Missed Filing F&O Losses for FY 2018-19? Your Only Legal Option in 2026

By FnOTax India Editorial Board · Updated 2026-05-29 · F&O Loss

Source basis: This research draft is checked against listed official sources where available. It is educational guidance, not personalized tax advice.

Missed Filing F&O Losses for FY 2018-19? Your Only Legal Option in 2026

If you are reading this, you are likely experiencing severe deadline anxiety. You traded Futures and Options (F&O) back in FY 2018-19, took a substantial hit, and failed to report those losses in your Income Tax Return (ITR). Now, years later, you have profitable trades and want to know: “I missed to file losses in ITR for 2018-19. Can I do it this year?”

Let us address the most dangerous misinformation on the internet first.

If you search this question, most ranking articles will immediately start lecturing you about F&O tax audit thresholds (Rs 10 crore) or complex turnover calculations. That is completely irrelevant to your problem. Other articles might vaguely suggest filing an Updated Return (ITR-U) to fix historical errors. That is dangerously incorrect.

Here is the definitive, unvarnished truth: You cannot use standard ITRs, belated returns, or Updated Returns (ITR-U) to claim missed FY 2018-19 losses today. The statutory deadlines have long expired.

However, the door is not entirely shut. Your final, absolute last legal resort is filing a Condonation of Delay petition under Section 119(2)(b) with the Income Tax Department.

This guide will break down exactly why standard methods fail, how the Section 119(2)(b) process works, and how to protect your current F&O losses under the AY 2026-27 rules.

The Hard Truth: Statutory Deadlines for FY 2018-19 Have Expired

To understand why you are in this predicament, you must understand the strict temporal rules governing business losses.

As traders often lament on forums: “To carry over the losses, you need to file within the Due date of filing the returns.” This is not just a best practice; it is the law. Under Section 80 of the Income Tax Act, a business loss cannot be carried forward unless the ITR is filed on or before the original due date specified under Section 139(1).

For FY 2018-19 (Assessment Year 2019-20), let us look at the timeline of expired remedies:

  1. Original Return (Section 139(1)): The deadline was July 31, 2019 (or September 30, 2019, for audit cases). Missing this meant you automatically lost the right to carry forward the F&O loss.
  2. Belated Return (Section 139(4)): Even if you just wanted to report the loss (without carrying it forward), the absolute final deadline to file a belated return for AY 2019-20 was March 31, 2020.
  3. Updated Return (Section 139(8A)): Introduced recently, ITR-U allows taxpayers to update their returns up to 24 months from the end of the relevant Assessment Year. For AY 2019-20, this 24-month window permanently closed on March 31, 2022.

We are now in 2026. The standard tax portal will not even allow you to select AY 2019-20 from the drop-down menu for a fresh filing.

Why ITR-U (Updated Return) is Not Your Savior

Even if we were discussing a more recent year where the 24-month ITR-U window was still open, you cannot use an Updated Return to claim a missed loss.

Section 139(8A) explicitly states that an Updated Return cannot be filed if it:

  • Is a return of loss.
  • Has the effect of decreasing the total tax liability determined previously.
  • Results in a refund or increases the refund due.

ITR-U was designed by the government to collect more tax from undisclosed income, not to hand out missed tax benefits to traders.

If standard ITRs are blocked, what is left?

Your only remaining legal avenue is Section 119(2)(b) of the Income Tax Act, 1961. This section empowers the Central Board of Direct Taxes (CBDT) to admit an application or claim for any exemption, deduction, refund, or any other relief after the expiry of the specified period, provided it is necessary to avoid “genuine hardship” to the taxpayer.

The CBDT has delegated this power to lower authorities via Circular 9/2015. Here is how it works.

1. The 6-Year Time Bar (Why 2026 is Critical)

Under Circular 9/2015, a condonation application must be filed within 6 years from the end of the assessment year for which the claim is made.

For FY 2018-19 (AY 2019-20), the assessment year ended on March 31, 2020. Adding 6 years brings us to March 31, 2026. If you are reading this before March 31, 2026, you are in the final possible window to act. If you are reading this after, the loss is permanently dead.

