Income Tax Filing 2025: New Business Codes for Intraday, F&O and Delivery-Based Trading

1. Introduction: New Business Codes for Securities Trading

To facilitate accurate classification of share trading income and ensure consistency in return filing, the Income Tax Department has introduced dedicated business codes under the "Nature of Business" section in ITR utilities. These codes help determine:

• The nature of income (speculative, non-speculative, or business),
• The appropriate ITR form,
• Audit applicability under Section 44AB,
• Presumptive taxation under Section 44AD, and
• Loss carry-forward eligibility.

Business Classification for Intraday, F&O, and Delivery-Based Trading:

The business codes relevant to share trading are as follows:

2. Comparative Table of Business Codes and Tax Treatment

3. Clarification: Section 44AD is Legally Available for Code 21011

A common misconception exists that Section 44AD is not applicable to delivery-based share trading declared under business head. This is incorrect. Code 21011 is fully eligible for Section 44AD, subject to certain conditions.

Eligibility Conditions under Section 44AD for Code 21011

• Assessee must be an Individual, HUF, or Partnership Firm (not a Company or LLP).
• Turnover must not exceed ₹2 crore (₹3 crore where 95% or more receipts are digital).
• Trading must be delivery-based, not speculative or derivative.
• Income should be offered as business income, not under "Capital Gains."

Legal and Administrative Support

• CBDT Circular No. 6/2016: Clarifies that delivery-based shares can be treated either as investment or business at the discretion of the assessee.
• Sucon India Ltd. v. DCIT (ITAT Delhi, 2022): Held that Section 44AD is applicable for delivery-based equity trades offered as business income.
• International Fresh Farm Products v. ACIT (2021): Reinforces that Section 44AD is not available for speculative/F&O business, but does not bar it for delivery-based trades treated as business.

4. Important Utility Constraint - ITR-4 Limitation

Although legally permitted, Code 21011 cannot currently be selected in the ITR-4 utility, even when opting for Section 44AD. This is due to utility validation restrictions, and not a legislative bar.

Implications and Workaround

• Use ITR-3 to file income under Code 21011 with Section 44AD.
• Do not use ITR-4 if reporting Code 21011, even with presumptive taxation.
• This applies similarly to Codes 21009 and 21010 (F&O and Intraday), which must also be filed via ITR-3.

5. Legal and Procedural Summary Table

6. Professional Filing Recommendations

As per the advisory of Varun Amita Gupta & Co., Chartered Accountants:

1. If only delivery-based equity trading is conducted, and Section 44AD is intended to be used, select Business Code 21011 and file using ITR-3.

2. Do not use ITR-4 with Code 21011, even though Section 44AD is applicable.

3. Similarly, for F&O and Intraday trading, use Codes 21010 and 21009 respectively, with ITR-3 only.

4. File the return within the due date under Section 139(1) to preserve the right to carry forward business losses under Sections 70 to 80.

5. Maintain full documentation: contract notes, trading summaries, and profit-loss statements, especially in cases where turnover computation or audit is disputed.

The author can also be reached at varunmukeshgupta96@gmail.com