How to file ITR-3 with Zerodha F&O turnover

ITR-3 is the income tax return form for individuals and Hindu Undivided Families (HUFs) who have income or loss from a business or profession. Because the Income Tax Act classifies F&O trading as non-speculative business income under the proviso to section 43(5), any trader with even a single F&O contract in the financial year must file ITR-3 rather than ITR-2. This guide covers the complete procedure for Assessment Year 2025-26 (Financial Year 2024-25) using the Tax P&L data available on Zerodha Console.

Who must file ITR-3

File ITR-3 if you are an individual or HUF and:

• Have traded futures, options, or commodity derivatives classified as F&O income.
• Have intraday equity profits treated as speculative business income that you wish to report under business income.
• Have any other business or professional income alongside capital gains or salary.
• Are carrying forward a business loss from a prior year and need to claim set-off.

If your only income sources are salary, capital gains, and dividends, and you have no F&O trades, file ITR-2 instead. Refer to How to file ITR-2 with Zerodha capital gains for that procedure.

Prerequisites

• The Tax P&L statement from Zerodha Console (see How to download the Tax P&L statement from Zerodha Console).
• The capital gains CSV from Console if you also have equity delivery trades (see How to download the capital gains statement on Zerodha).
• Your Annual Information Statement (AIS) and Form 26AS from the e-filing portal.
• A record of all trading-related expenses: brokerage, exchange transaction charges, Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), SEBI fees, Goods and Services Tax (GST) on brokerage, internet, data subscriptions, and advisory fees.
• If audit is applicable, a completed tax audit report (Form 3CB + 3CD) from a practising CA.
• ITR-3 offline utility from incometax.gov.in.

Understanding F&O income classification

Non-speculative business income

Section 43(5) of the Income Tax Act defines speculative transactions as those where contracts are settled otherwise than by actual delivery. Futures and options contracts on a recognised stock exchange are expressly excluded from this definition by the proviso to section 43(5). Therefore, F&O profits and losses are treated as non-speculative business income, and any F&O loss can be set off against income from other heads (except salary) in the current year and carried forward for eight assessment years.

Contrast this with intraday equity trading, which remains a speculative transaction and is reported under the head Profits and Gains from Business or Profession but in a separate speculative bucket. Speculative losses can only be set off against speculative gains, not against F&O or other business income. See How to report intraday speculative income for that procedure.

Treatment of losses under section 72 and 73

An unabsorbed non-speculative business loss (such as an F&O loss) can be carried forward under section 72 and set off against any business income in each of the next eight assessment years. However, the taxpayer must have filed the return of income on or before the due date for the year in which the loss was incurred; a belated return filed after the due date forfeits the carry-forward benefit for business losses (though this restriction does not apply to capital loss carry-forward under section 74). Filing on time is therefore especially important for F&O traders with losses.

Step-by-step procedure

Step 1: Download the Tax P&L statement from Console

Log in to console.zerodha.com. Navigate to Reports → Tax P&L and select the financial year 2024-25. The page shows:

• Equity delivery turnover and realised P&L (capital gains, reported in Schedule CG).
• F&O turnover and realised P&L (business income, reported in Schedule BP).
• Intraday equity turnover and realised P&L (speculative business income, reported in Schedule BP under a separate speculative sub-head).
• Charges summary (brokerage, STT, CTT, exchange charges, GST) which form allowable business deductions.

Download the detailed CSV for F&O trades. The Zerodha ITR capital gains statement page and the Console Tax P&L statement explain the fields in detail.

Step 2: Compute F&O turnover

The correct method for computing F&O turnover for the purpose of section 44AB, as per ICAI guidance, is:

1. For futures: sum of the absolute value of every settlement profit or loss (each expiry or squared-off trade counts separately).
2. For options: sum of the absolute value of every settlement profit or loss, plus the total premium received on sale of options.

