Trading in the stock market, especially Futures & Options (F&O) and intraday equity, has grown rapidly in India. However, with high trading volumes comes the reality of trading losses. For salaried corporate professionals who also trade, a critical question arises: Can I set off my trading losses against my salary income to lower my tax bill in AY 2026-27?

F&O Losses vs. Salary Income: The Legal Boundaries

Under the Income Tax Act, 1961, Futures & Options (F&O) trading is classified as a Non-Speculative Business. On the other hand, your corporate salary is taxed under the head "Salaries". The tax laws state that non-speculative business losses cannot be set off against salaried income. This means if you paid ₹2 Lakh in salary tax and incurred a ₹1.5 Lakh loss in F&O, you cannot deduct the loss from your salary to get a refund. You must pay the full tax on your salary.

Why Filing ITR-3 is Crucial for Traders

Even though F&O losses cannot offset salary income, they are extremely valuable. By filing ITR-3, you can:

• Offset against other income: You can set off F&O losses against other business profits, rental income, or interest income earned in the same financial year.
• Carry forward losses: You can carry forward F&O losses for the next 8 assessment years. These carried-forward losses can offset future trading profits, bringing down your future tax liability to zero.

Intraday vs. F&O Losses: Understanding the Tax Treatment

It is important to distinguish between intraday equity trading and F&O trading, as they fall under different tax brackets:

• Intraday Equity Loss: Classified as a "Speculative Business Loss". It can only offset intraday trading profits and can be carried forward for a maximum of 4 years.
• F&O Loss: Classified as a "Non-Speculative Business Loss". It can offset regular trading profits, interest income, or rental income, and can be carried forward for up to 8 years.