1. ITR-3 form is required to be filed by individual or HUF whose total income for a given assessment year includes Income from a profession or business (both audit and non-audit cases), Income earned from one or multiple house properties, Income from Other Sources, Income generated from short or long-term capital gains. A salaried person engaged in F&O or intraday trading shall use ITR 3 to file the return.
2. ITR-3 is viewed as the most complicated ITR form for taxpayers, especially for a layman. In this article, an attempt has been made to simplify the filing of ITR 3 with the help of Illustrations and relevant provisions.
3. INTRADAY TRADING Intraday trading means buying and selling stocks on the same trading day. Intraday trading is also known as Day Trading. Share prices keep fluctuating throughout the day, and intraday traders try to draw profits from these price movements by buying and selling shares during the same trading day.
Intraday equity transactions are speculative in nature and hence income gained from intraday stock trading is regarded as speculative business income. Intraday trading is done through a Demat account of the trader.
4. FUTURE AND OPTIONS ( F&O) Futures and options are stock derivatives that are traded in the share market and are a type of contract between two parties for trading stock or index at a specific price or level at a future date.
The income/loss arising from trading in F&O transactions would be treated as a Business Income / Loss for the purpose of taxation. This means that taxpayers who have made money or incurred losses in the derivatives market will have to file their income tax returns through ITR Form-3 or Form-4.
5. DEMAT ACCOUNT STATEMENT: The first step for a taxpayer towards such return filing is to download/obtain a Demat Statement.
The demat Account statement is a summary of all the shares in the demat account. The statement provides the relevant details like quantity, buy date, buy price, buy value sale date , sale price , sale value , P&L value etc. of each transaction. These inputs are needed for reporting details in ITR Schedules.
Demat Statement can be downloaded either directly from the website of the relevant national depository or through a broker with whom the taxpayer maintains a demat account.
6. PRELIMINARY STEPS :
(a) Download utility from the income tax website www.incometax.gov.in
(b) Login to the portal and download prefill data. Upload this data in the downloaded utility.
(c) Select: AY 2021-22(Current AY) >. Start New filing > Individual> Select ITR Form > ITR 3> Let’s Get Started. Tick on the reason for filing Tax. Taxable income is more than the basic exemption limit.
(d) Select Schedules: Uncheck the schedules not required / applicable for ascertaining tax on share market transactions. You may find some irrelevant schedules, not getting unchecked. Just ignore.
7. ILLUSTRATION: TRANSACTION DETAILS FOR PY 2020-21
| Sl | Particulars | Amount(Rs.) | Amount(Rs.) |
| (a) | Income From Salary | 25,00,000 | |
| Less: Professional Tax | (2,500) | ||
| Less: Standard Deduction | (50,000) | ||
| Taxable Salary (25,00,000- 52500) | 24,47,500 | ||
| (b) | F&O Business ( Sale Value ) | 12,00,000 | |
| F&O Business ( Purchase Value ) | 15,00,000 | ||
| Exp incurred for F&O | 1,25,000 | ||
| Net Profit/ Loss from F&O Business | ( 4,25,000) | ||
| F&O Turnover ** | 18,00,000 | ||
| (c ) | Intraday turnover ( Absolute) | 75,000 | |
| Profit from Intraday transactions | 6,500 | ||
| Turnover in the case of Intraday Trading or F&O transaction is Absolute Turnover, Absolute Turnover is the Sum total of absolute profits minus losses made on daily transactions.
Turnover is only to determine if a tax audit is required or not. The tax liability does not get affected by turnover. |
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8. REPORTING THE DETAILS IN SCHEDULES
8.1 Nature of Business Select Code from the drop-down list. A trade name can be your name / Firm’s name. Enter description as F&O / Intraday business in the given box. This will give a fair idea about the nature of the business of the assessee.
There is no specific business code mentioned for F&O or intraday business. You may also select 09028 –Retail sale of other products.
