The income tax filing season for Assessment Year (AY) 2026-27 is underway, and Futures & Options (F&O) traders have a new compliance requirement to watch out for this year.
The Central Board of Direct Taxes (CBDT) notified the revised ITR-3 form on March 30, 2026, introducing several changes for taxpayers with business or professional income. Among the most important changes is a new disclosure requirement for those who traded in F&O during the financial year 2025-26.
Tax experts warn that ignoring these new fields or leaving them blank could result in the return being treated as defective, potentially leading to serious consequences if the issue is not rectified within the prescribed time.
Why F&O traders need to pay attention this year
Until last year, the ITR-3 form did not contain separate fields requiring taxpayers to specifically disclose turnover and income arising from F&O trading.
That changes in AY 2026-27.
The revised form introduces new reporting requirements under “Schedule Part A – Trading Account”. Taxpayers who have carried out F&O transactions during FY26 are now required to separately disclose:
-Turnover from F&O trading
-Income from F&O trading credited to the Profit and Loss (P&L) account
These fields are being introduced for the first time in ITR-3.
The move is expected to give the Income Tax Department better visibility into derivative trading activities and improve reconciliation of trading income reported by taxpayers.
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What happens if these details are not reported?
Tax professionals say these disclosures should not be ignored.
If mandatory information is omitted, the return may be considered defective under the Income-tax Act. A defective return can trigger notices from the tax department and, if not corrected within the stipulated period, the return may eventually be treated as invalid.
An invalid return is considered as good as not having filed a return at all, which can expose taxpayers to penalties and other compliance issues.
Intraday traders also covered
The same schedule now covers disclosures related to intraday trading as well.
While intraday turnover and income reporting requirements already existed earlier, the revised format places F&O and intraday disclosures together under the trading account schedule.
Taxpayers engaged in intraday equity trading must continue to report intraday turnover and income credited to the P&L account from speculative transactions.
The addition of F&O-specific columns means both categories of traders will now provide more detailed information in the same section of the return.
Why has the tax department introduced these fields?
The new reporting requirement appears to be part of a broader effort to improve transparency and traceability of derivative trading transactions.
The change comes at a time when participation in the F&O segment has increased sharply in recent years. At the same time, studies by market regulator SEBI have repeatedly highlighted that a large majority of retail F&O traders end up incurring losses.
Tax experts also note that some taxpayers mistakenly file ITR-4 despite having F&O income, leading to incomplete disclosures. The new fields in ITR-3 create a clearer audit trail for such transactions and may help the department identify mismatches more effectively.
Who should file ITR-3?
ITR-3 is meant for individuals and Hindu Undivided Families (HUFs) who earn income from business or profession.
The form is commonly used by:
-Proprietors and business owners
-Professionals such as doctors, lawyers and consultants
-Individuals earning income from trading activities treated as business income
-F&O traders
-Taxpayers having income from multiple sources like salary, pension and multiple house properties along with business income
Note: F&O income is generally treated as non-speculative business income. As a result, most F&O traders are required to file ITR-3 rather than ITR-1 or ITR-4, depending on their circumstances and eligibility.
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New tax regime selection now more explicit
Another important change in ITR-3 relates to tax regime selection.
The new tax regime under Section 115BAC continues to be the default regime. Taxpayers opting for the old tax regime must specifically exercise that option and comply with the applicable requirements.
Those eligible and intending to continue under the old regime may also need to submit Form 10-IEA before the applicable due date.
High-value transactions must be reported
The revised form also expands reporting requirements for certain high-value transactions.
Even if a taxpayer’s income falls below the taxable limit, disclosures may be required in cases involving:
-Bank deposits exceeding Rs 1 crore during the year
-Foreign travel expenditure exceeding Rs 2 lakh
-Electricity consumption expenses exceeding Rs 1 lakh
These disclosures help the tax department match financial transactions with income declarations.
More detailed filing and residential status information
The updated ITR-3 also seeks additional information regarding filing status and residential status.
Taxpayers will have to provide clearer details on whether the return is being filed as origi,turn, belated return, revised return and updated return.
The form also seeks additional information relating to residential status, including resident, resident but not ordinarily resident (RNOR) and non-resident classifications.
For NRIs, reporting requirements relating to foreign tax identification numbers and stay in India have also been expanded.
Other key changes in ITR-3
Apart from F&O disclosures, the revised form contains several other notable changes:
-Asset and liability reporting will now be required only if total income exceeds Rs 1 crore, up from the earlier threshold of Rs 50 lakh.
-Separate disclosure fields have been introduced for losses arising from share buybacks.
-Capital gains schedules have been updated to reflect recent tax law changes.
-Auditor-related reporting requirements have been streamlined.
-Relief under Section 89A for foreign retirement accounts is now restricted to ITR-2 and ITR-3.
-A new field has been added for reporting late filing fees under Section 234-I where applicable.
-Taxpayers will also need to indicate cash transaction percentages, which may affect tax audit applicability.
What should F&O traders do now?
With the filing season now open, taxpayers engaged in derivative trading should carefully review the revised ITR-3 before filing.
Experts advise F&O traders to:
-Use the correct return form, typically ITR-3.
-Report F&O turnover and income under Schedule Part A – Trading Account.
-Ensure books and trading records match disclosures made in the return.
-File Form 10-IEA on time if opting for the old tax regime.
Important deadlines
For AY 2026-27, the due dates are:
Non-audit cases: August 31, 2026
Audit cases: October 31, 2026
Tax experts caution that missing the applicable deadline may also affect the ability to carry forward eligible business losses, making timely and accurate filing even more important for active traders.
Disclaimer: This article is for informational purposes only and should not be construed as tax, legal or financial advice. Tax rules may vary based on individual circumstances. Taxpayers are advised to consult a qualified tax professional or refer to the latest CBDT guidelines before filing their income tax returns.
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