Tax Filing for Securities Traders (ITR-3)

Have you made any profit or incurred a loss from trading in future & options? If yes, then it is considered Business Income and is shown under the head “Income from business or profession” in the ITR. At FirstFiling, our experts can help file your tax return on business income under ITR-3!

Documents Required

Form 16 from your company

Form 26AS Tax Credit Statement

Trading account statement from your broker

Statement of trading account/ demat account in case of shares

TIS

FirstFiling - Filing for Securities

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ITR Filing for Securities Traders

File your ITR-3in 4 simple steps

1. Sign up & Purchase

Sign up and purchase the relevant plan by filling out the form above.

2. Share your details

Provide all the required information and relevant documents, as mentioned above

3. Consultation

Consult with our experts to get a solution to all your queries regarding ITR-3 filing.

4. ITR Filing

OOur Chartered Accountants will file your ITR-3 as per the details shared by you.

ITR-3 Filing

Pricing Plan

Silver

4999/-

  • Tax filing for individuals with single & Multiple Form 16 
  • Tax Due/Refund Status and Filing Confirmation
  • CA Assisted Tax Filing for Trading in Stocks
  • Balance Sheet and Profit & Loss A/c
  • Any Slab of Income
  • Income from other Sources, House Property Income
  • Director's Declaration in any company
  • Whatsapp Call / Email Support
  • Audit Fee & Digital Signature Not Included above
Platinum

3999/-

  • Updated Tax Return (ITR-U) filing   
  • Tax Due/Refund Status and Filing Confirmation
  • CA Assisted Tax Filing for Trading in Stocks
  • Balance Sheet and Profit & Loss A/c for the year end
  • Any Slab of Income
  • Income from other Sources, House Property Income
  • Director's Declaration in any company
  • Whatsapp Call / Email Support
  • Audit Fee & Digital Signature Not Included above

Filed your ITR? Here’s what you need to do now…

Steps for Verify E-Filing

Log in your account

Go to the user portal

Enter the otp and Verify your return

Check the Notifications

Log in your account

Go to the user portal

See if their any notification for you regarding ITR or Doucments verification

Track Filing Status

Once your filing is complete, you can track the filing status.

Log in and to user portal. Click on my filings.

Click on the ITR Return Status

Benefits of ITR Filing

Why File Your Income Tax Return?

If you've paid a higher income tax than your actual tax liability, you should file income tax returns to claim a refund. After verification, you’ll get the refund directly into your bank account!

Applying for a Visa to visit a foreign country? You'll most likely have to submit your ITR so the embassy can analyse your income and tax status.

Your income stability is critical for the lenders. This is why you’ll have to submit your ITRs of at least 3 consecutive years when applying for loans.

You should file your income tax returns every year before the due date to avoid any penalties or other severe consequences.

Don't Know Which ITR to File

Types of Income Tax Return Form

The total income of an individual must not exceed Rs.50 lakh. His/her source of income must be:

Salary

One Hopuse Property

Other Sources Of Income, I.E., Interest Income, Dividends, Etc.g

Agricultural Income Up To Rs.5,000 Only.

Individual Must Be Ordinarily Resident In India.

A salaried individual can file his/her tax return using the ITR-2 form if:

Has A Total Annual Income Of More Than Rs. 50 Lakh.

Is A Director Of A Corporation.

Owns Unlisted Equity Shares.

Is Owning Assets Outside Of India Considered Income From Salary, Multiple Homes, Capital Gains, And Other Kinds Of Revenue.

Is A Member Of The Hindu Undivided Family (HUF).

A Resident Or A Non-Resident (Both Ordinarily Or Not Ordinarily).

by an individual or a Hindu Undivided Family having income from the following sources are eligible to file ITR-3:

Pursuing A Profession Or Business.

Invested In Unlisted Equity Shares During The Fiscal Year.

An Individual Director Of A Firm.

The Return Could Include Earnings From Rental Property, Salaries, Pensions, And Other Sources Of Income.

Income Earned As A Partner In The Company.

Individuals, HUFs, and partnership firms having the following total annual income are required to file Form ITR 4:

Business Income As Per Section 44AD Or Section 44AE.

Earnings From A Profession As Determined Under Section 44ADA.

Having A Salary Or Pension That Is Up To Rs. 50 Lakh.

Income From A Single Residential Property Earning Up To Rs. 50 Lakh (Including The Brought Forward Loss Or Loss To Be Carried Forward Cases Under This Head).

Up To Rs. 50 Lakh In Income From Other Sources (Including Winning From The Lottery And Income From Horse Races).

All about Taxation forSecurities Traders

Any profit or loss incurred from trading in future & options is shown under the head ‘Income from business or profession’ in the ITR filing. You don’t have to open a separate company for dealing in F&O trades and any individual can deal in them.

Also reporting income under ‘business’ head comes with multiple benefits. You can claim expenses that are directly related to trading, for example, rent of the premises used for the trading, mobile or telephone expenses, internet charges, broker’s commission, demat account charges, depreciation on the laptop, consultancy charges in case you took advice from a professional, etc. But you must maintain the receipts or bills of such expenses. Also, any expense exceeding INR 10,000 in a single day should not be paid in cash to be deemed valid.

For taxation, ITR-3 is applicable for Business Income or ‘income from business or profession’. If you have a salary income, income from house property, or income from any other sources, you can disclose the same along with the F&O income in ITR-3.

