ITR-3 F&O Reporting: Which Schedules (BP, GST, P&L) Salaried Side-Hustle Traders Miss
F&O income in ITR-3 requires Schedule BP (business income), a P&L statement with turnover and expenses, a balance sheet, Schedule DPM/DOA (depreciation), and Schedule GST — even if you are not GST-registered. Salaried traders must also complete Schedule S and Schedule TDS; reporting F&O under Schedule CG instead of BP is a common Section 139(9) trigger.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Short answer: F&O income is business income, so ITR-3 is the only correct form, and it demands more than a single income figure. The mandatory schedules are: Schedule BP (F&O as non-speculative business income), a profit and loss statement (turnover, expenses, net profit), a balance sheet (even if nominal), Schedule DPM/DOA (depreciation, if any), and Schedule GST (select "Not registered" and enter nil turnover if unregistered — F&O P&L is not a supply). A salaried trader adds Schedule S (salary), Schedule TDS1 (salary TDS from Form 16 Part A) and Schedule TDS2 (TDS on all other income including F&O, interest, etc.). The most common fatal error: putting F&O under Schedule CG (capital gains) instead of Schedule BP — a direct s.139(9) defective-return trigger.
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The schedule checklist
Schedule BP: where F&O actually goes
F&O is business income, so it belongs in Schedule BP — the schedule for "profits and gains of business or profession." Inside BP, F&O is reported as non-speculative business income. The inputs you must be able to reproduce:
- Turnover (ICAI method — absolute sum of per-trade P&L plus options premium received);
- Expenses deductible against it: brokerage, DP charges, exchange charges, internet, data/software subscriptions, advisory fees, and a pro-rata share of home-office costs if you trade from home;
- Net profit or loss for the year.
STT note: Securities transaction tax is not an allowable business expense under s.40(a)(ib) ITA 1961 — do not claim it as a deduction.
The P&L and balance sheet
Even a small F&O business needs a simple P&L and balance sheet inside ITR-3:
- P&L: turnover → expenses → net profit/loss. This figure must reconcile with Schedule BP.
- Balance sheet: capital brought in, margin balances, brokerage payable, bank balances, and the trading-account balance. It can be nominal — but a blank balance sheet is a common defect.
If you hold F&O positions open on 31 March, the treatment of mark-to-market gains/losses on open derivative positions has specific rules — confirm with a CA before netting them off.
Schedule GST: say "NIL", do not leave blank
Schedule GST asks for your GST registration status and turnover. If you are not GST-registered (your trading P&L is not a supply), state "NIL". Leaving the schedule blank or skipping it is a defect trigger. Registered? Then report GSTIN, turnover, and taxes as applicable — but remember GST turnover (only brokerage is a service) differs from income-tax turnover, a confusion covered in GST on F&O Brokerage vs Income Tax Turnover.
If you are salaried too
A salaried side-hustle trader fills:
- Schedule S — salary income exactly per Form 16 Part B, including perquisites;
- Schedule TDS1 — TDS on salary only (from Form 16 Part A);
- Schedule TDS2 — TDS on all income other than salary (F&O, interest, dividends, professional fees, etc.);
- Schedule BP — the F&O business; and
- The computation sheet, where salary + business income combine for slab-rate tax.
The most common salaried-trader mistake is filing ITR-1 or ITR-4 — both are wrong once F&O exists (ITR-1 has no Schedule BP; ITR-4 is only for presumptive income, and s.44AD does not cover F&O).
Worked example: Rohit's side-hustle return
Persona: Rohit, salaried at ₹15,00,000 (Form 16, TDS ₹1,10,000), traded F&O in FY 2025-26:
What goes where in ITR-3:
- Schedule S: salary ₹15,00,000.
- Schedule BP: non-speculative F&O income ₹1,95,000 (gross P&L ₹4,20,000 less expenses ₹2,25,000).
- P&L statement: turnover ₹62,00,000, expenses ₹2,25,000, net ₹1,95,000.
- Balance sheet: nominal — bank balance, margin, capital.
- Schedule GST: NIL.
- Schedule TDS1: ₹1,10,000.
- Computation: total income ₹16,95,000; tax per slab (new regime), less TDS, less advance tax if any.
If Rohit files ITR-3 with a blank Schedule BP and shows only salary, the CPC flags the return — the F&O income disappears from the computation, and the mismatch with his AIS (broker reports flow into the AIS) triggers a s.139(9) notice.
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Frequently Asked Questions
1. Can F&O income be reported under Schedule CG in ITR-3?
No. F&O is business income and must be reported in Schedule BP as non-speculative business income. Reporting it under capital gains is a s.139(9) defective-return trigger.
2. Is a balance sheet really required for small F&O traders?
Yes — ITR-3 requires a P&L and balance sheet, but they may be simplified/nominal for individuals. A blank balance sheet is a common defect.
3. I am not GST-registered. What do I fill in Schedule GST?
Write "NIL". Do not leave the schedule blank. Your trading P&L is not a GST supply; only the broker's service (brokerage) carries GST, and that is not your output tax.
4. Which ITR form should a salaried F&O trader use?
ITR-3. ITR-1 has no Schedule BP; ITR-4 is only for presumptive income (s.44AD), which does not cover F&O. ITR-2 is for those without business income.
5. Are brokerage and STT deductible against F&O income?
Brokerage: yes (a business expense). STT: no — s.40(a)(ib) ITA 1961 disallows securities transaction tax as a deduction.
6. What if I held open F&O positions on 31 March?
Open positions are marked to market for the year-end. The treatment of unrealised gains/losses on open derivative positions has specific rules — get a CA to confirm before you net them off in the P&L.
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File the right form with the right schedules
Before you submit, run your return through the Defective Return Validator. It checks form selection, schedule presence, and F&O-in-wrong-schedule errors — the three most common reasons a side-hustle trader's ITR bounces back under s.139(9).
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Last verified: 2026-08-08.
Sources: Sections 139(9), 40(a)(ib), 43(5), 44AB, 44AD ITA 1961; Income-tax Rules, 1962 (Rule 12, ITR-3 schedules); Income-tax e-filing portal instructions for ITR-3 (AY 2026-27).
Reviewer: pending CA sign-off. Draft status — do not publish before CA review.
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See Also
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