What changed in 2026
- New law: the Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026. It uses a single tax year in place of the previous year and assessment year, so income earned from 1 April 2026 to 31 March 2027 belongs to tax year 2026-27.
- Same treatment: section numbers changed, but F&O income is still non-speculative business income, losses still carry forward for eight years and the tax audit thresholds are unchanged.
- Higher STT: from 1 April 2026, STT rose to 0.05% on futures and 0.15% on options premium. See our STT tax calculator.
- Income from 2025-26: returns for income earned up to 31 March 2026 are filed under the 1961 Act, with the old STT rates.
How trading income is classified
| Activity | Tax treatment | Rate | Losses carried forward |
|---|---|---|---|
| Futures and options on a recognised exchange | Non-speculative business income | Your slab rate | 8 years, against business income |
| Intraday equity trades | Speculative business income | Your slab rate | 4 years, against speculative income only |
| Shares held up to 12 months | Short-term capital gain | 20% | 8 years, against capital gains |
| Shares held over 12 months | Long-term capital gain | 12.5% on gains above ₹1.25 lakh a year | 8 years, against long-term gains |
Futures and options on commodities and currencies traded on recognised exchanges are treated the same way as equity F&O.
Tax rates
F&O profit is added to your salary, interest and other income, and the total is taxed at your slab rate. The new tax regime is the default, and its slabs for tax year 2026-27 are the same as for 2025-26.
| Total income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 lakh to ₹8 lakh | 5% |
| ₹8 lakh to ₹12 lakh | 10% |
| ₹12 lakh to ₹16 lakh | 15% |
| ₹16 lakh to ₹20 lakh | 20% |
| ₹20 lakh to ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
- A 4% health and education cess is added to the tax, and a surcharge applies above ₹50 lakh of income.
- Under the new regime, a rebate removes the tax if your total income is up to ₹12 lakh. F&O income counts towards that limit. The rebate does not cover capital gains taxed at special rates.
- You can choose the old regime instead. With business income, you can switch back to the new regime only once.
How to calculate F&O turnover
Turnover decides whether you need a tax audit. For F&O it is not the value of the contracts you traded. Under the ICAI Guidance Note on Tax Audit, F&O turnover is the total of the profits and losses on each trade, all counted as positive numbers.
| Trade | Result | Counts towards turnover |
|---|---|---|
| Nifty option sold and bought back | ₹12,000 profit | ₹12,000 |
| Bank Nifty option bought and sold | ₹8,000 loss | ₹8,000 |
| Nifty futures | ₹5,000 profit | ₹5,000 |
| Stock option | ₹15,000 loss | ₹15,000 |
| Total | ₹6,000 loss | ₹40,000 |
Your broker's tax P&L statement usually shows a turnover figure. Check how it was worked out before you use it.
Do you need a tax audit?
The audit rules are the same in both laws: section 44AB of the 1961 Act became section 63 of the 2025 Act.
- Turnover above ₹10 crore: an audit is required. The ₹10 crore limit applies when cash receipts and payments are each no more than 5% of the total, which is true for almost every F&O trader because trades settle through the bank.
- Turnover up to ₹10 crore: no audit is needed in most cases, including when you have a loss.
- The presumptive scheme: a resident individual whose business turnover is up to ₹3 crore, with cash receipts within 5%, can declare 6% of turnover as profit instead of keeping full accounts. This is section 44AD of the 1961 Act, carried into the 2025 Act. Whether it suits F&O income is a question for your chartered accountant.
- The exception: if you declared income under the presumptive scheme in any of the previous five years, then declare a profit below the presumptive rate, an audit is required when your total income is above the basic exemption limit.
Under the 2025 Act, the audit report is filed in Form 26, which replaces Forms 3CA, 3CB and 3CD. A chartered accountant can tell you whether any of these apply to you.
Setting off and carrying forward losses
- In the same year: an F&O loss can be set off against any other income except salary, such as interest, rent, capital gains or other business income.
- In later years: what is left can be carried forward for eight years and set off against business income only.
- The condition: you must file your return by the due date. A loss reported in a belated return cannot be carried forward.
- Intraday equity losses are speculative and can be set off only against speculative income, for four years.
Expenses you can claim
Because F&O income is business income, you can deduct the costs of earning it:
- brokerage, exchange transaction charges, SEBI fees, stamp duty and the GST on them,
- STT, which is deductible when your trading income is business income,
- subscriptions to trading software, data and charting tools, including platforms such as QuantPower,
- internet and phone bills, in proportion to trading use,
- depreciation on a computer used for trading,
- interest on money borrowed for trading, and
- fees paid to your chartered accountant for your trading accounts.
Keep invoices and contract notes. If your business income exceeds ₹2.5 lakh, or your turnover exceeds ₹25 lakh, in any of the previous three years, you must also keep books of account.
