing service

Frequently asked questions