Stock Trading Tax Filing — Intraday, F&O & Equity Done Right

F&O trading income (futures and options on NSE/BSE) is Non-Speculative Business Income — NOT speculative. This is because the proviso to Section 43(5) of the Income Tax Act explicitly excludes derivatives trading on a recognized stock exchange from the definition of speculative transactions. This distinction is crucial: Non-speculative losses can be set off against any income except salary (including rental income, interest income), while speculative losses can only be set off against speculative income. F&O losses can also be carried forward for 8 years (vs only 4 years for intraday/speculative losses).

F&O turnover for income tax purposes is the sum of the absolute values of profits and losses on each individual trade — not the net profit or loss, and not the notional value of contracts. For example: Trade A profit ₹1L + Trade B loss ₹60K + Trade C profit ₹40K = F&O Turnover of ₹2L (not ₹80K net profit). For options: turnover includes premium received on sale of options plus absolute value of profit/loss on each options contract. This is per ICAI guidance Note on Tax Audit. Audit under Section 44AB is required if total trading turnover exceeds ₹10 crore in FY 2025-26.

Yes. A salaried person can also trade in F&O. The F&O income/loss is reported separately under "Business and Profession" in ITR-3 (not ITR-2). The F&O profit is added to total income and taxed at slab rates. F&O losses can be set off against other income types except salary — but not directly against salary income. However, if F&O loss exceeds other non-salary income, it can be carried forward for 8 years. Important: the salaried person must file ITR-3 (not ITR-2 or ITR-1), and if trading turnover and loss situation requires audit, they must get it done by 31 October.

F&O and intraday traders can deduct legitimate business expenses from their trading income: (1) Brokerage, STT, exchange charges, stamp duty, SEBI fees; (2) Internet, mobile data used for trading; (3) Electricity for home office; (4) Trading software, charting tools, data feeds; (5) Books, courses, research subscriptions; (6) CA/professional fees; (7) Depreciation on computer and trading equipment; (8) Interest on margin loans from broker. These expenses reduce taxable trading income significantly. Note: Expenses are NOT deductible from capital gains (delivery-based equity) — only from business income (F&O/intraday). Keep all bills and payment proof.

If you have an F&O loss and wish to carry it forward to future years, you typically need a tax audit under Section 44AB — unless your total turnover is well below the threshold. Specifically: if your F&O turnover is below ₹10 crore AND profit is below 6% of turnover (applicable under presumptive scheme), audit is required. If your turnover is above ₹10 crore, audit is mandatory regardless of profit/loss. Even if audit is not strictly required, it is strongly advisable when claiming losses for carry forward — as it provides audit trail and reduces scrutiny risk. TAXAJ CAs conduct Section 44AB tax audits for traders.

For delivery-based equity shares (held overnight and longer): STCG (held 12 months or less) is taxed at 20% — raised from 15% in Budget 2024, effective 23 July 2024. LTCG (held more than 12 months) is taxed at 12.5% on gains above ₹1.25 lakh per financial year (the exemption was raised from ₹1 lakh to ₹1.25 lakh in Budget 2024). LTCG up to ₹1.25L per year is completely exempt. No indexation benefit for equity shares. These gains are reported in ITR-2 (if no intraday/F&O) or ITR-3 (if also trading intraday/F&O).

Yes — F&O traders with turnover below ₹2 crore (the 44AD threshold for eligible businesses) can opt for presumptive taxation under Section 44AD and declare 6% of turnover (or 8% if payments received by cash) as profit, without maintaining detailed books of accounts. However, once you opt for 44AD, you must continue for 5 consecutive years. If you opt out before 5 years, you cannot use 44AD again for the next 5 years. Also, 44AD cannot be used if you also have intraday speculative losses to carry forward. TAXAJ CAs evaluate whether 44AD is beneficial in your specific case before recommending it.