2. Jurisdictional Limits (Who to Apply To)

You cannot just email the Income Tax Department. You must file a formal petition to the correct authority based on the size of your loss:

  • Loss up to Rs 10 Lakh: Principal Commissioner of Income Tax (Pr. CIT) or Commissioner of Income Tax (CIT).
  • Loss between Rs 10 Lakh and Rs 50 Lakh: Chief Commissioner of Income Tax (CCIT) or Principal Chief Commissioner of Income Tax (Pr. CCIT).
  • Loss exceeding Rs 50 Lakh: The CBDT directly.

3. The “Genuine Hardship” Test

This is the hardest part. The department will not condone the delay just because you “forgot,” “didn’t know the rules,” or “your previous CA made a mistake.”

You must prove genuine hardship. Historically, courts and the CBDT have accepted:

  • Severe medical emergencies or prolonged hospitalization of the taxpayer or immediate family during the filing window (July-August 2019).
  • Natural disasters destroying records.
  • Severe financial distress or bankruptcy proceedings.
  • In rare cases, genuine technical glitches on the IT portal that were documented at the time.

You must attach robust documentary evidence (hospital bills, police FIRs, court orders) to your petition. If the authority is satisfied, they will issue an order condoning the delay, directing the Assessing Officer (AO) to accept your belated return and allow the loss to be carried forward.

What You Are Trying to Save: F&O Loss Carry Forward Rules

Why go through this complex legal process? Because F&O losses are highly valuable tax assets. If you successfully get your delay condoned, here is what you unlock.

Non-Speculative Classification

Under Section 43(5) proviso (d), trading in derivatives (Futures and Options) on a recognized stock exchange is classified as non-speculative business income. (Note: Intraday equity trading without taking delivery remains speculative. These two are taxed and set-off completely separately).

8-Year Carry Forward

Under Section 72, non-speculative business losses can be carried forward for 8 consecutive assessment years immediately succeeding the assessment year in which the loss was computed. A loss from FY 2018-19 (AY 2019-20) can be carried forward all the way to FY 2026-27 (AY 2027-28).

Set-Off Rules

Once carried forward, this F&O loss can be set off against any business income (including future F&O profits, delivery-based trading profits, or profits from a completely different business). Note: Under Section 71, in the same financial year the loss is incurred, it can be set off against any income EXCEPT salary. But once carried forward, it can only be set off against business income.

Worked Example: The Financial Impact of Condonation

Let us look at a real-world scenario with numbers.

The Situation: Rahul incurred a massive Rs 15,000,000 (Rs 15 lakh) loss in Bank Nifty options in FY 2018-19. Due to a severe car accident and subsequent 6-month rehabilitation, he completely missed filing his ITR-3 by the July 2019 deadline.

The Present (FY 2025-26): Rahul has recovered, refined his strategy, and generated Rs 20,000,000 (Rs 20 lakh) in F&O profits this year. If he files normally, he will pay roughly 30% tax on that Rs 20 lakh (approx. Rs 6,000,000).

The Solution: In February 2026 (just before the 6-year time bar expires), Rahul’s CA files a Section 119(2)(b) petition to the Chief Commissioner of Income Tax (since the loss is between 10-50 lakh). They attach his 2019 hospital records and medical certificates proving genuine hardship.

The CCIT accepts the petition and condones the delay. Rahul’s AO processes the 2018-19 loss. Rahul can now set off the Rs 15 lakh historical loss against his Rs 20 lakh current profit. His taxable business income drops to Rs 5 lakh. Tax saved: ~Rs 4,50,000. The legal effort was entirely worth it.

Exceptions: What CAN Be Carried Forward Even if Late?

While F&O business losses strictly require filing before the Section 139(1) deadline (barring a condonation), it is worth noting two exceptions in the Income Tax Act that can be carried forward even if you file a belated return:

  1. Loss from House Property (Section 71B): Can be carried forward for 8 years even if the ITR is filed late.
  2. Unabsorbed Depreciation (Section 32(2)): Can be carried forward indefinitely, regardless of filing delays.

While F&O traders rarely have massive unabsorbed depreciation (unless they run a heavy algorithmic trading setup with expensive server hardware capitalized as assets), it is a vital technical distinction to keep in mind.

Looking Ahead: Don’t Repeat the Mistake in AY 2026-27

If you are trading F&O today, you must ensure flawless compliance to avoid ever needing a Section 119(2)(b) petition again. Here are the current, 2026-correct rules you must follow:

1. ITR Form & Due Dates

F&O traders must file ITR-3. (ITR-4 is only allowed if you opt for Section 44AD presumptive taxation, which is rare and mathematically disadvantageous for most F&O traders).

