How is F&O Trading Income Taxed in India?

Income from eligible futures and options (F&O) transactions on recognised stock exchanges is generally treated as “business income” (and NOT capital gains). Such transactions are classified as non-speculative business transactions as per the latest provisions of the Income Tax Act, 1961.

How is the F&O Income Taxed in India? Understand Through an Example

Taxable business income from the F&O transactions is calculated after considering eligible business expenses. Let’s understand through an example:

• Suppose a trader earns ₹6 lakh profit from F&O transactions during a financial year.
• The trader incurs ₹80,000 in eligible expenses, such as brokerage, exchange charges, and other allowable trading-related expenses.

Now, the taxable business income would be ₹5,20,000 (₹6,00,000 – ₹80,000), which is taxable under the head Profits and Gains from Business Profession (PGBP).

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