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Tax on Intraday Trading

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Sakshi Shah

income from trading
Income Tax
Last updated on July 19th, 2021

A taxpayer who has done Intraday Trading should file ITR and pay tax on this income. Intraday Trading means buying and selling of stock on the same day. The trader squares off his trade on the same trading day and does not take actual delivery. The intention is to earn profits from the fluctuations in prices. Intraday Trading of Equity is considered to be a speculative Income.

Head of Income, ITR Form and Due Date – Income Tax on Intraday Trading

Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
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Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
Explore

Turnover in case of Intraday Trading

To determine whether the audit is applicable and not to calculate the tax liability, we must calculate Trading Turnover.

Turnover of Equity Intraday Trading = Absolute Profit

Absolute Turnover means the sum of positive and negative differences.

Example: Rahul buys 100 shares of PNB at INR 85. He sells the shares at the end of the day at INR 88. On the next day, he buys 200 shares of Tata Steel at INR 500. At the end of the day, he sells the shares at INR 450.

Tax Audit on Intraday Trading

Trading Turnover up to Rs. 1 Cr

Trading Turnover more than Rs. 1 Cr and up to Rs. 2 Cr

Trading Turnover more than Rs. 2 Cr

Note: In the case of Traders, since all these trading transactions are digital, the prescribed rate under Sec 44AD would be 6% instead of 8% in normal cases.

Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
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Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
Explore
Income Tax on Intraday Trading - Tax Audit Applicability upto FY 2019-20

Tax Calculation for Intraday

Income Tax on trading income is calculated at prescribed slab rates as per the Income Tax Act as per the table below.

Taxable Income Slab Rate
Up to INR 2,50,000 NIL
INR 2,50,001 to 5,00,000 5%
INR 5,00,001 to 10,00,000 20%
More than INR 10,00,000 30%

Note: Surcharge is liable on the total income as per the prescribed surcharge slab rates. Cess is liable at 4% on (basic tax + surcharge).



Carry Forward Loss for Intraday

Under Equity Intraday Trading, the trader can claim and carry forward the loss if a tax audit has been conducted by a professional chartered accountant in practice. This loss can be carried forward to future years and set off against future profits to reduce the income tax liability.

Loss from Equity Intraday Trading is a Speculative Business Loss. It can be set off only against Speculative Business Profits. The trader can carry forward a speculative loss for 4 years.

Import Your Trades
File ITR Online

India’s fastest growing Tax Filing Platform

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Import Your Trades

File ITR Online

India’s fastest growing Tax Filing Platform

[Rated 4.8 stars by customers like you]

FAQs

What is turnover in F&O Trading?

Under F&O Trading, turnover refers to as the sum of positive and negative differences of futures i.e. absolute profit. For options it is equal to the absolute profit plus premium on the sale of options.

When is Tax Audit mandatory for F&O Trading?

The conditions to determine the Tax Audit are the same for all types of trading.
– Trading turnover is above the threshold
– Profit is less than 6% of the turnover & Total income is above the basic exemption limit

Can I adjust the loss from intraday trading against other incomes?

The loss from equity intraday trading is considered to be a Speculative Business Loss. It cannot be adjusted against any income except Speculative Profits. The remaining loss can be carried forward for 4 years and adjusted with future speculative profits.

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