8.2 Audit Information: Are you liable to maintain accounts under section 44AA:
Statutory Provision
An individual or HUF, carrying business or profession (other than a specified profession) needs to maintain Books of Accounts if his income from business exceeds Rs. 2.50 lakhs and total turnover from business exceeds Rs 25 lakhs in any of the 3 preceding years – Section 44AA
In the Illustration above, income from the business is not exceeding Rs 2.50 lakhs or total sales in business is not exceeding Rs.25.00 lakh, Accounts are not required to be maintained under sec 44AA of Income tax Act.
However, the utility in the portal is not allowing to enter losses under the heading “No Account “. So, the option, yes need to be clicked and sales and purchase value of F&O transaction need to be reported in the schedule Part A – P&L Account.
8.3 Are you liable for Audit Under Sec 44AB
| Statutory Provision : | ||
| (a) | A person carrying on business, if his total sales in business for the year exceed or exceed Rs. 10 crores is required to get his Accounts Audited. | The threshold limit of Rs 10 crores is applicable as in the case of share trading more than 95% of the business transactions are done through banking channels. |
| (b) | Tax audit under Section 44AB also becomes mandatory for taxpayers who opt for a presumptive scheme of taxation in any of the preceding 5 years and now declare an income lower than the presumptive income and such income (after setting off F & O losses or other business losses if any) exceeds the maximum amount not chargeable to tax i.e. Rs 2.5 lakhs. | |
There is a difference of opinion amongst the experts, whether presumptive taxation scheme under section 44AD can be availed for F&O business.
In my view, F&O transactions are executed through recognized stock exchange and accounts cum records are maintained by the agencies / brokers of demat account. Hence presumptive tax scheme under sec 44AD cannot be availed in case of F&O income.
Thus, the relevant clause of audit requirement under section 44AB for presumptive tax is not applicable on a person carrying F&O business.
An individual engages in F&O business whose absolute turnover is less than Rs 10 crore and incurred loss is not required to get Tax Audit.
8.4 PART A -P&L Enter the sale value of F&O under the heading other Income Credited to P & L account and purchase value and expenditure in another expenditure debit to P & L Account
8.5 Intraday Transaction: – Part A – Profit & Loss – No Account > Speculative Activity
8.6 Schedule Salary: -Enter the relevant details in Salary Schedule
8.7 Other Schedules: Click on Schedule BP (Income from Business & profession), CYLA (Current Year Loss Adjustment), BFLA (Brought Forward Loss Adjustment) & CFL Carry Forward Losses) and confirm.
These schedules will automatically fetch the amount from the details entered. You just need to confirm.
8.8 Schedule Part II – TTI (Tax on total Income) – Provide confirmation of Tax Computation by clicking on it.
8.9 Preview Return > Proceed to preview > Proceed to Validation
9. Validation Error It is quite irritating to find the number of Validation errors after doing all the above exercises. Common validation errors and the way to rectify such errors are as follows: –
9.1 The total of all the quarter of respective CG must be equal to the final figures of schedule BFLA.” This is because you have not entered the quarter-wise details in Schedule Capital Gain.
Click on Sl. No. F ” of Schedule CG (Information about Accrual / Receipt of Capital Gain). Add details and enter the quarter-wise details of Capital Gain. Enter 0 if there is NIL CG in any quarter.
9.2 Validation error in TDS Schedule: Please select the radio button for the field TDS credit relating to Self/Other Person. Select the drop-down of the head of income for which corresponding income offered
Go to Schedule Tax Paid. Select Tax deducts at the source. There will be two options. Self and others. Click on Self
In the same schedule, scroll down and select the head of income from the drop-down menu:-
10. Frequently Asked Questions
Q.1 Is it mandatory to report F&O losses in ITR 3
Ans. Though it is not mandatory under the I tax Act but highly recommended to report losses in ITR. As not only these losses can be set off against other income but also can be carried forward for 8 subsequent years.
Q 2. What is the Business code (Nature of Business) for F&O Traders to be mentioned in ITR3 for FY 2020-21? Is it 13018 – Other financial intermediation services n.e.c (OR) 09028 – Retail sale of other products n.e.c (OR) any other appropriate code?
Ans. There is no specific code under the category, you may select “others” under Trading
Q3. Can I carry forward F&O losses without setting off in the current year’s profits.
