Normal business under section 44ad and FNO loss reporting

[Raghav Sharma]

One of my client have a business with Rs. 1.82 crore turnover (to be offered under 44AD presumptive) and an F&O loss of Rs. 19,500 on Rs. 1.42 lakh turnover (all digital) for FY 2025-26. Can I file ITR-3 with the Rs. 1.82 crore under 44AD and F&O as a separate normal business showing the loss - without tax audit u/s 44AB -?

Kindly guide on the matter.

[Sanjeev Agarwal]

My conclusion

Particular	Treatment
Main business turnover	Rs. 1.82 crore
Main business	44AD
Digital receipts	6% presumptive rate, subject to conditions
Presumptive income	Rs. 10.92 lakh, if entire Rs. 1.82 cr qualifies for 6%
F&O turnover	Rs. 1.42 lakh if correctly computed as tax-audit turnover
F&O result	Actual loss Rs. 19,500
F&O treatment	Normal business
ITR	ITR-3
Tax audit merely because of F&O loss	No
Tax audit because F&O turnover is Rs. 1.42 lakh	No

One qualification I would specifically document

I would not simply rely on the broker's Rs. 1.42 lakh figure. First recompute F&O turnover as per the ICAI Guidance Note. A broker's "turnover"/P&L figure and section 44AB turnover are not necessarily identical.

Also verify that the Rs. 1.82 crore business is genuinely an eligible 44AD business, that the assessee is eligible for 44AD, and that the cash-receipt condition for the Rs. 3 crore limit and 6% treatment is satisfied.

There is also a recent Jaipur ITAT decision concerning F&O losses and the interaction of sections 44AD/44AB, so I would keep that jurisprudence in the file rather than treating the issue as completely risk-free.

AI Summary

Presumptive taxation permits eligible digital business receipts alongside separately reported futures and options losses, subject to turnover computation and eligibility checks.
Presumptive taxation under section 44AD may apply to an eligible main business with qualifying digital receipts, while futures and options activity may be reported separately as normal business income in ITR-3. Tax-audit exposure for futures and options depends on turnover computed under applicable audit principles, rather than broker-reported figures. Eligibility for presumptive taxation, the nature of the principal business, cash-receipt conditions, and correct computation of derivatives turnover require verification.