F&O Taxation

F&O trading in India is taxed as non-speculative business income under Section 43(5) of the Income Tax Act. That single classification cascades into a few practical consequences: you file ITR-3, you can claim expenses against your profits, your losses carry forward for eight years, and you may need a tax audit depending on turnover.

F&O profits are added to your other income and taxed at slab rates - there’s no special flat rate (unlike crypto). If you’re salaried and also trade F&O, salary stays under ITR-3’s salary head, and F&O sits as business income on the same return.

Turnover and audit threshold

For F&O, turnover is the absolute sum of all profits and losses (not the notional contract value, which would be astronomical). If your turnover exceeds ₹10 crorein a financial year, a tax audit under Section 44AB is mandatory - even if 95%+ of your transactions are digital, which most are. If you opt into the presumptive scheme under 44AD, audit kicks in earlier; most active traders don’t use 44AD for F&O.

Loss treatment

F&O losses are non-speculative business losses. They can be set off against:

• Any other business income in the same year
• Salary income? No. Business losses can’t offset salary.
• Capital gains? Yes, but only short-term capital gains.

Unused losses carry forward for 8 years and can offset any future business income (speculative or non-speculative). Compare to speculative intraday losses, which only carry forward 4 years and only offset speculative gains.

What counts as a deductible expense

Brokerage, STT, exchange charges, SEBI charges, stamp duty, GST, internet, platform subscriptions (TradingView etc.), advisory subscriptions, depreciation on the laptop you trade from - all deductible. Keep receipts for anything above ₹10,000 and a clear log of trade-related expenses. The Find My Edge CSV export bundles your charges per trade so you don’t reconstruct it at year-end.