Ans. No
Q4. An assessee, whose business turnover on options trading is Rs 20 lakhs in the year and incurred a loss of Rs 4 lakhs and did not maintain books of accounts as per sec44 AA. He has other income from Other Sources more than taxable exemption limit says Rs. 2.5lakhs. Is there any need for tax audit and to maintain books of accounts as specified?
Ans. Tax audit is not applicable if there is no cash receipts/payment involved as such, however, books may only be in form of a ledger statement, P&L given by the broker.
Disclaimer: The article is for education purposes only.
The Author can be approached at caanitabhadra@gmail.com
Author Bio
Hello,
I filled ITR 3
Salary
Loss from House property
F& O Loss (as suggested in P&L Section)
Other sources
but loss from house property is also not getting setoff and it is automatically c/f (big issue) with F&O loss
Please guide.
How much is the amount of loss from house property? It can be set-off against any other head of income only to the extent of Rs. 2,00,000.
Hello Ma’am
My F&O
Sale Value is Rs. 139 Crore
Purchase Value is Rs. 140 Crore
Loss is Rs. 1 Crore
The Turnover (For the purposes of Tax Audit Calculation) is Rs. 68.40 Lakhs i.e., (31 Lakhs absolute Profit and 37 Lakhs absolute Loss)
Now while filing ITR-3, In P&L Section, which amount to be reported in Other Income ??
Rs. 139 Crore ? or Rs. 31 Lakhs? or should I put overall loss of Rs. 1 Crore in Expenditure with Income as Zero?
Kindly clarify
In m view, you should put overall loss of Rs 1 crore in P&L section , under the heading other expenditure (F&O losses).
There are difference of opinion amongst experts. Some are of view, one should credit the sale value & debit the purchase in P&L and it will automatically calculate the loss .
Both may be correct. I feel , since it is not a normal business , only losses under the heading other expenditure is the correct approach.
I have F&O turnover 1.20 Cr ( addition of absolute of profit and loss) with net loss of 3.5 lakhs . I am a salaried person , annual salary >10 lakhs. In addition 2 lakhs interest. I have done F&O trade first time. Can I set off loss of 3.5 lakhs with 2 lakhs interest ? If so can I use ITR3 to file the return. Can I carry forward remaining loss for next 8 years ? Is IS TAX AUDIT APPLICABLE ?? please clarify.
F&O losses can be set off against Interest Income . In fact it can be set off against any income ( other than Salary Income)
Remaining losses can be carried forward for next 8 years.
Tax Audit is not required . The limit is 10 crores
As per Clear Tax
they said Tax audit is mandatory ..
I am confused … Please Clarify ..
If you want to show loss and carry it forward for setting off in subsequent years you have to get your accounts audited irrespective of the type of business.
So for loss to be caried forward you must get your accounts audited.
Further more you can set off your F&O loss against interest income provided you have audited your accounts.
Ma’am,
I have loss in intraday in equity in Year 2021-22 and salaried.
Filled ITR- 1.
ITD sent one message regarding high valume transections. AIS in portal is showing details of such intraday trading.
Please guide me.
There s an option available in AIS to give feedback.
If you feel transactions indicated in AIS is not correct , mention the fact with documents attached.
ITR 2 was required to be filled for intra day . You could have carry forward losses for next 4 years
sir greetings to the best
I have one question a salary income 5 lakhs with intraday losses of Rs 470000 speculate business losses for FY 2021/22 can I carry forward losses aftre due date without Audit is required
You an carry forward losses. Audit is not required
Isn’t audit is required for intraday losses?
Not mandatory for all the cases.
Hello mam,
I have salary more than Rs 10 lakhs, Options loss of Rs 6000 and Intraday trading loss of Rs 9 lakhs.
I have equity trading profit of Rs 94000 which I show in business income and get it audited. DO I need to get my intraday trading loss also in audit ? Please clarify urgently as due date of audit is approaching.
My sincere regards to you being kind hearted and helping small investors. Two queries:-
1. I feel that, adding of sale premium is not required when option trade is squared off / sine die on expiry. Do you see any logic for adding sale premium to absolute difference of premiums?
2. For ITR 3 if, qualified to maintain books of account but no other business, entering zero in Balance Sheet is OK or not?
