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Key Highlights
- Income from intraday trading is considered speculative business income.
- Tax on intraday trading income is calculated as per your tax slab.
- You need to fill out ITR-3 for income tax on intraday trading.
- You should consider your intraday trading annual turnover carefully to determine important tax filing deadlines.
Income Tax on Intraday Trading Made Easy
Post-COVID, people have developed a heightened interest in Indian stock markets. In stock markets, you can either invest in stocks and indices for the long or short term and earn through capital gains or through intraday trading.It is assumed that the returns from intraday trading can exceed capital gains. Thus, the tax on intraday trading earnings differs from the tax on long-term investments.In this blog, you will learn about the income tax on intraday trading, enabling you to build strategies to maximise your share market earnings.
What Is Intraday Trading?
As the name suggests, intraday trading refers to buying or selling a share during a business day and squaring off (selling or buying, respectively) on the same day. Therefore, you do not get shares credited to your Demat account in intraday trading.
You make money in intraday trading by analysing a stock’s short-term price action.
For example, you bought “ABC” share today at “x” price and sold it today at “x+y” price, making a profit of “y” in a single day. Keep in mind that gains from intraday trading are considered as ‘income from business’, and you need to pay a tax on trading income.
Tax on Intraday Trading Vs. Capital Gains
Intraday trading is considered speculative because you do not intend to take ownership of the contract. Therefore, the tax on intraday trading income is taxed at the slab rate applicable to your total income.On the other hand, long-term capital gains are taxed at concessional rates. Some capital gains from equity/ mutual funds are also exempt u/s 10(38) of the Income Tax of India, 1961. Tax on Intraday Trading: ITR Form and Due Date You must file an income tax return, ITR-3 , to account for income tax on trading. The last date to file intraday trading income tax is 31st July if a tax audit is not applicable; otherwise, it is 31st October. Also Read: What is Capital Gains Tax? - Types, Tax Rates & Calculation
What is Turnover for Intraday Trading?
Tax liabilities on intraday trading earnings are calculated based on turnover. Turnover refers to the absolute amounts of profits and losses generated from daily trading activities. It can be calculated using either the scrip-wise method or the trade-wise method.
Calculating Turnover for Intraday Trading
You need to calculate the annual absolute turnover to calculate income tax on intraday trading. It refers to the sum of profit and loss on all the intraday trades done in a financial year.For e.g. You bought 100 shares of “ABC” at ₹100 each and sold them the same day at ₹120. Your total profit will be ₹2000 on ABC.On the same day, you also bought 100 shares of “XYZ” at ₹120 each and sold them the same day at ₹80. Your total loss will be ₹4000 on XYZ.Your turnover for that day will be ₹2000 + ₹4000= ₹6000.
Calculating Tax On Intraday Trading
As mentioned earlier, income tax on intraday trading is computed at your slab rate and increased by the applicable surcharge rate + 4% cess. The slab rates under the old and new tax regimes are:
Old Tax Regime
| Income Range | Tax Rate |
| Up to ₹ 2,50,000 | Nil |
| ₹ 2,50,001 - ₹ 5,00,000 | 5% |
| ₹ 5,00,001 - ₹ 10,00,000 | 20% |
| Above ₹ 10,00,000 | 30% |
New Tax Regime
| Income Range | Tax Rate |
| up to ₹3,00,000 | Nil |
| ₹3,00,001- ₹6,00,000 | 5% |
| ₹6,00,001- ₹9,00,000 | 10% |
| ₹9,00,001- ₹12,00,000 | 15% |
| ₹12,00,001- ₹15,00,000 | 20% |
| ₹15,00,001 and above | 30% |
Are you wondering how you can legally save tax if your salary is higher than ₹10,00,000? Click here to read our blog.Let us understandincome tax on tradingin both tax regimes through an example:Annual salary for the last financial year (FY), A= ₹10,00,000Income from intraday equity trading (speculative business income), B
= ₹2,00,000Income from trading in futures and options (non-speculative business income), C
= ₹2,00,000Capital gains on listed shares (assuming short-term), D= ₹1,00,000Interest from bank deposits, E = ₹1,00,000Your total annual income for the last FY, excluding capital gains, will be= A+B+C+E
= ₹15,00,000Your income falls in the highest bracket, 30%. Please note that capital gains are taxed at a concessional rate. Your short-term capital gains will be taxed at 15% in this case.Therefore, your total income tax, includingtrading income tax, will be 30% of ₹15,00,000 + 15% of ₹1,00,000=₹2,62,500 + ₹15,000=₹2,77,500 + cess Also read: E-Filing 2.0: New Income Tax E-filing Portal Explained
Solutions for Calculating Tax on Intraday Trading
Profits from intraday trading can complicate taxes, especially when combined with income from multiple other sources. You should be careful while calculating the tax on intraday trading and pay your liabilities to avoid any penalties.Stay abreast of the latest financial updates that may affect your financial future with Aditya Birla Capital. Visit us now !
FAQS - FREQUENTLY ASKED QUESTIONS
How much tax on intraday trading in India?
According to your tax slab, you need to pay a trading tax in India for your intraday income. Your tax will be calculated on your total income from all sources for one FY.
How much tax on intraday trading in India?
You can carry forward intraday losses for up to four consecutive financial years. Also,
they can be set off only against speculative business income made during that period. Hence, there is no income tax on intraday losses.
Is a tax audit required for intraday trading tax in India?
If your intraday trading turnover exceeds ₹10 crores, a tax audit is mandatory, irrespective of your profit or loss.
Do I pay tax if I make losses in intraday trading?
There is no income tax on intraday trading loss. Most traders set it off against their intraday gains.
Can I do intraday trading along with my job?
You can do intraday trading with your job if your employer allows it. However, intraday trading requires complete attention and can interfere with your job responsibilities.
How should I file my ITR if I have intraday trading income and other sources of income?
If you need to pay tax on income from intraday trading as well as income from other sources, report each type of income separately in the relevant sections of the ITR form.
What documents do I need to maintain for tax on intraday trading?
You should keep comprehensive records, including trade summaries, transaction statements, brokerage statements, and financial statements, to serve as supporting documentation when filing your ITR.
Can I e-verify my ITR if I have paid income tax on intraday trading?
Yes, you can e-verify your ITR if you are liable for intraday trading income tax.
Can I e-verify my ITR if I have paid income tax on intraday trading?
Yes, you need to pay advance tax if your estimated intraday trading tax exceeds ₹10,000. If you opt for Presumptive tax u/s 44AD, you must pay advance tax in a single instalment by 15th March. If you have not opted for Presumptive tax, you can pay advance tax on intraday trading in 4 instalments in the following manner:
Advance Tax
Due Date
15% of tax on intraday trading
By 15th June
45% of tax on intraday trading
By 15th September
75% of tax on intraday trading
By 15th December
100% of tax on intraday trading
By 15th March
What is Presumptive business income tax u/s 44 AD?
Presumptive business income tax from intraday trading is 6% of the turnover up to a limit of ₹2 crores, whether a profit or loss. You cannot carry forward losses if you treat your income under presumptive business income.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
