Section 44AB on WebNotes

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 be an astronomically large number 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.

How to declare F&O as business income in India

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

Futures and options (F&O) trading on a recognised stock exchange is treated as non-speculative business income under the Income Tax Act 1961. This classification has significant practical implications: F&O losses can be set off against other heads of income (except salary), carried forward for eight years, and deducted against future business profits. This guide explains the statutory basis, the correct method of computation, allowable deductions, and how to report F&O income in ITR-3.

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

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

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.

ITR-3 (Income Tax Return)

Mon, 11 May 2026 00:00:00 +0000

ITR-3 is the Income Tax Return form prescribed by the Central Board of Direct Taxes (CBDT) for individuals and Hindu Undivided Families (HUFs) who have income from profits and gains of business or profession. It is the form applicable to equity derivatives traders, intraday equity traders, freelancers, consultants, proprietors, and partners in a firm, among others. Where an investor also has capital gains income alongside business income, all income must be reported in a single ITR-3 return rather than splitting it across multiple forms.