HI Mam
I’m having F&O Turn over 4.3cr and having a profit of 4lakhs is it mandatory to maintain books of accounts;
Maintenance of Accounts is mandatory but not tax Audit
Mam,
There are many mismatches w.r.t sale of listed securities as per Broker Statement and AIS.
Sale values and buy values are not at all matching for even a single transaction with AIS Vs Broker Statement.
Do we need to provide feedback for each and every mismatched transaction in AIS,
or can we proceed by considering broker statement and file ITR.
If we do so, will there be any defective notice though we declare all the actual profits as per Broker Statement..
Please suggest.
Go ahead with actual ( broker’s statement ) . Even if notice come , you can always response with the actual details .
In my view , for sale of securities in AIS , if there are number of mismatches , no need to give feedback for each and every transactions.
In ITR3 -I have loss from F& O trading which i have shown u/s 44AA – P & L a/c and also i have got profit from Speculative (intratrade) transaction , please advise shall I shown in no accounts maintain u/s P& L a/c head for the FY 21-23
Intraday transaction’s to be reported in No Account ( Speculative business )
Is balance sheet need to be add in this case?
In my view , If you have only F&O / share transactions and no other business ,Balance sheet is not required to be added.
Mam,
I have F&O turnover 73 lakhs ( addition of absolute of profit and loss) with net loss of 16 lakhs . I am a salaried person , annual salary >50 lakhs. In addition 8 lakhs interest, bond interest and dividend income. I have done F&O trade first time. Can I set off loss of 16 lakhs with 8 lakhs interest ? If so can I use ITR3 to file the return.
Can I carry forward remaining loss for next 58 years ?
Is tax audit applicable in this case. please clarify.
Tax Audit is not required .
F&O losses can be set off from interest income or any other income except salary.
F&O losses can be carry forward for next 8 years
Mam,
I have F&O turnover 74 lakhs ( absolute value of Loss and Profit) with loss of 17 lakhs. My salary is greater than 50L and there are interest income from FD and Bonds approx. 8L.
My understanding from the article I have to file ITR3.
My query is
1. Can I settle the interest income (8L) with F&O loss (-17L) ?
2. Can the remaining Loss ( 17 – 8) = 9L be carried forward to next 8 years years ?
3. For the remaining year can I settle the loss with interest income ?
AND Is tax audit applicable in this case. please clarify.
You can set off F & O losses from interst income and carry forward balance losses for 8 years.
The losses that would be brought forward losses in next year will b set off from business profession income only and not from interest income.
Tax Audit is not required
Mam,
I have F&O turnover 3.5 cr with loss of 10 lakhs , but i have wrongly filed ITR-2 as STCG and return also processed. now i want to revise my return with ITR-3 filing to carry forward F&O losses. can i do.
AND Is tax audit applicable in this case.
please clarify,
You can revise your return . Tax Audit is not required.
Great article mam,
Salary income is ₹6,00,000
Capital Gains and other income less than ₹2,50,000
Intraday loss – (₹500)
No other business or F&O income.
Some say, we can ignore intraday loss and file ITR-2, some say to report the same and file ITR-3.
Can I select 44AA, AB etc. as “NO” and file ITR-3 by showing intraday loss in Speculative activity under No accounts case.
Though I’m not liable to maintain books of accounts, can I carry forward losses..
You cannot ignore intra day transaction and file ITR 2 .
You can very well select 44 AA, AB etc. as “NO” and file ITR-3 by showing intra day loss in Speculative activity under No accounts case.
Anita Mam,
In ITR-3, the portal is not accepting “loss” under “no accounts case” in Business or Profession tabs, but the same is accepting in Speculative Activity (Intraday in my case).
Can we avail the same and carry forward losses in no accounts case for speculation activity or will it get defected later?
Please clarify…
Intraday is speculative business under Income tax and is required to be reported as speculative profit/ loss.
Go ahead with entering details of intraday in speculative table
I have incurred a loss of -72, 000 and total turnover is around 2.1 Lakhs. Can I forward this loss to the next year. Please comment if audit is also required in this case.
You can carry forward losses for nxt 8 years.
