A non speculative F&O loss has wider set off and a longer carry forward than a speculation loss
Set off comes first. In the year of the loss, an F&O business loss can be set against other heads of income, such as capital gains or income from other sources, but not against salary. Section 71 of the 1961 Act allows the set off, and section 71(2A) bars it against salary.
Carry forward comes second. What is left after set off goes forward for up to eight years, and in those years it can be set off only against business income. The carry forward needs a return that shows the loss and is filed in time under section 139(3). Section 80 of the old Act allows no carry forward of a loss that is not determined in such a return.
Speculation is separate. Intraday trading in shares for cash is a speculation business. Its loss can be set off only against speculation income and carried forward for up to four years. Exchange traded F&O is not in that group, so the two results are reported separately.
The 2025 Act keeps the structure with new numbers: section 109 for set off, section 112 for the eight year carry forward and section 113 for speculation losses. Losses from before 1 Apr 2026 keep their character under the transition rules, so an old F&O business loss stays a business loss, and its eight years still count from the year of the loss.
Keep the contract notes and a year by year profit and loss statement for each year a loss may be used. This page explains the rules and does not work out anyone's loss. A chartered accountant can apply them to your records.
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study