ITR filing 2026: How freelancers and F&O traders should declare their income

The 31 July deadline for fil ing your income tax return (ITR) for financial year 2025-26 (assessment year 2026-27) has passed, but a sizeable group of taxpayers still has more time to complete the process. Individual taxpayers with income from a business or profession who are not subject to tax audit can file their returns until 31 August.

This deadline is also applicable to salaried individuals earning income from futures and options (F&O) trad ing, social media content creation or other side hustles. They have more time to file their ITR, thanks to the change introduced in Budget 2026. Return filing has been staggered this year: taxpayers using ITR-1 (Sahaj) and ITR-2 had to adhere to the regular 31 July deadline, while non-audit busi ness cases can do so until 31 August.

Reconcile records with AIS

Salaried taxpayers with income from side hustles should start by reconcil ing their Form 16 with the Annual Information Statement (AIS) and Form 26AS. Tally your income records with tax credits displayed in the form.


“Freelancers should reconcile receipts with bank statements, invoices, and Goods and Services Tax (GST) returns, if registered. F&O and intraday traders should ensure that turnover, profit or loss calculations, and broker age statements are matched with their return disclosures,” explains Divya Baweja, Partner, Deloitte India.

Ensuring there are no mis matches is important, especially for taxpayers with multiple in come streams. Since the Income Tax Department can now access information around your income receipts, investments made as well as tax deducted at source (TDS) withheld through multiple reporting sources, even minor mismatches get flagged, potentially resulting in I-T queries.

“Salary income should match employer disclosures, while freelance re ceipts and related TDS credits should align with the amounts reported by clients. Any mismatch between the return and the department’s records could trigger inquir ies or delays in processing,” according to chartered accountant Suresh Surana.

If you engage in stock markets, reconcile broker-generated reports, contract notes and ledger statements with the figures re ported in your return. “F&O transactions, generally treated as non-speculative busi ness income, and intraday equity transac tions, generally treated as speculative busi ness income, should be separately identified and disclosed. Turnover calculations should also be retained for verification and audit purposes, where applicable,” Surana says.

Reconcile your income and business expenses with your bank statements. “Taxpayers claiming deductions for profes sional or trading expenses should maintain documentary evidence to substantiate such claims,” explains Surana. Ensure that losses—be it business or trading—are correctly classified and carried forward. “Since speculative and non-speculative losses are governed by different set-off rules, maintaining proper records and rec onciliation statements is essential before claiming future tax benefits,” he adds.

The ITR schedules that matter

Source: CA Suresh Surana

Make the right disclosures

As a salaried taxpayer with income from additional streams such as trading, free lancing, content creation or consulting, you must disclose these under the correct heads in the ITR forms.

“Salary income should be disclosed un der the salary schedule (i.e. ‘S’), freelance or consulting receipts under ‘Profits and Gains from Business or Profession’, F&O income (regular transactions and not just one-off) as non-speculative business in come, and intraday equity trading as specu lative business income,” Baweja says.

Surana notes that a salaried individual earning from F&O, intraday trading and freelance or consulting work should or dinarily file ITR-3 because the activities generate business or professional income. “Freelance or consulting income is gener ally taxed as business or professional in come if the work is done independently and regularly. If it is an isolated or occasional, casual receipt that does not amount to a business or profession, it is usually taxed as income from other sources,” he explains.

Current-year set-off of losses should be reported in Schedule CYLA, brought-for ward losses in Schedule BFLA, and carry forward losses in Schedule CFL. “F&O losses cannot be set off against salary, while intraday losses can be adjusted only against speculative profits,” says Surana.

ITR-3 or ITR-4: Pick the right form

Choosing the right form is critical as filing a return using the wrong form can render it defective, as per I-T rules. The decision will depend primarily on the taxpayer’s total in come, the nature of income and whether the person qualifies for presumptive taxation under Sections 44AD, 44ADA or 44AE of the Income Tax Act. “Eligible profession als such as consultants and freelancers may opt for presumptive taxation under Section 44ADA, while eligible businesses may con sider Section 44AD, subject to the prescribed conditions and thresholds,” says Baweja.

ITR-4 is meant for resident taxpayers opting for the presumptive taxation re gime—those whose total income is less than Rs.50 lakh, besides other eligibility criteria, can opt for this form. “Taxpayers with more complex income situations, including de tailed business reporting requirements, cer tain capital gains situations, foreign assets, or those not using presumptive taxation or income above Rs.50 lakh, generally need to file ITR-3. Where trading income, multiple busi ness activities and detailed expense claims are involved, ITR-3 is often the more appro priate form,” points out Baweja.