Audit is not required
hi, i have a salary of 20L, and i have a intraday profit of 22k and turnover of 1L,
since i can claim internet expense of say 12k and
brokerage+STT+exchangeTransactionCharges of say 12k , can i show 22k as profit and 22k as expenditure and total net amount as 0 ? is there any audit for verifying expenditures?
this is for option “65. i. Turnover from speculative activity”
A reasonable amount of expenditure in ration to turnover is recommended to be claimed.
Otherwise chances of scrutiny/ notices are very high.
Dear Anita Ma’am, this has been a go-to page for me this tax season and I greatly thank you for sharing your professional insights.
My question is related to Turnover in F&O – where is it reported within the ITR3? I understand that if it is under 10Cr, audit is not applicable – but I could not figure out how to report within the forms and the application. Would greatly appreciate your insights in this.
Thanks!
Sir
Thanks for your humble comment.
F&O Turnover is required to ascertain audit requirement . As you rightly mentioned , tax Audit is not required for turnover up to Rs 10 crores.
Profit/ Loss from F&O trading is required to be reported in P&L of Schedule BP ( Business & Profession)
Hello Maam
I would like to thank you for simplifying this complex concept in such a easy way. You have cleared many doubts regarding accounting of Trading activities.I just want to know how dowe calculate absolute turnover for F&O, Equity,and commodity trading transactions.
The Sale for of F& O ,Commodity and equity is 103940000 and purchase is 104060000,net loss of 120000 ,is it liable for tax audit,pls revert
For Future: the absolute profit (addition of profit and loss) is considered as turnover.
For options, apart from the absolute profit (addition of profit and loss), the premium received on sale is also added to derive total turnover.
Your turnover seems to be more than prescribed limit of Rs 10 crores. In that case , Tax Audit is required
I have a specific questions related to accrual of Capital Gain – If I have Capitals gains in 3 Quarters but loss in 4th Quarters, how do I show loss ? The current form for showing accrual does not provide any figure for loss. In that case, can I substract this loss from earlier quarter’s profit and show only the gain value remaining after substraction
Adjust losses with 3rd quarter / 2nd quarter and report net profit in 3rd or 2nd quarter .
Please guide. I have taken 3 lakh money from my sibling and I have incurred 3L loss from f n o trading. I donot have salaried income for this year. Please help me wat is the source of income I should mention in ITR3.
Thanks
Source of Income is not required to be reported . Enter losses from F&O in debit to P&L Account ( Others)
Hi,
Thanks for the informative article.
I have a query regarding wrong ITR Filled.
Last Year, I had an income from salary which was above 3 lakh and made losses in 1.1 lakh from F&O and INTRADAY. However, I filled ITR-1 form instead of ITR -3 due to lack of knowledge which ITR should fill at that time.
So, How can I carry forward my losses from last year? Or Can I fill ITR-3 form for last year
Please assist.
Neither you can file last year return now nor the losses from earlier years can be set off / carry forward in current year .
However, in case you receive notice of defective return ( as incorrect form was filled ) you can revise the return , subject to interest & penalty
Dear Madam, This is my first year in which I had tried the Options. My total turnover is 76 lacs and a loss of 1.6 lacs. I had seen in lot of youtube videos that to show F&O loss, I have to enter the balance sheet and trading account details, You have shown direct entry to the P&L account. Since I am a salaried person I do not have any balance sheet or so. Should I enter the loss directly in P&L as shown by you in my ITR for AY 2022_23 ? Please guide since I am in confusion>
There is difference of opinion amongst professionals.
In my view , ITR 3 is basically for business & profession . Since F&O is considered as business income , one has to file ITR .
A person trades in F&O is generally not doing any other business and may not be having Business Assets & Liability . Hence balance Sheet is not to be prepared .
Profit or loss from F&O Business can be directly reported to P&L Account.
Thanks for guidence. One more point is that I had also received salary arrears in this FY. So finding for 10E, but this form is shown under heading “for those without business/professional income. Can I fill form 10E, though I have F&O losses shown in P&L.
You have to file 10E for availing relief from arrear salary .F&O losses and relief are two different concept . A salaried employee trading in F&O will claim relief by filing 10E and report his F&O transactions as business income/loss.
