F&O and Intraday Trading Tax Guide — India FY 2025-26
How F&O, intraday, and commodity trading income is taxed in India. Business income rules, ITR-3 requirement, loss set-off, and advance tax obligations.
The key rule — trading is business income
F&O (futures and options), intraday equity trading, and commodity trading are treated as business income — not capital gains. This has major implications for tax rates and deductions.
| Trading Type | Tax Treatment | ITR Form | Expenses Allowed |
|---|---|---|---|
| F&O (futures and options) | Non-speculative business income — taxed at slab rate | ITR-3 | Yes — brokerage, STT, internet, workspace |
| Intraday equity | Speculative business income — taxed at slab rate | ITR-3 | Yes — brokerage, charges |
| Commodity trading (MCX) | Non-speculative business income — taxed at slab rate | ITR-3 | Yes |
| Delivery-based equity (held overnight) | Capital gains — NOT business income | ITR-2 or ITR-3 | No (only purchase/sale price matters) |
What expenses can F&O traders deduct?
- Brokerage paid to your broker
- STT (Securities Transaction Tax)
- Exchange transaction charges
- Internet and computer expenses used for trading
- Workspace rent (if you have a dedicated trading setup)
- Trading software or data subscription fees
- Advisory or mentor fees (if professional)
F&O loss — can you offset it against salary?
This is a critical point:
- F&O loss CANNOT offset salary income. Salary is a separate head — you pay full tax on it regardless of F&O losses.
- F&O loss CAN offset other business income, capital gains (in some cases), or other non-salary income.
- Unabsorbed F&O loss carries forward for 8 years and can be set off against future F&O / business profits.
Tax audit — when is it required?
F&O turnover is calculated as the absolute sum of all settlement amounts (not the contract value). If this turnover exceeds:
- ₹1 crore (or ₹3 crore if 95%+ receipts are digital) — tax audit under Section 44AB is required
- Below threshold but you want to declare income below 8% of turnover — audit is required
Advance tax for traders
If your tax liability is above ₹10,000, you must pay advance tax in instalments:
| Instalment | Due date | Amount |
|---|---|---|
| 1st | June 15 | 15% of estimated annual tax |
| 2nd | September 15 | 45% of estimated annual tax |
| 3rd | December 15 | 75% of estimated annual tax |
| 4th (final) | March 15 | 100% of estimated annual tax |
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