- Date : 18/04/2023
- Read: 4 mins
You should mention profit and loss from F&O trading in your ITR form. Learn which form to choose, the ITR form latest updates, the ways to ITR filing, and more.
When filing your income tax return, do you report your F&O profit and loss? If not, you should start filing your profits or losses from your futures and options (F&O) trading.
Is F&O Profit Your Business Income?
The profit you earn from trading futures and options (F&O) or other derivatives is considered your business income. Even if you are salaried, you must file your profit and loss in the Income Tax Return Form as your business income. The same is true for self-employed, professional, or business persons.
Now, you have to add the F&O profit to your total income. Once done, you'll be taxed as per the normal tax slab rate. If you've incurred a loss while trading futures and options, you'll have to file the return by the due date.
Also Read: Top 3 Tax Filing Apps to Make ITR Filing Easy and Simple
What Will Happen If You Incur Loss in F&O Trading?
Trading financial derivative products such as futures and options are highly risky. Even the most seasoned traders can incur a loss.
If you incur a loss during F&O trading, you can adjust it against other heads in the latest ITR form, such as:
- Capital gains
- Rentals
- Interest
Please remember that you can't use your salary income to adjust your F&O losses.
Also Watch: Why ITR Filing is Necessary Even When You Have Incurred Loss from F&O Trading?
If your losses from trading futures and options are not fully adjusted in a year, they will be carried forward to the next financial year. You can carry forward your F&O losses for up to eight financial years. This facility provides you with an adequate financial cushion for your losses.
What are The Deductibles You Can Claim?
You can claim deductions for all your expenses for F&O trading. Some of the most important deductions you can claim are:
- The trading portal subscription fee
- Brokerage
- Charges related to phone and broadband
- Trading course fees
- Expenses on trading equipment
ITR 1 or ITR 2: Which ITR Form Should a Salaried Person File for F&O Income?
If you are a salaried person who has earned business income through F&O trading profit, ITR 1 or ITR 2 forms are no longer suitable for you. Instead, you should file ITR 3 form. In this form, you'll have to show income from F&O trading as business/professional income. You'll have to pay tax as per your normal tax slab (after adding your salary with F&O income).
Also Read: What are the Different Types of Income Tax Returns? Which ITR Form to File?
Which ITR Form Should a Business Person File for Including F&O Income?
You can file your income tax return through ITR 4 form if you are a business person. In that case, you must file taxes under the presumptive income scheme.
Should I Go For an Audit?
If turnover from your F&O trading is more than 10 crores, you have to audit your accounts with the help of a chartered accountant. Once the audit report is complete, you must submit it with your tax return during your ITR filing.
Suppose your turnover is less than Rs. 10 crores. In that case, also you have to audit your accounts mandatorily if:
- You had opted for presumptive taxation in any year in the last five years
- You haven't opted to declare your F&O losses in the current financial year
Should You Deposit Advance Tax on F&O Profit And Loss?
Yes, you can deposit advance tax if your total profit from F&O trading is over Rs. 10,000 in a financial year. The schedule to deposit advance tax on gains from future and options trading is given below:
- June 15, 2023: 15% or more on total due tax.
- September 15, 2023: 45% or more on total due tax.
- December 15, 2023: 75% or more on total due tax.
- March 15, 2024: Complete the entire balance.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
When filing your income tax return, do you report your F&O profit and loss? If not, you should start filing your profits or losses from your futures and options (F&O) trading.
Is F&O Profit Your Business Income?
The profit you earn from trading futures and options (F&O) or other derivatives is considered your business income. Even if you are salaried, you must file your profit and loss in the Income Tax Return Form as your business income. The same is true for self-employed, professional, or business persons.
Now, you have to add the F&O profit to your total income. Once done, you'll be taxed as per the normal tax slab rate. If you've incurred a loss while trading futures and options, you'll have to file the return by the due date.
Also Read: Top 3 Tax Filing Apps to Make ITR Filing Easy and Simple
What Will Happen If You Incur Loss in F&O Trading?
Trading financial derivative products such as futures and options are highly risky. Even the most seasoned traders can incur a loss.
If you incur a loss during F&O trading, you can adjust it against other heads in the latest ITR form, such as:
- Capital gains
- Rentals
- Interest
Please remember that you can't use your salary income to adjust your F&O losses.
Also Watch: Why ITR Filing is Necessary Even When You Have Incurred Loss from F&O Trading?
If your losses from trading futures and options are not fully adjusted in a year, they will be carried forward to the next financial year. You can carry forward your F&O losses for up to eight financial years. This facility provides you with an adequate financial cushion for your losses.
What are The Deductibles You Can Claim?
You can claim deductions for all your expenses for F&O trading. Some of the most important deductions you can claim are:
- The trading portal subscription fee
- Brokerage
- Charges related to phone and broadband
- Trading course fees
- Expenses on trading equipment
ITR 1 or ITR 2: Which ITR Form Should a Salaried Person File for F&O Income?
If you are a salaried person who has earned business income through F&O trading profit, ITR 1 or ITR 2 forms are no longer suitable for you. Instead, you should file ITR 3 form. In this form, you'll have to show income from F&O trading as business/professional income. You'll have to pay tax as per your normal tax slab (after adding your salary with F&O income).
Also Read: What are the Different Types of Income Tax Returns? Which ITR Form to File?
Which ITR Form Should a Business Person File for Including F&O Income?
You can file your income tax return through ITR 4 form if you are a business person. In that case, you must file taxes under the presumptive income scheme.
Should I Go For an Audit?
If turnover from your F&O trading is more than 10 crores, you have to audit your accounts with the help of a chartered accountant. Once the audit report is complete, you must submit it with your tax return during your ITR filing.
Suppose your turnover is less than Rs. 10 crores. In that case, also you have to audit your accounts mandatorily if:
- You had opted for presumptive taxation in any year in the last five years
- You haven't opted to declare your F&O losses in the current financial year
Should You Deposit Advance Tax on F&O Profit And Loss?
Yes, you can deposit advance tax if your total profit from F&O trading is over Rs. 10,000 in a financial year. The schedule to deposit advance tax on gains from future and options trading is given below:
- June 15, 2023: 15% or more on total due tax.
- September 15, 2023: 45% or more on total due tax.
- December 15, 2023: 75% or more on total due tax.
- March 15, 2024: Complete the entire balance.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