Additional Information on

Information on ITR-3 Filing for Securities Traders

Computation of Income

To compute the income from your future & options (F&O) trades, you must consider any profit or loss incurred as business income. You should report this income under the head "Income from business or profession" in your Income Tax Return (ITR). It is not necessary to establish a separate company to engage in F&O trades, as any individual can participate in such trades. Even if you are a salaried individual or retired senior citizen, you are eligible to trade in F&O.

Reporting income under the business head provides you with multiple benefits. You can claim expenses related to trading while calculating your income from F&O trades. These expenses may include rent of the premises used for trading, mobile or telephone expenses,internet charges, broker’s commission, demat account charges, depreciation on a laptop, consultancy charges in case you took advice from a professional, etc.

It is essential to maintain receipts or bills of all such expenses to claim them. Moreover, any expense exceeding Rs. 10,000 in a single day should not be paid in cash to be considered valid. Therefore, it is crucial to keep track of all expenses related to F&O trades and ensure that you maintain proper records to claim them while computing your income from F&O trades.

Relevant ITR form

If you are a taxpayer who earns income from various sources, including business income, salary income, income from house property, or income from any other sources, you must file your income tax return using the correct form. In this case, the ITR-3 form is applicable to you.

The ITR-3 form allows you to disclose your business income, along with other sources of income, including F&O income and capital gains from the sale of shares or mutual funds. However, if you choose to follow a presumptive income scheme and declare your profits at a prescribed percentage of your turnover, you will be required to file ITR-4. The prescribed percentage is 6% in case of a digital transaction and 8% in case of non-digital transactions. Security traders can also declare 6% of their turnover under this scheme.

If you declare your F&O income as presumptive business income and have capital gains, you must file your income tax return using the ITR-3 form. It is important to note that capital gains cannot be declared under the presumptive income scheme and must be reported separately in the ITR.

Know Securities Transaction Tax

If you purchase or sell securities listed on recognized Indian stock exchanges, you will be subject to a direct tax called Securities Transaction Tax (STT). STT is collected on various taxable securities transactions, such as equity, derivatives, and unit of equity oriented mutual funds. Unlisted shares sold through an IPO that are subsequently listed on stock exchanges are also subject to STT. STT is collected by recognized stock exchanges, prescribed persons in the case of every mutual fund, or the lead merchant banker in the case of an initial public offer. Failure to collect or remit STT will result in interest and penal consequences.

Filing Taxes as a Securities Trader

Gather all necessary information and documents, including your trading statement, profit and loss statement, and any other relevant financial records.

Fill out the ITR 3/ITR 4 form (as applicable) available on the Income Tax Department's website.

Provide your personal and financial details in the form, including your name, address, PAN number, and income earned from securities trading.

Declare your income from all sources, including securities trading income, capital gains, and any other income earned during the financial year.

Ensure that all income and expenses related to securities trading are reported accurately in the form.

Pay any tax due on your securities trading income based on the applicable tax rates.

Submit the form online or in person before the deadline.

Frequently Asked Questions

Futures and options are the major types of stock derivatives trading in a share market. F&Os are contracts signed by two parties for trading a stock asset at a predetermined price at a later date. They are contracts that derive their price from an underlying asset, such as shares, stock market indices, commodities, ETFs, and more. Such contracts try to hedge market risks involved in stock market trading by locking in the price beforehand. But, since we cannot predict price movements, it can cause substantial profits or losses if a market prediction turns out to be inaccurate. Typically, individuals well-versed in the operations of a stock market participate in such trades.

ITR-3 is applicable for Business Income. If you have a salary income, income from house property or income from any other sources, you can disclose that income along with the F&O income in the ITR-3. If you are following a presumptive income scheme and declare profits at 6% of your turnover (8% in case of non-digital transactions and 6% in case of a digital transaction. Security traders can declare 6% of the turnover), then you will have to file ITR-4. However, you need to file ITR-3 if you declare your F&O income as presumptive business with capital gains. When you declare F&O income as presumptive business and you have capital gains, ITR-3 is applicable.

It is mandatory to report any losses in your ITR. If you fail to do so, the Income Tax Department will issue a notice. Declaring your losses while filing your returns comes with multiple benefits that many are unaware of. If you have incurred any loss by trading in F&O, then you can set it off against any other income except salary income. For example, if you have a rental income of INR 9 lakh and a loss from F&O of INR 2 lakh, then your total taxable income would be INR 7 lakh.

Yes, you can carry forward non-speculative business losses from F&O trading for up to 8 years. You can lower your overall income tax liability by carefully offsetting these losses against future profits

Future and option trading are different with respect to the obligations imposed on individuals. Futures act as a liability on an investor, requiring them to follow up on a contract by a pre-set due date, whereas options contracts give individuals the right to do so. A futures contract to buy or sell an underlying security has to be followed up on the predetermined date at a contractual price; whereas, an options contract provides a buyer with a choice to do the same if they profit from a trade. Here are the specific differences between Futures and Options:

Points of DistinctionFuturesOptions
DefinitionFinancial contracts with binding obligationsContracts provide the right (but not obligation) to buy/sell
ObligationsBoth buyer and seller are obligatedOnly the seller is obligated; the buyer has a choice
Risk and RewardUnlimited for both partiesBuyer's risk is limited to premium; unlimited profit potential
Trading FlexibilityStandardised terms on organized exchangesMore flexibility, customizable, traded on exchanges or OTC
Price DeterminationBased on the current market price adjusted for factorsInfluenced by market price, time to expiration, volatility, etc
Market DirectionProfits from both upward and downward movementsProfits from upward, downward, or sideways movements

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