Tax filing has become more detailed for intraday and F&O traders this year. Knowing a few key rules before filing your ITR can save you from unnecessary notices and compliance hassles
Buying and selling shares has become easier than ever. Many people now actively trade in stocks, while others try their hand at intraday trading or futures and options (F&O) to earn extra income. But when it comes to filing income tax returns, trading income is treated very differently from normal investment gains.
For Assessment Year (AY) 2026-27, traders need to be more careful than before. The Income Tax Department has introduced additional disclosure requirements in the latest ITR forms, especially for those earning through intraday and F&O trading.
1. Picking the right ITR form is the first step
One of the biggest mistakes traders make is selecting the wrong ITR form. If you earn income from intraday trading or F&O transactions, you will generally have to file ITR-3. This is because the Income Tax Department treats intraday trading as speculative business income, while income from F&O trading is considered non-speculative business income.
ITR-2 is meant for taxpayers who only have capital gains from investments, while ITR-1 is available only for taxpayers meeting specific eligibility conditions.
2. Understand how your trading income is classified
Not every stock market transaction is taxed in the same way. If you buy shares and sell them later as an investment, the profit is normally taxed under capital gains. However, if you frequently trade or carry out intraday transactions, the income is treated as business income.
Similarly, profits or losses from F&O trading are also treated as business income, even though they are not considered speculative.
3. Report the correct business activity in ITR-3
The latest ITR-3 asks traders to mention the exact nature of their business by using the prescribed business activity codes. For AY 2026-27, the relevant codes include:
- 21009 for intraday (speculative) trading
- 21010 for futures and options trading
- 21011 for share trading carried out as a business
4. Separate disclosure of intraday and F&O income
One of the biggest changes this year is the requirement to disclose intraday and F&O figures separately. Under the Trading Account section of ITR-3, taxpayers now need to report turnover from intraday trading separately from turnover generated through F&O transactions.
Earlier, traders were not required to provide this level of segregation.
5. Keep proper records and books of account
Maintaining proper financial records has become even more important for active traders. Generally, books of account may be required if business turnover exceeds ₹25 lakh or net profit exceeds ₹2.5 lakh in any of the previous three financial years. Depending on turnover levels and the nature of transactions, tax audit provisions may also apply.
6. Be careful before opting for presumptive taxation
Some taxpayers assume that they can simply choose presumptive taxation and file ITR-4 to simplify compliance. However, this may not be appropriate for intraday or F&O income. Business income from trading has specific tax treatment, and selecting the wrong return form can create compliance issues.
7. Don’t miss the filing deadline
For taxpayers whose accounts are not required to be audited, the due date for filing ITR-3 for AY 2026-27 is 31 August. Waiting until the last few days can increase the chances of mistakes, especially for traders who need to calculate turnover and reconcile broker statements.