  • Non-Audit Due Date: For AY 2026-27, the due date for filing ITR-3 (non-audit) is August 31, 2026 (extended from the historical July 31 deadline via the Finance Act 2026).
  • Audit Due Date: The Tax Audit Report (Form 3CA/3CB-3CD) is due September 30, 2026, and the corresponding ITR-3 is due October 31, 2026.

2. The Correct Turnover Formula

Do not calculate turnover by adding up your total contract values. Per the authoritative ICAI 8th Edition Guidance Note on Tax Audit u/s 44AB (issued August 19, 2022), F&O turnover is calculated as: Sum of Absolute Profits + Sum of Absolute Losses for each trade. Crucial Note: Premium received on options writing is NO LONGER added separately to this formula. The ICAI clarified this to prevent double-counting.

3. Tax Audit Thresholds (Section 44AB)

Under Section 44AB(a), a tax audit is required if your business turnover exceeds Rs 1 crore. However, this threshold is raised to Rs 10 crore if your cash receipts and cash payments each do not exceed 5% of total transactions. Since F&O trading is 100% digital and routed through bank accounts, the Rs 10 crore threshold is effectively applicable to all F&O traders.

4. Books of Account (Section 44AA)

You must maintain books of account (trading ledger, P&L, bank statements) if your F&O income exceeds Rs 1.2 lakh OR your turnover exceeds Rs 10 lakh in any of the last 3 years.

5. Penalty for Missing Audit (Section 271B)

If your turnover exceeds Rs 10 crore and you fail to file a tax audit, the penalty is 0.5% of turnover OR Rs 1,50,000, whichever is LOWER. Note: The Finance Act 2026 converted this from a “penalty” to a “fee” status to reduce litigation, but the financial hit remains exactly the same.

Conclusion

Missing the deadline to file F&O losses is a costly mistake. For FY 2018-19, standard filing windows are permanently closed. Do not waste time trying to force an ITR-U through the portal.

If your historical loss is substantial enough to justify professional fees, immediately consult a Chartered Accountant to draft a Section 119(2)(b) Condonation of Delay petition. Gather your evidence of genuine hardship, ensure you file before the 6-year time bar expires on March 31, 2026, and hope the Commissioner grants you relief.

Going forward, treat your ITR-3 deadline with the same strict discipline you apply to your stop-losses.

Disclaimer: Tax laws are subject to interpretation and frequent amendments. The Section 119(2)(b) process is discretionary and depends heavily on the specific facts of your case. Always consult a practicing Chartered Accountant before initiating legal petitions with the Income Tax Department.

Frequently Asked Questions (FAQ)

1. Can I file an Updated Return (ITR-U) to claim my missed F&O losses for FY 2018-19? No. Section 139(8A) explicitly prohibits using an Updated Return (ITR-U) to file a return of loss, claim a new loss, or increase an existing loss. Furthermore, the 24-month time limit for AY 2019-20 expired on March 31, 2022.

2. What is the time limit to file a Section 119(2)(b) condonation of delay petition? Under CBDT Circular 9/2015, a condonation petition must generally be filed within 6 years from the end of the assessment year for which the claim is made. For FY 2018-19 (AY 2019-20), this 6-year window closes on March 31, 2026.

3. Are F&O losses considered speculative or non-speculative? Under Section 43(5) proviso (d) of the Income Tax Act, trading in derivatives (F&O) on a recognized stock exchange is classified as non-speculative business income. Intraday equity trading, however, remains speculative.

4. Can I carry forward unabsorbed depreciation if I missed the ITR deadline? Yes. Unlike business losses (which require filing before the Section 139(1) due date), unabsorbed depreciation under Section 32(2) and house property losses can be carried forward even if the return is filed belatedly.

5. What is the F&O tax audit turnover limit for AY 2026-27? Under Section 44AB(a), the base limit is Rs 1 crore. However, since F&O trading is 100% digital, the enhanced threshold of Rs 10 crore applies, provided cash receipts and payments do not exceed 5% of total transactions.

Official sources

Source basis: The references below point to the official Indian tax sources used to inform this article. The article has not completed our full source-verification review; treat it as educational guidance only and consult a qualified Chartered Accountant before acting on it.