How to Calculate F&O Turnover for Income Tax
F&O turnover decides whether a tax audit applies. Here’s how it’s calculated and why it matters.
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If you trade futures and options, your income is treated as business income, and “turnover” decides whether a tax audit applies and how you file. It is not the total contract value.
How F&O turnover is computed
For tax purposes, F&O turnover is generally the sum of the absolute profits and losses from each trade (the favourable and unfavourable differences), plus premium received on options sold. So a ₹10,000 profit and a ₹6,000 loss contribute ₹16,000 to turnover — not the lakhs of notional value traded.
Why turnover matters
- It determines whether a tax audit under Section 44AB is required.
- It affects whether you can use presumptive taxation.
- F&O losses can be set off and carried forward if you file on time.
Report it correctly
F&O income/loss is reported as non-speculative business income in your ITR (usually ITR-3). You can claim related expenses, and active traders may owe advance tax.
Tax rules are detailed and change — this is general information, not tax advice. Consult a qualified professional for your situation.
