Futures and options taxation in India

Sat, 16 May 2026 00:00:00 +0000

Futures and options taxation in India is governed by the Income Tax Act, 1961 , with the core classification provided by Section 43(5)(d), which treats eligible derivative transactions on recognised stock exchanges as non-speculative business income rather than as speculative income or as capital gains. The classification is the structural foundation of the F&O tax framework and has consequential implications across the entire computation: profits and losses are computed as business income, are aggregated with other business income, are reported in ITR-3 , are subject to the Section 44AB tax audit thresholds, are eligible for the Section 44AD presumptive taxation option (subject to turnover limits), and produce business losses that can be set off against other heads of income (other than salary) and carried forward for 8 years.

How to compute turnover for F&O audit under section 44AB

Tue, 12 May 2026 00:00:00 +0000

The single most consequential computation for F&O traders in India is the turnover figure used to determine whether a tax audit under section 44AB of the Income Tax Act is mandatory. Importantly, this is not the gross contract value of futures and options trades (which would run into crores even for a small trader). The Institute of Chartered Accountants of India (ICAI) has specified a distinct method, known as the absolute-profit-loss method, which yields a much smaller and more economically meaningful turnover figure. This guide explains the method in detail and shows how to apply it using Zerodha Console data.

F&O Turnover on WebNotes

Futures and options taxation in India

How to compute turnover for F&O audit under section 44AB