What is F&O income considered as in Income Tax?
F&O income is treated as Non-Speculative Business Income, even though it’s trading. It’s not considered gambling or speculative.
Do I need to report F&O income in my ITR?
Yes, it's compulsory. Whether you made a profit or loss, you must report it in your income tax return.
Why is it important to report F&O even if there’s a loss?
Because the income tax department tracks all transactions via exchanges. Also, reporting loss allows you to set it off or carry it forward.
Can I carry forward F&O losses to future years?
Yes, you can carry it forward for 8 years, but only if you file your return on or before the due date.
Under which head is F&O income shown in ITR?
It is shown under Profits and Gains of Business or Profession (PGBP).
Which ITR should I file for F&O income?
Generally, you must use ITR-3. If you opt for presumptive taxation (like under Section 44AD), then ITR-4 may apply.
Do I need to maintain books of accounts if I do F&O?
Yes, if your income is more than ₹2.5 lakh or turnover exceeds ₹25 lakh in the last 3 years.
When does tax audit apply to F&O traders?
If your turnover exceeds ₹1 crore (or ₹10 crore if all transactions are digital), and you don’t show minimum profit as required, tax audit is applicable.
How is turnover calculated for F&O trading?
Turnover is the absolute profit – total of all gains and losses from trades, not just net profit.
Was there any change in how F&O turnover is calculated?
Yes. From AY 2022-23, only absolute profit is considered. Earlier, for options, premium value was also included.
What is presumptive taxation in F&O?
Under Section 44AD, you can declare profits at 6% of turnover and skip audit, if conditions are met.
Can I switch between presumptive and normal tax schemes every year?
No. If you opt out after choosing presumptive, you can’t go back for the next 5 years.
Can F&O losses be adjusted against other incomes?
Yes, but only against non-speculative business income. You can’t set it off against salary or capital gains.
Are expenses allowed against F&O income?
Yes, you can claim expenses like brokerage, internet, advisory fees, etc., as business expenses.
Can I claim cash expenses in F&O business?
You can, but not more than ₹10,000. Cash expenses above this limit are disallowed.
Can I set off F&O losses against salary income?
No. Business losses can’t be set off against salary.
Do I have to pay advance tax on F&O income?
Yes, if your total tax liability exceeds ₹10,000 in a year, you must pay advance tax in 4 instalments.
What business code should I use for F&O income in ITR?
Use 09028 – Retail sale of other products, which is generally acceptable for traders.
Is filing ITR compulsory if I only have F&O loss?
Yes, if you want to carry forward the loss, ITR must be filed before the due date.
Do I get capital gains benefits for F&O trading?
No. F&O is business income, not capital gains. So, benefits like indexation or 10% LTCG tax don't apply.
Has STT increased on F&O trading?
Yes. As per Budget 2024:
· Futures: 0.02%
· Options: 0.1% on premium
Can I use the new tax regime if I have F&O income?
Yes, but under the new regime, you won’t get deductions like 80C, 80D, etc. Choose wisely.
How are other stock transactions like intraday and long-term investing taxed?
· Intraday: Speculative business income
· Long-term investing: Capital gains, taxed at 10% (LTCG) or 15% (STCG), if not treated as business.
I invest in both stocks and F&O. How should I report it?
You need to separately report:
· F&O as business income
· Stocks as capital gains or business, depending on your trading style
Can I avoid audit if I use presumptive taxation?
Yes. If your turnover is under ₹2 crore and you declare 6%+ income, audit is not required.
Is GST applicable on F&O income?
No, GST is not applicable to F&O trading.
Is F&O income considered professional income?
No, it is business income, not professional income like that of doctors or lawyers.
Can salaried individuals do F&O and file returns?
Yes, salaried people can trade in F&O and must file ITR-3, showing both salary and business income.
Will trading platforms report my F&O trades to the government?
Yes, exchanges and brokers report trades under Annual Information Statement (AIS).
Can I show losses to reduce my tax liability?
Yes, you can adjust current year F&O loss with other non-speculative business income and carry forward the rest.