Profits from intraday trading and Futures & Options (F&O) trading are taxed differently from regular stock investments in India. While intraday trading is deemed speculative business income under section 43(5) of the Income Tax Act, F&O income is classified as non-speculative business income.
This distinction affects tax rates, loss set-off rules, and even the ITR form a trader must file. Here’s a detailed look at how intraday and profits are taxed in India under the applicable rules.
How intraday trading gains are taxed in India?
Purchasing and selling securities listed in a stock exchange one the same day is known as intraday trading. The trader’s primary purpose of transacting in this method is to take advantage of the short-term price movements and make profits the very same day.
Since is considered speculative business income, it must be reported in the income tax return (ITR) under the head “Profit and Gain From Business or Profession,” and taxed at the applicable slab rate of a person, according to ClearTax.
Since intraday trading is a business income, a taxpayer must file ITR-3 and prepare financial statements related to the transactions. The due date for filing ITR-3 and reporting intraday trading income is as follows:
- 31 August 2026- if tax audit is not applicable (For FY 2025-26)
- 31 October 2026 – if tax audit is applicable
Intraday losses can be set off only against speculative business income and can be carried forward for up to four assessment years, subject to timely ITR filing.
Since intraday trading is treated as business income under income tax laws, traders may also have to maintain books of accounts as per section 44AA and comply with audit provisions under 44AB in certain cases, depending on turnover and profit declaration, according to ClearTax.
How are profits from F&O trading taxed?
According to Section 66 of the Income Tax Act, 2025, income or loss from F&O is classified as non-speculative business income. Hence, traders must report F&O gains and losses as normal business income under the head ‘Profits & Gains from Business and Profession.’
Since income from F&O is treated as business income, traders are required to report such profits or losses in, which is meant for individuals earning income under the head “Profits and Gains from Business or Profession” (PGBP). However, taxpayers opting for the presumptive taxation scheme, subject to eligibility conditions, can file their returns using ITR-4 instead.
Additionally, F&O traders must maintain books of accounts if their income exceeds ₹2.5 lakh or turnover exceeds ₹25 lakh in any of the three preceding years or in the first year in case of a new business, according to ClearTax.
You can set off F&O losses against other income (except salary income) in the same financial year. Any remaining losses can be carried forward for up to 8 years and adjusted against future income. Though, traders must note that carried forward F&O losses cannot be set off against speculative business income in the subsequent years.