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ITR Filing 2025: Know which income tax return form to choose for your ITR, especially when you earn income from the stock market along with your salary income.
Which ITR form to choose for salary and stock market income?
ITR Filing FY2024-25: The income tax return (ITR) filing season is going on, with over one crore returns already filed. Currently, only ITR-1 and ITR-4 utilities have been enabled for e-filing. ITR-2 and ITR-3 filings are yet to start. The Income Tax department has extended the deadline to September 15, 2025 from July 31, 2025, giving taxpayers more time to complete their tax duties without any rush and avoid any errors and mistakes. Here’s which ITR form to choose for your ITR, especially when you earn income from the stock market along with your salary income.
Why It Is Important To Choose Correct ITR Form
The income tax department has specified different ITR forms for different income sources. If you use the wrong form, your return may be treated as defective, leading to unnecessary notices or even fines. In order to choose the correct ITR form, it is necessary to know the type of income you earn.
Types of Income and Their Tax Treatment
Salary Income: It is taxed under the head ‘Income from Salary’. It is simple to file and allowed under most ITR forms.
Delivery-based Equity Investments: If you hold shares more than 12 months, the profit earned from them is called long-term capital gain (LTCG). However, if you sell the shares within 12 months, it called short-term capital gain (STCG). It taxed under ‘capital gains’.
Intraday Stock Trading: It is treated as ‘speculative’ income. It is taxed under ‘Profits and Gains from Business or Profession’. Losses can only be set off against speculative gains.
Futures & Options (F&O) Trading: It is treated as non-speculative business income, both intraday and delivery. It is also eligible for presumptive taxation under Section 44AD.
Dividend income received from Indian companies is taxed as ‘income from other sources’ at slab rates and may be subject to TDS under Section 194 of the I-T Act.
Which ITR Form To Choose?
ITR-1: Not allowed if you have long-term capital gains over Rs 1.25 lakh or any short-term capital gains.
ITR-2: Salary plus LTCG over Rs 1.25 lakh and delivery-based STCG.
ITR-3: Salary plus business income (F&O and/or intraday), with or without capital gains.
F&O and Salary: Do You Need to File ITR-3?
Yes. If you have even one F&O trade, you are considered to be carrying on a business, and you must use ITR-3.
F&O trading is considered a non-speculative business, and must be declared under ‘Business & Profession’. Even a small loss or profit counts, and failure to report could invite a notice under misreporting of income.
“For taxpayers engaged in trading activities such as futures and options (F&O) or intraday equity trades, the income is characterised as business income. Intraday equity trading income is considered speculative business income, whereas income from F&O is treated as non-speculative business income. In such cases, the correct form for filing is ITR-3, which is designed for taxpayers having income under the head ‘Profits and Gains of Business or Profession’,” said Suresh Surana, a Mumbai-based chartered accountant.
When Is a Tax Audit Required?
According to an income tax expert, you will need to undergo tax audit under Section 44AB if your total trading turnover exceeds Rs 10 crore, or turnover is below Rs 2 crore, but you declare less than 6% profit and don’t opt for presumptive taxation.
Under presumptive taxation (44AD), audit is not required. But, this option is not available for intraday (speculative) trading, and once opted, you need to continue for at least 5 years, he added.
“You stand to lose presumptive tax benefits, if you do not continue them for at least 5 years,” according to cleartax.in.
Do I Need to Maintain Books of Accounts?
If you don’t opt for presumptive taxation, and your business income (from F&O or intraday) is above Rs 2.5 lakh, you must maintain books of accounts such as day-wise trading log, contract notes from brokers, profit & loss statements, and bank and demat account statements.
“Books of accounts/accounting records have to be maintained if the income from business or profession exceeds Rs 1,20,000 or turnover/gross receipts exceeds Rs 10,00,000 in any of the 3 preceding years for an existing profession,” according to cleartax.in.
However, in case of specified professionals, books of accounts are to be maintained only if income exceeds Rs 1,50,000 in all of the 3 preceding years. They include lawyers, doctors, engineers, accountants, film artists, etc, it said.
How to Calculate Turnover for F&O and Intraday?
F&O turnover is calculated based on absolute profit/loss:
Turnover = Sum of absolute profits and losses of all trades
Intraday turnover = Total of positive and negative differences from buying and selling
This method is used to determine audit applicability and whether you can file under presumptive scheme.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h… Read More
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