The Zerodha Tax P&L page displays a turnover figure for F&O. Verify it against your own computation using the trade-level CSV. If using the Quicko integration on Console, turnover is computed automatically.

Step 3: Determine tax-audit applicability

Under section 44AB:

If audit applies, engage a CA. The deadline shifts from 31 July to 31 October of the assessment year, and you must upload Form 3CA/3CB + 3CD before filing ITR-3.

Step 4: Download and install the ITR-3 utility

On incometax.gov.in, navigate to Downloads → Offline Utilities → ITR-3 for AY 2025-26. Download and open the offline utility. Alternatively, the online portal offers a guided wizard, but for traders with both F&O and capital gains, the offline utility or an integrated platform such as Quicko is more practical for handling the volume of entries.

Step 5: Fill in Part A general information

Enter PAN, name, date of birth, address, filing status, residential status, and bank account details. Select the tax regime. For AY 2025-26, the new tax regime is the default under Finance Act 2024. Under the new regime, most deductions (80C, 80D, HRA, etc.) are not available but the basic exemption limit is Rs 3 lakh. Under the old regime, trading-related expenses and Chapter VI-A deductions are available. Discuss the choice with your CA.

Step 6: Fill the Trading Account (Profit and Loss Account)

Navigate to Schedule P&L or the trading account section. Enter:

Revenue side:

• Gross receipts (turnover) from F&O: from the Zerodha Tax P&L CSV.
• Gross receipts from intraday equity (if any).

Expense side (allowable deductions for traders under old regime):

• Brokerage paid to Zerodha (from the charges summary on the Tax P&L page).
• STT and CTT (note: STT paid on business income trades is deductible as an expense; it is not available as a credit or rebate in the same way as for investors).
• Exchange transaction charges, SEBI turnover fees, stamp duty.
• GST on brokerage and charges.
• Internet and data subscription costs (proportionate to trading use).
• Advisory, software, and charting tool subscriptions.
• Depreciation on trading equipment (computer, monitor) at applicable rates.

Do not claim personal expenses or expenses unrelated to trading.

Net result: Gross receipts minus allowable expenses equals net profit or net loss from the F&O business.

Step 7: Fill Schedule BP (Business Profession)

Transfer the net profit or loss from the trading account to Schedule BP. Key fields:

• Net profit from F&O (non-speculative): enter the amount.
• Net profit or loss from intraday equity (speculative): enter in the speculative sub-section.
• Whether audit is applicable: select Yes or No.
• If audit applicable: enter the UDIN of the CA, audit report date, and auditor PAN.

If you are using the presumptive scheme under section 44AD (turnover < Rs 3 crore, profit >= 6% of turnover), you declare a lump-sum profit of 6% of turnover (or 8% for cash receipts) without maintaining detailed books. You cannot then separately deduct expenses. Consult a CA before opting for the presumptive scheme for F&O.

Step 8: Populate Schedule CG for capital gains (if applicable)

If your Zerodha account also has equity delivery trades or mutual fund redemptions, populate Schedule CG, Schedule 111A (STCG under section 111A at 20% for post-23 July 2024 sales; 15% for pre-23 July 2024 sales), and Schedule 112A (LTCG under section 112A at 12.5% above Rs 1.25 lakh) using the Zerodha capital gains CSV. The procedure is identical to that described in How to file ITR-2 with Zerodha capital gains.

Step 9: Set off losses and compute total income

The ITR-3 utility performs set-off automatically if entries are made correctly. Key rules:

• F&O loss (non-speculative): can be set off against any business income except salary. If the current year has no other business income to absorb it, the loss is carried forward to Schedule CIF (carry-forward) for the next eight years.
• Intraday speculative loss: can only be set off against speculative income in the same year or the next four years.
• Capital losses: STCL can be set off against STCG or LTCG; LTCL can only be set off against LTCG.

Review Schedule CYLA (current year loss adjustment) and Schedule BFLA (brought-forward loss adjustment) in the utility.

