New income tax forms for Assessment Year 2026-27 now require F&O traders to separately disclose their trading turnover, profits, and losses. These changes clarify how derivative income is reported, with filing deadlines of August 31 or October 31 depending on whether a tax audit is required for the trader's business income.
Starting with the Assessment Year 2026-27, the government has introduced stricter reporting requirements for traders involved in Futures and Options (F&O). Taxpayers must now provide specific details regarding their F&O turnover and the resulting gains or losses within their income tax filings. This update is designed to bring more transparency to income generated through derivative instruments.
How to Calculate F&O Turnover
Calculating turnover for tax purposes can be complex because the Income-tax Act does not provide a single, universal formula. To navigate this, many taxpayers rely on the guidance provided by the Institute of Chartered Accountants of India. Under this framework, turnover is generally calculated by adding the sum of absolute values of both favorable and unfavorable differences from trades.
For instance, if a trader makes a profit on one trade and a loss on another, both figures are treated as positive additions to determine the total turnover volume. Additionally, premiums received from the sale of options are included in this calculation unless they have already been incorporated into the net profit figures. It is also important to note that open positions at the end of the financial year are not counted as turnover until those positions are squared off.
Business Income and Filing Deadlines
For tax purposes, income from F&O trading is classified as non-speculative business income. This classification has direct implications for how an individual files their taxes and when they must do so.
If a trader’s business turnover exceeds the specified threshold that mandates a tax audit, the filing deadline is October 31. For those whose trading activity does not trigger the tax audit requirement, the standard deadline remains August 31. Investors should be aware that the timing of these filings is critical, as missing the deadline can impact the ability to carry forward business losses to future years, potentially increasing the total tax burden. Proper documentation of all trade logs and profit-loss statements throughout the year is now more important than ever to ensure compliance with these new disclosure norms.