Thanks a lot, one more query & last one. My employer had wrongly put an amount of Rs.498209/- in my 26AS,its tax amount Rs.9584/- also. This amount does not pertain to me. I have informed my employer about the same and they told me that they are reversing the entry from my PAN. But now my question is how should I fill the ITR, with the entry taking into account or debiting the entry from my side. Since taking entry into account increases my tax liability as the amount is big and I am in 30% bracket this year due to my retirement.
This is regarding your query on incorrect details in 26AS by the employer : Do not add incorrect figures in your ITR as Income .
Save the response by employer about accepting and amending the incorrect entries and submit to the department , in case you receive any notice from them.
Hi, I have income from Capital gain of rupees 260000 and also profit of rupees 12000 from intra day trading. I do not record my books of accounts. So can we choose ITR3 form by Disable the option 44AA & 44AB.
Yes , you can file ITR 3
Yes , You can choose ITR 3
pls guide , which ITR form needs to be filled if taxable Salary & Income from other sources is > 50 lacs and want to set off losses from F&O . further there is some income from sale of shares also .
Filled all details in ITR 2 , but not found any thing for F&O losses and shares income
ITR 3 is required to be filed .
Hi,
I have 3 questions
1. When there is accidental intraday trades with minor loss of couple of hundreds, do we need to file ITR3? Or can we ignore the loss and proceed with ITR2?
2. Can we file ITR 1 with salary, capital gains?
3. I read somewhere that we can specify total sum amounts of capital gains without providing individual trade details? Is this true?? I couldn’t find any such option.
(1) In my view , you can ignore very small value of intra day transactions and proceeds with ITR 2
(2) You cannot file ITR if there is Capital gain transactions . You need to file ITR 2
(3) You can provide consolidated amount of Capital Gain except for Long Term Capital Gain where securities were purchased before 31.01.2018
we dont want to show my optoiion and intraday losses . is it mandatory to show in itr
Not Reporting Intra day & F&O losses in ITR will attract notice as there will be mismatch in details of AIS Vs and your ITR
I am a Salaried person. One of the shares I bought was sold on same day mistakenly. I got Rs. 65/- overall as profit from this share. This is the only share I sold in Intraday. Whereas rest of the Shares I bought were sold before One year. Is there any chance that Income tax Department objects, if I file ITR-2 and show this amount of Rs. 65/- as Short Term Gain ? Please suggest. Thanks in advance,🙏
In my view , there should not be any problem . Amount is too short and you are not in regular business of intraday transactions
In ITR3 for F&O and intraday is the balance sheet of of Business or individual is to be reported?
If you don’t have items such as stock etc to be reported in Balance Sheet , you can skip preparing Balance Sheet or just enter “Zero” in Balance Sheet .
( Disclaimer : This is my view , though there is a difference of opinion on this issue- Nowhere it’s mentioned clearly whether (in case of F&O )to prepare Balance Sheet or not.
Thanks for the above excellent article on ITR3. I have loss in F&O, Gain LTCG and STCG, some pension and divident income, FD intrest Kindly advice how to make and fill balance sheet.
In one of the answer above you said put zero in balance sheet head
Capital Gain , Dividend & Pension Income are required to be reported in respective schedule .
For F & O transaction , just make a simple p& L Account ( Receipt in Credit side & Cost of Acquisition + Exp in Debit Side )
In BP Schedule( P & L ) , Enter Credit and Debit Amount under the head ” Amount Credited / Debited in respective box.
Balance Sheet , you can put value as Zero
i have incurred a loss of lakh in f&o and 1 lakh in intraday trading. While i am salaried with an annual income of 12lk. Do i have to fill itr pertaining to losses in stock market?
I am salaried with an annual income of 12 lakh rs. I have incurred a loss of 6 lakh in f&o and 1 lakh in intraday trading. Do i have to fill itr pertaining to f7o losses or should i simply pay basis my salaried income.
Hi,
Thanks for the informative article.
I have to set off my losses from intraday (F&O) trading. I am a salaried employee with an income above 2.5 LPA. While filing the IT return, I noticed that the standard deduction under section 16(is) (under Schedule Salary) for 50,000 is not enabled for me. Why am I not able to enter the amount against it?