STT and your costs
STT is charged on every F&O sale and cannot be avoided, so it comes off your profit before tax.
| Transaction | STT from 1 April 2026 | Charged on | Paid by |
|---|---|---|---|
| Futures | 0.05% | Traded value | Seller |
| Options | 0.15% | Premium | Seller |
| Options exercised at expiry | 0.15% | Intrinsic value | Buyer |
Selling one lot of Nifty futures at 25,000, with a lot of 65, costs ₹812.50 in STT, up from ₹325 at the old rate. Our STT tax calculator works out STT and the other charges for a trade.
Advance tax
If your tax for the year, after TDS, is ₹10,000 or more, pay it in instalments during the year:
| Due by | Share of the year's tax |
|---|---|
| 15 June | 15% |
| 15 September | 45% |
| 15 December | 75% |
| 15 March | 100% |
Interest is charged on any shortfall. F&O profits are hard to predict, so review your profit each quarter and pay on what you have earned so far.
Filing your return
- Form: F&O income is reported as business income in ITR-3, with your F&O turnover and profit or loss.
- Records: use your broker's tax P&L statement and contract notes, and check them against your Annual Information Statement on the income tax portal.
Due dates for income earned in 2025-26:
| Return | Due date |
|---|---|
| Without tax audit | 31 August 2026 |
| With tax audit | 31 October 2026, extended by the CBDT to 21 November 2026 |
| Belated return | 31 December 2026 |
| Revised return | 31 March 2027, with a fee of up to ₹5,000 after 31 December 2026 |
The 31 August date for business returns without an audit is new; until 2025 the date in the law was 31 July. The Finance Act, 2026 also moved the last date for a revised return from 31 December to 31 March. For this year the CBDT has extended the tax audit report date from 30 September to 21 October 2026, and the return date for audit cases from 31 October to 21 November 2026. Dates can move again, so check the e-filing portal before you rely on them.
Losses in a belated return cannot be carried forward. Returns for tax year 2026-27 will be filed in 2027 under the 2025 Act.
Common mistakes
- Reporting F&O as capital gains. F&O income goes in ITR-3 as business income.
- Not filing because of a loss. Without a return filed on time, you lose the right to carry the loss forward.
- Using contract value as turnover. Turnover is the total of profits and losses counted as positive numbers.
- Missing advance tax. A large profit in one quarter brings interest if you wait until March to pay.
- Forgetting the rebate limit. A small F&O profit can lift your income above ₹12 lakh and make your other income taxable too.
Keeping records with QuantPower
QuantPower's Verified P&L, order management and strategy performance reports help you track every trade through the year. For filing, use your broker's tax P&L statement and contract notes as the main record.
Related guides
- STT tax calculator: STT and the other charges on a trade
- Brokerage calculator: the full cost of a trade before tax
- Options trading: how options work, from premium to expiry
- Intraday trading: the basics, and why intraday equity is speculative income
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Frequently asked questions
Is F&O income taxed as capital gains?
No. Futures and options traded on a recognised exchange are treated as non-speculative business income, added to your other income and taxed at your slab rate, plus 4% cess.
Can I set off an F&O loss against my salary?
No. An F&O loss can be set off against other income such as interest, rent or capital gains in the same year, but not salary. The rest is carried forward for eight years.
Do I need a tax audit if I made a loss in F&O?
Not usually. An audit is required if your turnover is above ₹10 crore, or if you used the presumptive scheme in the previous five years and now declare a lower profit with income above the exemption limit.
Which ITR form should F&O traders file?
ITR-3, because F&O income is business income.
Is STT deductible for F&O traders?
Yes. When your trading income is business income, STT paid on those trades is a deductible expense.
What changed under the Income-tax Act, 2025?
The law and its section numbers changed from 1 April 2026, and the tax year replaced the previous year and assessment year. The treatment of F&O income, the audit thresholds and the loss rules stayed the same.
Sources
- Income-tax Act, 2025, in force from 1 April 2026, and the Income-tax Act, 1961 for income up to 31 March 2026
- Income-tax Rules, 2026: Form 26 for the tax audit report, and the Income Tax Department's Form 26 FAQs (incometaxindia.gov.in), checked 20 October 2026
- Income Tax Department, return of income under the Income-tax Act, 1961 as amended by the Finance Act, 2026 (incometaxindia.gov.in), and the e-filing portal's income tax return FAQs for AY 2026-27 (incometax.gov.in), for the due dates and the belated and revised return dates, checked 20 October 2026
- NSE circular NSE/FATAX/73524 of 31 March 2026 and NSE's STT rates page, for STT from 1 April 2026 under the Finance Act, 2026 (nseindia.com), checked 20 October 2026
- ICAI Guidance Note on Tax Audit, for the calculation of F&O turnover
- CBDT extension of the tax audit report and return due dates for audit cases, AY 2026-27, as reported by All India Radio News (newsonair.gov.in), 29 September 2026
- Income Tax Department e-filing portal (incometax.gov.in)