ITR filing FY 2024-25: Profits and losses from futures and options (F&O) trading have to be disclosed in your income tax return. Here’s a quick guide on how they are taxed and what steps you need to take.F&O gains are treated as business incomeThe tax department classifies income from derivatives trading as business income. This rule applies to everyone, whether you are a salaried professional, a business partner, a retiree, or even a full-time trader. Your F&O profits are added to your total taxable income and taxed at the slab rate that applies to you.Trading expenses are deductibleSince it is considered business income, you can claim deductions for costs related to your F&O activities. These can include brokerage fees, subscriptions to trading platforms, internet and phone bills, training program fees, and even the cost of equipment purchased for trading purposes.Audit required if turnover crosses ₹10 croreWith business classification also comes stricter compliance. You’ll need to maintain detailed books of accounts for all your trading transactions and expenses. If your F&O turnover in a financial year exceeds ₹10 crore, a tax audit by a chartered accountant becomes mandatory. The audit report must be submitted along with your return.Losses can be set off and carried forwardLosses from F&O trading can be adjusted against other incomes such as rent, interest, or capital gains, but not against salary income. If the entire loss cannot be set off in the same year, it can be carried forward for up to eight years, giving you time to absorb the impact.File using ITR-3 or ITR-4If you earn a salary but also have business income from F&O trading, you cannot use ITR-1 or ITR-2. You will need to file your return using ITR-3. However, if you are eligible and choose to declare income under the presumptive taxation scheme, you should use ITR-4.Advance tax on gainsIf you gained more than Rs 10,000 from F&O trading during the financial year, you were liable to pay advance tax on the income. If you haven’t paid the advance tax, you should immediately pay it. There will be a small penalty on the overdue tax but it will put you in the safe zone.
