Find
Income from futures and options on a recognised stock exchange is non-speculative business income, not capital gains. It is shown in ITR-3 under profits and gains of business or profession.
ITR
F&O trading income is business income
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Provisions
Sec 43(5), Income-tax Act 1961; Sec 28, Income-tax Act 1961 (now Sec 26, Income-tax Act 2025)
Analysis
Sec 43(5) of the 1961 Act excludes eligible derivatives traded on recognised exchanges from speculative transactions, so they are normal business. Example: F&O profit of ₹2.8 lakh with ₹40,000 of expenses gives business income of ₹2.4 lakh, taxed at slab rates along with your other income. Showing it as capital gains is a common error that can lead to a defective notice.
Close
- Download the F&O P&L and tax statement from your broker
- Compute net profit after expenses
- Report it in ITR-3 as business income
- Keep contract notes for the year
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