Tax Consultant
1312 Points
Posted on 19 June 2026
For intraday trading and F&O transactions, the ITR form and audit requirement depend on how these are classified as business income.
ITR FORM:
Intraday trading (equity): Speculative business income under Section 43(5). Use ITR-3.
F&O trading: Non-speculative business income (explicitly excluded from Section 43(5)). Also use ITR-3.
Both disqualify you from ITR-2. ITR-3 handles both types in Schedule BP.
TURNOVER CALCULATION:
Intraday (speculative): Sum of the absolute value of all daily settlement differences (profits and losses). Not the gross buy/sell value of shares.
F&O: Sum of absolute values of settlement differences. Not the notional contract value.
AUDIT THRESHOLD FOR AY 2026-27 (Section 44AB):
No audit required if all three conditions are met: (1) Total business turnover including trading turnover is below Rs 10 crore. (2) Net profit is 6% or more of total turnover (6% for digital receipts, 8% for cash). (3) Opted for presumptive taxation under Section 44AD (only if applicable).
If profit is below 6% of turnover, audit is required even if turnover is small.
If you have a trading loss: audit required when turnover exceeds Rs 10 crore; advisable below that threshold if you want to carry forward losses.
LOSS CARRY-FORWARD (file on time to preserve this):
Speculative loss (intraday): Carried forward 4 years, set off only against future speculative gains.
F&O loss (non-speculative): Carried forward 8 years, can be set off against any non-speculative business income.
Must file ITR-3 by July 31, 2026 to retain carry-forward rights.
For the true cost of missing the ITR-3 deadline including interest under Sections 234A and 234B, this [late filing penalty guide](https://taxgarden.in/blog/true-cost-late-gst-tds-roc-filing-penalties-india-2026) covers the ITR and GST penalty framework.
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