Archive · 22 Sep 2026
Income Tax Act 2025 Clarifies F&O Loss Set-Off Rules
The new Income-tax Act, 2025, changes the numbers used for some tax rules.
However, the basic tax treatment of eligible futures and options trading remains mostly the same.
These trades are usually treated as business activity, not capital gains or speculation.
Traders can subtract eligible costs such as brokerage and exchange charges when calculating business profit.
A qualifying business loss can generally be used against certain income and carried forward for up to eight years.
Speculation losses have stricter rules and can only offset speculation profits for four years.
Traders must file a loss return on time to preserve the carry-forward benefit.
Turnover is calculated differently from taxable profit for audit and compliance purposes.
Traders with uncertainty may need advice from a certified tax professional.
The Income-tax Act, 2025, took effect on 1 April 2026 and replaced the Income Tax Act, 1961.
Eligible exchange-traded futures and options transactions generally remain non-speculative business transactions.
Non-speculative F&O losses can generally be carried forward for up to eight years and offset against business or professional income.
Speculation losses are restricted to speculation profits and can generally be carried forward for four tax years.
Traders must calculate turnover correctly, claim eligible expenses, and file loss returns by the prescribed deadline.
- Who
- Futures and options traders, taxpayers, and tax professionals, including tax expert Nishant Shanker.
- What
- The Income-tax Act, 2025, retains the broad tax treatment of eligible F&O transactions while setting rules for profits, losses, turnover, and compliance.
- When
- The Act came into force on 1 April 2026.
- Where
- Under the Income-tax Act, 2025; the articles do not specify a physical location.
- Why
- To explain how traders should classify transactions, calculate taxable income and turnover, claim expenses, set off or carry forward losses, and meet filing requirements.
- Effective date
- 1 April 2026
- Replaced law
- Income Tax Act, 1961
- Eligible F&O classification
- Generally non-speculative business transactions
- Non-speculative loss carry-forward
- Generally up to eight tax years
- Speculation loss carry-forward
- Four tax years, restricted to speculation profits
- Relevant loss-return requirement
- The loss return must be filed by the prescribed due date
- Turnover calculation
- Generally considers the absolute value of favourable and unfavourable differences and relevant option premiums