I would really appreciate your help.
Thanks & Regards,
Ishan
Standard deduction has nothing to do with setting off F&O .
It should not be disabled .
E mail your PAN & Password on my e-mail : canitabhadra@gmail.com
I will just check why it is happening .
How to mention loss if there any in F&o in financial year 21-22. Being a normal retail trader with less turnover is need to get the Audit done to show the lossess in F&o please let me know the answer.
Thanks in advance.
Audit is not required to be done .
There are different ways to report loss in Schedule BS – P&L Account
In my view, the best way to report F&O loss is :
Enter Sale proceeds in Credits and buy price & exp in Debits to P&L Acct
I have income from salary above 2.5Lacs per annum & done derivative trading is audit & books of account applicable?
The Audit & Accounts requirement depends on your turnover .
For more than 10 crores turnover , Audit is required
Your article is very nice. I would appreciate, if you clarify my two doubts.
1) Scenerio : I have income from retail business for which I used to opt for presumptive income u/s 44AD ( T.O. 60 Lacs Net Profit 5 Lacs) and now this year, I have the Income/ loss from option/ Future trading also.
Q1 : Can I file ITR 3 by taking 44AD for the retail business and simultaneously fill Profit & loss account for reporting Income/ loss from option/ Future trading.
Q2. If my actual Sale value is 2 Cr and buy value is 2.01 cr from F & O business, resulting in loss of Rs 1 Lac from F & O business. The sum total of positive & negative differences of future & Option is 2.55 lacs.( ie TO as per ICAI guideline)
Then which figure should be reported in Profit & Loss account of ITR 3 as TO ?
a) Actual T O of 2 Cr . or,
b) The sum total of positive & negative differences of future & Option ie 2.55 Lacs
Further
in purchase
a) 2.01 Cr or
b) The balancing figure of Rs 3.55 lacs to bring the loss of Rs 1 lac in P/L account.
I think tax audit would not be applicable in this case as the total TO is less than 1Cr even if I add the following.
i) TO of Rs 2.5 lac of F & O
ii) 60 Lacs of retails business
If you opt for 44AD , ITR 4 is to be filed
I have mistakenly filed ITR3 in FY20-21. How to file revised return with ITR2 form now? I tried but on IT portal I’m getting message not eligible to file ITR2..
RES MAM
I HAVE INCOME FROM F&O,INTRADAY TRADING AND STCG FROM SHARE TRADING ACTIVITIES AND MAINTAIN MY ACCOUNT BOOKS.HOW TO PREPARE TRADING ACCOUNT IN ITR 3.PLEASE HELP ME
Response of your query is send thru e mail .
Can a professional introduce mutual fund income in ITR 4 under section 44 Ada.for last two years I filled ITR 4 under section 44 Ada.but in current year I have mutual fund income also.My income from profession is 280000 and from mutual fund income is 20000. Total income is 3 lakh
how to fill the balance sheet page of ITR 3 for a person with salary, F&O income and STCG ?
Enter the value zero against the heads of Balance Sheet
Sale value is 33 crore, but turn over is 32 lacs in f and o. Please sugest me can I do computation in same manner as suggest u above. Few Tax expert suggst me fill itr 1 and so only stgc, but then how I set of my f and o lossese inn subsequent years? Your way of explaining is very good mam.
In my view, computation shall be in the manner I suggested above. You can’t even report STGC in ITR 1.
As you rightly said, you can’t set off F&O losses in subsequent years if you will not select the right ITR and report F&O losses.
One more point, I want to add here. Forward & Set of losses in subsequent years will not be allowed, If you have not filed return for FY 20-21 till due date i.e. 31st Dec 2021,
F & O losses can set off with income from other source? If yes then please reply me a govt salaried person receiving 4 years arrears in salary, can claim relief after filing 10 e form as this form is showing under tab persons without business or profession income head. Second thing is that while computing current year taxable income for 10e, we have 20000 income from other source, if we taken it for computing taxable income then how we set off it from lossess of f & o.
F & O losses can be set off from income from all other sources EXCEPT SALARY INCOME .
