Clipped from: https://camantra.com/carry-forward-of-share-trading-losses-for-ay-2025-26-a-complete-guide/
Investing in the stock market can be rewarding, but it sometimes leads to losses. The IT Act lets you carry forward trading losses and adjust them against your income in the coming years. Understanding these rules is essential to maximize tax benefits and avoid filing errors.
New Business Codes by CBDT
The Central Board of Direct Taxes (CBDT) introduced new business codes in July 2025 to classify share trading activities. Proper reporting using these codes is mandatory for Income Tax Returns
- Code 21009: Intraday Equity (Speculative)
- Code 21010: Futures and Options (Non-Speculative)
- Code 21011: Delivery-Based Business Trades
At present, the ITR-4 utility does not fully support code 21011. Taxpayers may need to use workarounds such as code 21008 or file ITR-3 and revise later.
Classification and Carry Forward Provisions
Different types of trading losses have different carry forward periods and set-off rules. The following table summarizes the key points:
| Trading Type | Classification | Carry Forward Period | Set Off Allowed Against |
| Intraday Equity | Speculative | 4 Years | Speculative income only |
| F&O Trading | Non-Speculative | 8 Years | Any business income except salary |
| Delivery-Based Frequent Trades | Business Income | 8 Years | Any business income except salary |
| Delivery-Based Occasional Trades | Capital Gains | 8 Years | Capital gains only |
Conditions to Carry Forward Losses
Taxpayers must fulfill the following conditions to carry forward losses
- Correctly classify trading activity in the Income Tax Return
- File your ITR on or before the due date u/s 139(1) to remain eligible for carrying forward your trading losses.
- 31 July 2025 for non-audit cases
- 31 October 2025 for audit cases
- Conduct a tax audit u/s 44AB if applicable
- Maintain separate ledgers for each trading category and retain broker statements and contract notes for six years
Non-compliance with any of these conditions may result in the inability to carry forward losses.
Turnover Computation Guidelines
Accurate computation of turnover is critical
- Intraday Equity: Sum of absolute profit and loss differences
- F&O Trading: Absolute differences plus option premiums
- For delivery-based business trades, calculate turnover as the total value of shares sold during the financial year.
Practical Examples
- An individual with INR 80,000 intraday loss and INR 1.6 crore turnover must file by 31 October 2025 with an audit. The loss can be carried forward for 4 years.
- An individual with INR 3 lakh F&O loss and INR 28 lacs turnover can carry forward the loss for eight years without audit if filed by 31 July 2025.
- A firm under Section 44AD with INR 4 lacs loss and INR 45 lacs turnover must conduct an audit to carry forward the loss for 8 years.
- Long-term capital loss cannot be carried forward if the return is filed after the due date.
Conclusion
Correctly classifying your trades, filing your returns on time, and maintaining proper documentation are essential to carry forward share trading losses for AY 2025-26. Following these rules ensures that taxpayers can efficiently utilize their losses against future income.
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