In one line
Income from futures and options in India is treated as non-speculative BUSINESS income, which changes the return you file, the records you keep, and what can be set off against what.
How it works
Because it is business income rather than capital gains, the profit is added to total income and taxed at the slab rate that applies to you. There is no separate rate and no holding-period distinction — an option held for four minutes and one held for four weeks are treated the same way.
TURNOVER for F&O is not the notional value of the contracts. It is computed from the absolute profits and losses on each trade, with premium received on options written added in, and it is the figure that decides whether a tax audit applies. The thresholds move between finance acts, and whether a particular year needs an audit also depends on whether the presumptive scheme was used and on how much of the receipts were digital.
Non-speculative business losses can be set off against most heads of income in the same year other than salary, and carried forward for eight years against business income, provided the return was filed by the due date. Filing late costs the carry-forward, which is the single most expensive avoidable mistake in this area.
Expenses genuinely incurred to earn the income — brokerage, exchange charges, data, internet, a share of professional fees — are deductible against it, which is the practical consequence of the business-income treatment.
What it is not
This is a description of how the head of income works. It is not advice, and it is not a substitute for a chartered accountant. Thresholds, audit limits and the presumptive scheme's conditions change with each finance act, and the treatment of a particular year depends on facts this desk does not know. Check the current position for your own year before you file.