For futures and options (F&O) traders, the revised ITR-3 form for assessment year 2026-27 has made it mandatory to report F&O turnover and income. The income tax return (ITR) will be marked defective without these details.
The revised ITR-3 form has enhanced disclosure requirements in Schedule Part A —Trading Account. Taxpayers have to separately report income and turnover from F&O, intraday equity, commodity and currency, enhancing transparency and improving tax compliance. They must separately report F&O turnover and income, ensuring a clear distinction between non-speculative derivative trading and speculative intra-day equity transactions.
Accurate reporting of F&O turnover and income in the dedicated ITR-3 fields is essential as these disclosures will help the income tax department to classify derivative transactions and verify loss set-off claims. Incomplete or incorrect reporting may cause the return to be flagged as defective under Section 139(9), requiring rectification within the prescribed time limit.
If the defect is not corrected, the return may be treated as invalid, leading to late-filing consequences and loss of certain tax benefits. Proper disclosure is also important for preserving the eligibility to carry forward non-speculative business loss. Any inconsistencies between broker’s record and ITR disclosures can increase the likelihood of scrutiny or clarification notices.
Sandeep Sehgal, partner, Tax, AKM Global, says the new disclosure fields are designed to help reconcile information with broker reports, tax audits, and annual information statement (AIS) records. “Timely and accurate filing is essential to preserve loss carry-forward benefits and avoid compliance issues,” he says.
Tax on trading
Taxpayers must note that F&O income is treated as non-speculative business income and is taxable at slab rates. The eligible losses can be set off against any other business income, except salary income. Unabsorbed non-speculative business losses can be carried forward for up to eight assessment years.
In contrast, intraday equity trading is classified as speculative business activity. Such losses can be set off only against speculative business profits and may be carried forward for four assessment years.
More transparency
Earlier, only turnover and income from intra-day trading needed to be reported separately. There was no specific field for reporting turnover and income from F&O transactions, which were aggregated with other business receipts and income in the profit & loss account.
Derivative trading volumes have increased substantially in recent years, making it important for the tax department to distinguish between speculative and non-speculative business activities and verify reported income more effectively.
Neeraj Agarwala, senior partner, Nangia & Company, says if a taxpayer engaged in F&O or intraday trading leaves the relevant fields blank, the return may not accurately reflect the nature of the business activity. “Depending on the facts of the case, the taxpayer may receive a notice seeking clarification or may be required to revise the return to provide complete information,” he says.
For assessment year 2026-27, the due date for filing ITR-3 is August 31, 2026 in cases where the accounts are not required to be audited. Where tax audit is mandated, the due date is October 31, 2026.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Investors should assess their financial goals, risk appetite and consult a qualified financial advisor before making investment decisions.
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