How to file F&O Income in ITR
F&O Income: Non-Speculative Business Income
F&O income is classified as non-speculative business income, i.e., normal business income. Declare your F&O profits or losses under the “Profits and Gains from Business” head.
For example, if you earned ₹50,000 from F&O trading, it should be reported as business income.
Using the Correct ITR Form
Use ITR-3 for reporting F&O income, as it is designated for business income. Filing the correct form ensures compliance and accurate tax calculation.
Example:
For a turnover of ₹5 lakhs, ITR-3 is the appropriate form.
Know When an Audit is Required
An audit is necessary if your turnover exceeds ₹1 crore in a year. For F&O trading, this threshold is ₹10 crore if 95% or more transactions are digital.
Example:
If your turnover from F&O trading is ₹12 crore, an audit is mandatory.
How to Calculate F&O Turnover
Turnover = Sum of positive and negative differences. Ensure accurate calculation to determine audit applicability.
Example:
Buying 100 units at ₹200 and selling at ₹210 results in ₹1,000 (210×100 – 200×100) turnover.
Tax Audit for Turnover Below ₹2 Crore
Presumptive Scheme Opted:
– No tax audit requirement exists when the Presumptive Scheme is opted for, i.e., declaring 6% of turnover as income.
Presumptive Scheme Not Opted:
– The normal threshold limit prescribed under section 44AB(a) will apply.
Presumptive Scheme Previously Opted and Subsequently Withdrawn:
– Tax audit is mandatory under section 44AB(e) if section 44AD(4) applies, meaning the trader opted out of the Presumptive Taxation Scheme within the last 5 years and has shown losses or profits below 6% of turnover.
Tax Audit for Turnover Between ₹2-10 Crore:
If your F&O trading turnover is between ₹2-10 crore:
– You do not need a tax audit if 95% or more of your transactions are digital.
– If less than 95% are digital, a tax audit is required.
Declaring a Loss:
– If you declare a loss and turnover is below ₹2 crore, a tax audit is mandatory if the loss is less than 6% of turnover and you have opted out of the presumptive tax scheme in the past 5 years.
Reporting F&O Losses
Report F&O losses to carry them forward and offset future income for up to 8 years. This would help you reduce future tax liabilities if you have any future gains.
Example:
If you incurred a loss of ₹3 lakhs, it can be offset against future gains.
Complete Reporting
Ensure all F&O trading activities are included in your Income Tax Return (ITR).
Not reporting can lead to tax notices as the tax department tracks all the transactions. If you made profits from trades, include them to avoid penalties.
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