Dealing in Futures and Options?
New Disclosures Are Introduced in ITR-3 for FY 2025-26!
If you trade in futures and options (F&O), this year’s income tax filing brings a change you can’t afford to ignore. The Central Board of Direct Taxes (CBDT) has revised the ITR-3 form for AY 2026-27 (income earned in FY 2025-26), and F&O traders now have dedicated disclosure fields that didn’t exist last year. Skip them, and your return could be marked defective.
Here’s everything you need to know before you sit down to file.
What’s Actually Changed
Until last year (AY 2025-26), F&O traders typically lumped their derivative turnover and income together with other business receipts in the Trading Account schedule of ITR-3. That’s no longer allowed.
Under the revised format, taxpayers who traded in F&O during FY 2025-26 must now separately disclose:
- Turnover from F&O trading
- Income from F&O transactions credited to the profit and loss account
This granularity extends beyond F&O too. The updated “Part A – Trading Account” schedule now asks traders to break out intraday equity trading, commodity trading, and currency trading as distinct categories as well, rather than reporting one combined trading figure. Along with turnover and income, you’ll also need to disclose related details such as opening stock, purchases, direct expenses, sales, and closing stock for the relevant activity, plus the resulting gross profit or loss.
Tax experts say the intent behind this is straightforward: better transparency and a cleaner audit trail for derivative trading activity, at a time when participation in F&O has grown sharply — even as SEBI data continues to show that the vast majority of individual F&O traders lose money.
Why You Shouldn’t Leave These Fields Blank
This isn’t a “nice to have” disclosure — it’s now a core part of the form. Tax experts have flagged that leaving these new columns empty can cause your return to be treated as defective under Section 139(9) of the Income Tax Act.
A defective return isn’t automatically rejected, but if you don’t fix it within the timeline specified in the department’s notice, the return can be treated as invalid altogether. That has real consequences:
- Loss of the ability to carry forward business losses (F&O losses can otherwise be carried forward for up to eight assessment years)
- Potential penalties
- Delays in processing and refunds
- Increased scrutiny of your filing
Given that F&O income is classified as non-speculative business income under the head “Profits and Gains of Business or Profession,” accurate reporting here directly affects your ability to set off losses against other business income and carry them forward.
Other Notable Changes in ITR-3 for AY 2026-27
The F&O disclosures aren’t the only update this year. A few other changes are worth knowing about if you’re filing ITR-3:
- Higher asset-liability reporting threshold: The threshold for reporting assets and liabilities (Schedule AL) has gone up to ₹1 crore, from ₹50 lakh earlier.
- More granular disclosures for filing status, residential status, and address: Non-residents will now need to provide details like foreign tax identification numbers and specifics about their stay in India.
- Secondary address and alternate contact details: You can now add a secondary address, alternate mobile number, and email ID for official communication.
- More detail required for certain deductions: Taxpayers claiming deductions under Sections 80G, 80GGC, 80DD, and 80U will need to furnish additional supporting details.
- Simplified disclosures for audited accounts: For taxpayers subject to tax audit, some auditor-related disclosures have been simplified.
Key Dates to Remember
- Non-audit cases: ITR-3 due date is 31st August 2026
- Audit cases: Due date is 31st October 2026
Missing the deadline doesn’t just attract a late fee (up to ₹5,000 depending on income level) — it can also cost you the ability to carry forward business losses.
A Common Mistake to Avoid
Many F&O traders mistakenly file ITR-4 instead of ITR-3, thinking of their trading activity as a simple presumptive income source. Since F&O income falls under non-speculative business income, ITR-3 is generally the correct form — and it’s the only ITR form that allows reporting of non-presumptive business income along with capital gains, salary, house property, and other income sources.
How to Get This Right
- Get your turnover calculation right first. F&O turnover isn’t the same as your total trade value — it’s typically computed as the absolute sum of profits and losses across trades (plus premium on options sold), per prescribed guidance. Cross-check this with your broker’s tax P&L statement.
- Reconcile with your broker statement and AIS. Before filling in the new fields, match your figures against your broker’s tax P&L report and the Annual Information Statement (AIS) on the income tax portal. Mismatches are a common trigger for scrutiny.
- Don’t club F&O with intraday or other trading. Report each category — F&O, intraday equity, commodities, currency — separately, as the revised schedule now requires.
- File early, but only after your data is ready. Even though the utility is live, it’s worth waiting until your Form 16, Form 26AS, and AIS are fully updated before filing, to avoid refund delays or notices from mismatches.
- When in doubt, consult a tax professional. Given the added complexity — turnover computation, audit applicability thresholds, and loss carry-forward rules — a CA’s review can save you from an expensive mistake.
The Bottom Line
The message from tax experts this year is consistent: F&O traders can no longer treat derivative income as an afterthought buried inside a combined business income line. The new ITR-3 wants it called out explicitly — turnover and income both — and the cost of getting it wrong isn’t trivial. If you’ve traded in futures and options in FY 2025-26, budget extra time this filing season to get these new schedules right.
This article is for general informational purposes and does not constitute tax or financial advice. Please consult a qualified chartered accountant or tax advisor for guidance specific to your situation.