Does the IT Department Have My Exact F&O Turnover and Losses? AY 2026-27 Guide

By FnOTax India Editorial Board · Updated 2026-05-30 · F&O Taxation Source verified

ICAI Guidance Note on Tax Audit (Revised 2025) — turnover formula update. The ICAI Direct Taxes Committee’s Tenth Edition (Revised 2025) of the Guidance Note on Tax Audit under Section 44AB updates the F&O turnover method. For tax audits of FY 2025-26 (AY 2026-27) onwards, the turnover formula is:

  1. Sum of favourable and unfavourable differences on squared-off trades; plus
  2. Premium received on sale of options — with anti-double-count proviso: if your broker P&L already nets the option-sale premium into the per-trade profit/loss, do not add the premium separately.
  3. Differences on reverse trades also count.
  4. Open positions at year-end are picked up when squared off.
  5. Delivery-settled derivatives use the trade-vs-settlement price difference; if you held the underlying as stock-in-trade, the entire sale value is business turnover.

For AY 2026-27 onward, use the Revised 2025 edition. Earlier assessment years should be checked against the ICAI guidance applicable to that year.

Source: ICAI, Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 (Revised 2025), Direct Taxes Committee, Tenth Edition, para 5.11(b).

Source basis: This guide is source verified against the official documents listed below. It is educational guidance, not personalized tax advice.

Official sources used: Income-tax Act, 1961 (India Code consolidated PDF); Income-tax Act, 2025 — CBDT (official landing); CBDT: 1961 ↔ 2025 provisions concordance utility; CBDT Notifications (official index); CBDT FAQs on Interplay & Transitions — Income-tax Act 2025; Income Tax e-Filing Portal: ITR downloads; Income Tax e-Filing Portal: individual business/profession help.

Short answer

The department sees broker-reported securities transactions, SFT entries, and TDS data through AIS/TIS — but it does not see the ICAI-method F&O turnover figure directly. The trader is expected to compute and report it correctly.

The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) on the Income Tax e-Filing portal are not a substitute for your broker tax P&L. AIS is built from SFT reports, TDS returns, GST reports, and similar third-party feeds. For F&O traders, AIS often lags the broker P&L, may carry off-market lines, and rarely shows the ICAI-method F&O turnover figure.

What AIS actually contains for F&O traders

For F&O reporting, the items most relevant to a trader’s AIS are securities transactions reported under SFT codes, off-market transfer entries (where applicable), and broker-side cash inflows/outflows. The portal’s own help pages describe AIS as comprehensive information across multiple categories, but they also confirm that taxpayers can submit feedback if any AIS entry is incorrect.

That feedback mechanism matters. If AIS shows an off-market transfer that is genuinely yours but was tagged incorrectly, or shows a duplicated entry, the right step is to submit AIS feedback rather than ignore it and risk a mismatch query later.

Reconciling AIS with the broker tax P&L

The reliable reconciliation for an F&O trader is:

  1. Pull the broker tax P&L (Zerodha, Upstox, Groww, etc.) for the financial year.
  2. Pull AIS and TIS from the e-Filing portal.
  3. Compute F&O turnover using the ICAI Revised 2025 turnover method from the broker trade-wise report — not from AIS.
  4. For each AIS line item not reflected in the broker tax P&L, decide whether to accept, partially accept, or deny via AIS feedback.
  5. Preserve a one-page reconciliation note showing how the broker P&L number maps to the ITR-3 schedules.

What the department sees vs what you report

AIS aggregates securities transactions and broker-side flows. The ICAI Revised 2025 turnover number is not in AIS. The mismatch between AIS aggregates and the ITR-3 turnover figure is normal — what matters is whether the trader can defend the ICAI method working when asked.

Pinned official sources for the points above: CBDT Circulars (official index); CBDT: Income Tax Returns (notified forms); Income Tax e-Filing Portal: ITR downloads; Income Tax e-Filing Portal: individual business/profession help.

Why AIS alone cannot decide your filing position

AIS is a tool to help the taxpayer and the department compare numbers. It is not a statutory computation of business income. The pinned position is that:

  • F&O is non-speculative business income under 1961 Act s.43(5) proviso (d) / 2025 Act s.2(31)(a) read with s.2(33).
  • Turnover for tax-audit purposes follows the ICAI Guidance Note (Aug 2022 revision) — favourable + unfavourable differences — not contract value, not AIS aggregates.
  • Audit applicability is tested under 1961 Act s.44AB / 2025 Act s.63, not by whether AIS shows a number.

If AIS and the broker P&L disagree, the broker tax P&L plus the trade-wise report (with a clean reconciliation) is the defensible filing basis. AIS feedback should be used to correct genuinely wrong AIS entries, not to backfit the broker number to AIS.

Dual-citation framing (AY 2025-26 vs AY 2026-27)

This guide cites two statutes side-by-side because India is mid-transition.

  • AY 2025-26 (TY 2024-25) and earlier: the Income-tax Act, 1961 applies. Returns filed in 2025 follow 1961-Act section numbers (43(5), 44AA, 44AB, 44AD, 71, 72, 73, 74, 80, 139, 143, 271B).
  • AY 2026-27 (TY 2026-27) onwards: the Income-tax Act, 2025 (Act No. 30 of 2025, assented 21 Aug 2025, commenced 1 Apr 2026 per s.1(3)) applies, with the 1961 Act repealed by s.536. Successor section numbers are 2(31), 2(33), 58, 62, 63, 110, 111, 112, 113, 117, 263, 270, 408, 428. Forms move from 3CA/3CB/3CD to Form 26 under the Income-tax (No. 2) Rules, 2026 (CBDT Notification 22/2026, in force 1 Apr 2026).

When a calendar date is not pinned to a CBDT circular below, treat the date as indicative and reconcile with the e-Filing utility before relying on it.

FAQ

1. Can the department see my profit and loss directly? It sees broker SFT and securities transaction reports, not the final ICAI-method turnover or business result. Those are computed by the trader.

2. Will hiding F&O work? No. Securities transaction reports and SFT feeds reach AIS, so omission typically leads to a mismatch notice.

3. Does this change under the 2025 Act? No. AIS/TIS reporting mechanics continue across the transition.

Official sources

Source basis: This article is checked against the official documents listed below. It is educational guidance, not personalised tax advice.