A Query on Tax Filing with F&O activity


Hello Traders,

Being salaried and having mostly dividends and long-term capital gains from equity, I had been using ITR1/2 so far with no problem. Last FY (2018-19), I have initiated F&O activity with a turnover of 3.6 Lakhs. I have a total loss of 20K.

I have been looking up for options for filing tax return. Being first timer, I am requesting some help/advice.

According to Varsity and other sites, I have option for ITR3 or ITR4 with presumptive income declaration. I was thinking that I go for ITR3 and declare the loss (and claim allowed expenses of around 5K approx) so that I can adjust losses against profits in future.

Since my profit (actually loss) is below 6% of turnover, I understand it will require tax audit. I know a CA who will help get this done. No problem.

Do any of you suggest otherwise to use ITR4 and pay taxes? This should be fine as I am not really saving or avoiding taxes.

I am confused because loss of 20K is small for future carry forward (Further, I have some interest income FD + Savings which I believe can be set off against these losses to further reduce carry forward amount).

It seems ideal case for using ITR4 to avoid tax audit, but if it is worth doing ITR3 I will get it done.

Please give me suggestions. Thanks.


Just to add, loss 20K is net loss in F&O.


You cannot use ITR4 because in that form there are no fields for showing capital gain or loss.

Your F&O loss can be set off against “income from other sources” … which includes interest income.

Your best option here is to use ITR3 and get tax audit done; set off your losses or carry forward them…

… unless your auditor charges far more than the tax you can save.

PS: You can show your expenses, like internet service as cost o doing business, which can save more on tax. Laptop and other capital expenditure items may be eligible for depreciation cost. Check with your auditor.


Auditor fee is also a cost of doing business and can be shown as expense.