Mam, my over all turn over from intra day, stgc and f and o is 52 lacs approx. But my F & O turnover as shown by angel one is 3442976( 34 lac approx) and net loss is -226766 and sale and purchase value is not in p and loss statement provided by them but when I calculated it, it is 392194892 and pur is 392421659 and loss is matched with p and l statement. On the basis of sale value of f and o, 44ab audit is required, if I calculate my tax compution as suggest above.
In my view. Tax Audit is not required under section 44AB unless you had opted presumptive taxation scheme in any of the last 5 previous years and now, in the current FY , would like to report capital loss in ITR
If speculative turnover is 1250000, than are you liable to maintain book of account, should be yes or no ? F&O is nil
An individual or HUF is liable to maintain Books of Accounts if turnover from business exceeds Rs 25 Lakhs or Income from business exceeds Rs 1.50 Lakhs – Proviso to Section 44A(2)
I have a doubt if you consider the intraday transactions and derivatives as Business income the Assessing officer might argue that the same should be considered under the head Capital Gains and Form ITR 2 has to be filed.Kindly mention the section where it is mentioned that such transactions are to be considered under the head Business income so that there is no problem from the department.
These two are covered under altogether different sections of Income tax Act .
F&O and intra day under section income from business ( Sec 43) whereas Capital gain under 111A / 112 /54 etc
Hello, I have loss from F&O trading = INR 6000/- (six thousand only). I filed ITR 3 – under no accounts case loss is restricted. I followed P&L account and declared loss. Validation is successful. No errors. However during submitting the return the error displayed is – ” you are submitting defective return. Your profit is less than 6% of turnover and Audit information is not filled up ” I double checked for and confirmed that No audit case is ticked. No matter what I tried this error does not go away. The declaration ” turnover more than one crore but less than 10 crore ” ” yes or no” is the source of problem. If I say yes it means my turnover is more than 10 crore and if I say no it means my turnover is more than 1 crore. I do not understand how to resolve this issue? Appreciate your guidance. BRgds, Mohan.
Under the Audit information TAB , click all No except the 1st one ” Liable to maintain Books of Account”
P&L – Part A schedule – credit the sale value and debit the purchase value.
Loss will b calculated automatically
Hope this will resolve the issue
Dear Anita,
I have tried the above solution, but still I face the same problem. Can you please help me with the error ” Income is less than 8% of the turnover” ?. I have not entered any turnover but just credited and debited the F&O transactions. Apart from this, I have also used 44ADA for one stream of professional income.
If you are using 44ADA , then you need to report 8% ( 6% in case of digital transactions ) of turnover as your Income .
Mam, same is the case with me…..I followed your instructions but still there is error showing defective return(Declaring less than 6%).
In my case ,T.O is less than 1cr….there is a loss.
Just ignore the error and go ahead with filing the return . The income tax portal is still confused so professionals have view that follow the provision under Income Tax Act and go ahead with filing the Return
Thanks for this article . It is very helpful. Can you help clarify whether for salaried employee filing ITR 3 Balance sheet for F&O trading is mandatory . If yes, then do we prepare only based on Demat statement or need to include personal assets as well eg: Bank accounts, Fixed deposits, etc.
Balance Sheet is not mandatory . Since Utility of new portal is not allowing to enter details under the heading ” No Account ” , you need to select the schedule BS.
Demat base details are good enough for the purpose.
There are many expert who advocate to have audit of your accounts if there is loss in F&O business and likely chance of being issued notice if you file the return without audit. There is lot of confusion on the subject.
Refer article ” Tax Audit Requirement For F&O Transactions ” dated 30 Dec 2021 for better clarity
No – I Intraday is speculative business and have different provision even for set off & carry forward of losses
Can intraday trading be shown along with F&O as there are huge volumes (Sale > 1cr)
Salary and other income is above the basic exemption limit. Intraday loss is 1.25L(including charges) and FO loss is 44 thousand. Can we carry forward losses, do we need to maintain books and tax audit applicability in this ?
Thank you in advance. I appreciate it.
You can carry forward Intraday for 4 years and F&O for 8 years
If your income from business ( F&O / Intraday in your case) is less than Rs 2.5 lakh and turnover from such business is less than Rs 25 Lakhs – you are not required to maintain BOA or get Audit