Step 10: Claim deductions

Under the old regime, complete Schedule VIA for deductions:

• Section 80C: life insurance premiums, PPF, ELSS, home loan principal up to Rs 1.5 lakh.
• Section 80D: health insurance premiums.
• Section 80TTA/TTB: savings account interest.

Under the new regime, most of these deductions are not available. The standard deduction of Rs 75,000 (for salaried individuals) and the NPS employer contribution deduction under section 80CCD(2) are available under both regimes.

Step 11: Compute tax

Use the utility’s Compute Tax button to verify:

1. F&O business income at slab rates (old or new regime).
2. Intraday speculative income at slab rates.
3. STCG under section 111A at 20% (post-23 July 2024) or 15% (pre-23 July 2024).
4. LTCG under section 112A at 12.5% on excess over Rs 1.25 lakh.
5. Total tax before TDS.
6. Less: TDS from Form 26AS / AIS.
7. Less: advance tax paid in June, September, December, and March installments.
8. Add: interest under section 234B (shortfall in advance tax) and 234C (deferred installments) if applicable.

Step 12: Upload and e-verify

Export the return as a JSON file. Log in to incometax.gov.in → e-File → Income Tax Returns → Upload Return. Upload the JSON. E-verify using Aadhaar OTP, electronic verification code (EVC) via net banking, or a digital signature certificate (DSC). If audit is applicable, attach the auditor’s DSC or upload Form 3CA/3CB + 3CD before filing.

Download the ITR-V acknowledgement and retain it for a minimum of seven years.

What can go wrong

Turnover mismatch with AIS: The AIS may aggregate F&O turnover differently from the ICAI method. The AIS figure may show gross contract values rather than the absolute-profit-loss method. Do not use the AIS turnover figure directly; compute it from trade-level data.

Forgetting to report intraday equity income: Intraday equity trades appear in the Tax P&L under a separate section. Some traders erroneously omit them because they are small amounts. They must be reported under speculative business income in Schedule BP.

Missing the audit deadline: If audit is applicable, the return must be filed by 31 October. Filing an ITR-3 that requires audit without attaching the audit report triggers a notice under section 143(1).

Using ITR-2 when ITR-3 is required: Even a single F&O contract in the financial year requires ITR-3. Filing ITR-2 when ITR-3 is mandatory is a defective return.

Not claiming trading expenses: Brokerage, STT (as expense for business income), exchange charges, GST on brokerage, and internet costs are legitimate deductions under the old tax regime. Failing to claim them increases tax liability unnecessarily.

Carry-forward forfeited by belated filing: If you have an F&O loss and file the return after 31 July (or 31 October if audit applies), the carry-forward benefit is lost. File on time.

Related guides

• How to declare F&O as business income
• How to compute turnover for F&O audit
• How to report intraday speculative income
• How to use the Quicko integration on Console
• How to download the Tax P&L statement from Zerodha Console
• How to file ITR-2 with Zerodha capital gains
• F&O taxation in India
• Section 44AB, tax audit
• Annual Information Statement (AIS)

References

1. Income Tax Act 1961, section 43(5), definition and exclusion of speculative transactions.
2. Income Tax Act 1961, section 44AB, requirement of audit of accounts.
3. Income Tax Act 1961, section 44AD, presumptive taxation scheme for eligible businesses.
4. Income Tax Act 1961, sections 72 and 73, carry-forward and set-off of business losses.
5. Finance Act 2024, amendment to section 111A (STCG rate: 20%) and section 112A (LTCG rate: 12.5%; threshold: Rs 1.25 lakh), effective 23 July 2024.
6. ICAI Guidance Note on Tax Audit under section 44AB, 2022 edition, method of computing F&O turnover.
7. CBDT Circular No. 6/2016, clarification on F&O income classification.
8. Zerodha Console Tax P&L documentation, console.zerodha.com/reports/tax-pnl.