Guidence on taxation of future & option trading

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Shubham Patel

student

78 Points Posted on 13 August 2023

can someone guide me on how to show f&o trading in income tax return ? in case of loss is it required to get audit us 44AB ? how to calculate turnover? is it compulsory to show minimum 8% profit ?? can i show loss without audit? someone have any guidance material in this regards please share with me

Replies (5)

Quick Summary

This discussion provides guidance on declaring Futures & Options (F&O) trading in your income tax return. F&O trading is treated as a business, and turnover is calculated by summing all net positions (profits and losses). You can generally file your return without an audit, even with losses, provided you don't need to declare a minimum profit under specific sections like 44AD. Refer to Section 44AB for AY 2023-24 for detailed audit requirements.

Eswar Reddy S

CFO- at NHTF

15022 Points Posted on 13 August 2023

Trading in F & O is considered as a normal business.

Turnover will be addition of all net positions ( Profit + Loss )

You may file ITR without Audit if 8% profit is declared on turnover

rama krishnan

5751 Points Posted on 14 August 2023

The turnover threshold limit for f&o trading is 10 crores (since there's no cash component involved in excess of 5% in either expenses or receipts). unless you declare income under 44AD, there's no requirement to offer 6 or 8% as total income. further there's no requirement to audit your books. you can simply show the loss incurred from f&o trading without auditing

Eswar Reddy S

CFO- at NHTF

15022 Points Posted on 14 August 2023

@ Shubham Patel,

You may refer Section 44AB ( FA 2022) for further guidance if you are filing ITR for AY-2023-24

sabyasachi mukherjee

Profession

19978 Points Posted on 14 August 2023

Pls post your transaction.

Aashok Kumar Sharma

Finance/Compliance Consultant

77884 Points Posted on 07 November 2026

F&O is non-speculative business income:

• Trading in F&O on recognised exchanges is a non-speculative business (Sec 43(5) proviso (d)). Report it in ITR-3 under business income (Schedule BP), with turnover per the ICAI Guidance Note (2022): the absolute sum of profits and losses of each trade. Option premium isn't added.

• Expenses (brokerage, internet, advisory, depreciation) are deductible. Losses can be set off against other income except salary, and carried forward 8 years (file by the due date).

• Tax audit: required if turnover exceeds Rs 10 crore (since transactions are digital). Below that, audit is required only if you opted out of 44AD in the past 5 years (44AD(4)) and declare a lower profit or loss with income above the exemption. F&O is typically not run under 44AD.

• So with a modest loss and turnover below Rs 10 crore, no audit in most cases. Maintain books (44AA) if thresholds are crossed.