“Besides the nature of your business ac tivity, business turnover/gross professional receipts, ascertain whether the presumptive scheme will be more beneficial than claim ing actual expenses,” advises Surana.

Section 44AD covers resident individuals, Hindu undivided families (HUFs) and partnership firms (excluding limited liabil ity partnerships, i.e. LLPs) carrying on an eligible business. Income is deemed to be 8% (6% for receipts through cheque or digital modes) of turnover/gross receipts under the presumptive taxation scheme. It is available to taxpayers whose turnover is less than Rs.2 crore (Rs.3 crore if cash receipts make up less than 5% of total receipts).

Section 44ADA applies to specified profes sionals such as consultants, accountants, architects, engineers, IT professionals, and other professions notified by the gov ernment. Under this scheme, 50% of gross professional receipts is treated as taxable in come. It is available where gross receipts do not exceed Rs.50 lakh (Rs.75 lakh if cash receipts constitute less than 5% of total receipts).

Section 44AE applies to taxpayers en gaged in the business of plying, hiring or leasing goods carriages, and is generally rel evant to transport operators. “The scheme is generally beneficial where expenses are relatively low, and the taxpayer prefers simplified compliance without maintaining detailed books of account. However, taxpay ers with F&O trading income, intraday trad ing income, substantial business expenses, brought-forward losses, or tax audit implications should carefully evaluate whether pre sumptive taxation is suitable,” says Surana.

New code, new questions

ITR forms meant for businesses and profes sionals come with an added layer of complex ity. “The determination of whether a taxpay er carries on ‘business’ or ‘profession’, while straightforward in the majority of cases, can be tricky in certain cases – especially where social media influencers are professionals,” says chartered accountant Himank Singla, Partner, SBHS Associates.

The question arises whether influencers should be taxed as businesses, with only 6-8% of turnover deemed as income under the presumptive scheme, or as profession als, where 50% of receipts are deemed as income. The presumptive taxation scheme under Section 44ADA is available only to specified professionals. “Social media influencer or content creator is not specifi cally included as a notified profession under Section 44AA,” points out Singla.

However, the tax department introduced a new code, 16021, for social media influencers in the ITR-3 and ITR-4 forms last year. Many taxpayers viewed this as recognition of influencers as professionals. If a profession code exists for influencers, the assumption was that they would qualify as professionals for tax purposes. “Legally, that conclusion is not necessarily correct because the Act it self has not been amended,” Singla cautions.

In other words, the inclusion of a profession code in an ITR form does not, by itself, alter the legal position. Chartered account ants believe the tax department should issue a clarification explicitly stating whether in fluencers can avail of presumptive taxation.

The final checklist

Beware of the common tax traps

Even salaried individuals with fairly straightforward disclosure requirements end up making mistakes, inviting notices from the taxman. Those with multiple in come sources need to be even more careful.

“Misclassifying trading income remains one of the most common errors. Many tax payers incorrectly report F&O income as capital gains when it is treated as business income, leading to incorrect tax computa tion,” highlights Baweja.

Although the AIS now contains detailed information about taxpayers’ financial transactions, some fail to verify the state ment with their own records. Failing to rec oncile income disclosures with AIS, Form 26AS, broker statements, bank records and TDS certificates can result in mismatches and notices. The tax department increasing ly relies on data-driven verification, making reconciliation critical, Baweja explains.

Checking the AIS helps you spot income you may have overlooked, like interest on bank fixed deposits, dividends or invest ment, redemption, and sale transactions.

As mentioned earlier, selecting the wrong ITR form can lead to your returns being treated as ‘defective’. “Incorrectly opting into or out of presumptive taxation can create compliance complications, delay processing and potentially lead to defective return notices. Taxpayers should carefully evaluate eligibility before choosing between ITR-3 and ITR-4,” adds Baweja.

Reporting income under the wrong head is another oft-repeated error, say experts. “For example, F&O income, which is generally treated as non speculative business income, is clas sified as speculative business income. Incorrect classification can lead to wrong tax computations, denial of expense claims, improper loss set-off, and potential notices from the tax de partment,” says Surana.

He adds that taxpayers in this cat egory incorrectly calculating their trading turnover, income and losses is another common tax trap. “Some end up claiming loss set-offs that are not permitted under the Income Tax Act. These errors can affect the ability to carry forward losses, trigger tax audit implications, or result in incorrect tax liability calculations.”