Income Tax on Intraday Trading

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Sakshi Shah

income from trading
Income Tax

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.

ITR for Intraday Traders
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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.
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FY 2019-20: Due Date to file Income Tax Return for both audit and non-audit cases has been extended to 30th November 2020
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FY 2019-20: Due Date to file Income Tax Return for both audit and non-audit cases has been extended to 30th November 2020

Turnover in case of Intraday Trading

To determine whether the Tax Audit is applicable or not, we must calculate Trading Turnover. It is important to note that tax liability does not depend on 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.

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Have any queries for trading income, ask us on TaxQnA and we will answer it in the simplest way!
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Have any queries for trading income, ask us on TaxQnA and we will answer it in the simplest way!

Income Tax on Intraday Trading – Tax Audit

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.
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Income Tax on Intraday Trading - Tax Audit Applicability upto FY 2019-20
Applicability of Tax Audit from Trading Income
Read detailed situations under which Tax Audit as per Income Tax Act is applicable
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Applicability of Tax Audit from Trading Income
Read detailed situations under which Tax Audit as per Income Tax Act is applicable
Read More

Tax Calculation for Intraday Trading

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 Rs.2,50,000 NIL
Rs.2,50,001 to Rs.5,00,000 5%
Rs.5,00,001 to Rs.10,00,000 20%
More than Rs.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 Trading

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.

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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. The turnover for options 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 is same for all types of trading.
– When the turnover is up to Rs. 1 Cr, there is a loss or profit is less than 6% of turnover and total income is more than the basic exemption limit.
– If the turnover is between Rs. 1 Cr and Rs. 2 Cr, and there is a loss or profit is less than 6% of turnover
– When the turnover is between Rs. 1 Cr and Rs. 2 Cr, profit is more than 6% of turnover and trader does not opt for presumptive taxation
– If the turnover exceeds Rs. 2 Cr irrespective of profit or loss.

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.

  • PARTHA SARATHI RAY says:

    The above page is very informative and can be 7nderstood easily.

  • Amak says:

    Audit is not applicable if assesse having loss or profit is <6%/8% and does not opt for 44AD. 6%/8% criteria is applicable only when assessee has opted for presumptive business

    • Sakshi Shah says:

      If there is a loss or profit is less than 6%/8% of turnover AND the total income is more than the basic exemption limit, the Tax Audit as per Section 44AB is applicable. Clause (e) of Section 44AB mentions that if taxpayer does not opt for Presumptive Taxation under Section 44AD, Tax Audit is applicable.

  • GK says:

    Nice Article Sakshi.
    If, intrday trading turnover is less than 5 lakhs, and there is a loss, can I opt for Presumptive Taxation and avoid Tax Audit?. Since turnover is less in this case, opting for tax audit would be very expensive. Instead I could pay 6% tax on turnover.

    • Anushka Shah says:

      You can apply for Presumptive Taxation, declare atleast 6% of turnover as profits, pay tax as per slab rates and file ITR-4. However, you would not be able to carry forward the loss. Further, you must follow the 5 year rule under Presumptive Taxation Scheme. Thus, if you opt out of Presumptive Taxation, you cannot opt for it for next 5 assessment years.
      Feel free to reach out to us on help@quicko.com

  • Krishna agarwal says:

    If I have intraday turnover of just Rs 1500 and intraday loss of just Rs 1000, Do I need to go for tax audit ? if Yes under which section ? please tell

    • Anushka Shah says:

      Hey Krishna,
      Loss of INR 1000 with turnover of INR 1500 is a negligible loss. You need not go for tax audit and need not consider as a business income.

  • Krishna agarwal says:

    GK, Why would you pay 6% on turonover when you have a loss. simply do not claim the loss in the return and that’s all. remember you won’t be able to carry forward the loss in any case.

    so this way, you dont have to opt for presumptive scheme and you can avoid being under the boundaries and regulations of 44AD.

    • Anushka Shah says:

      Hey Krishna,
      The IT Department has details of all your trading activity. It is reflected in your account on e-compliance portal of the income tax website. It is recommended to report the trading transactions in the ITR to avoid a tax notice.

  • Vaisakh says:

    By not claiming intraday losses, we are not evading taxes. So, why would income tax department take exception to not declaring such losses?

    • Maharshi Shah says:

      The Income Tax Department is interested in knowing the sources of income through which the trading is being done.

  • Brajesh says:

    Hi,
    For FY 19-20, My intraday turnover 1,38,000 and my intraday loss is -32000. Do, I need to go for Tax Auditing?
    Thank you.

  • UnKnown says:

    I doesn’t have any income but I invested 15000\- in intraday and made profit of 500 every day which is 15000/month for 3months does I need to do ITR filing

    • Aakash Lalchandani says:

      Hey,

      It is advised to file a NILL income tax return if your income for the financial year is below 2.5 lacs to report all your trades.

      Hope this helps 🙂

  • Kshirsagar Vikas says:

    I had left my job 3 years ago and used that previous year salary which is total 2 lakh for intraday in FY 19-20. I have no other sources of income.

    So, I have total income below 2.5lakh.

    In FY19-20 I have intraday turnover of 7559₹ and total realised profit of -5372₹(loss).

    In FY20-21 (till date) I have intraday turnover of 3.25 lakh ₹ and intraday total realised profit of +1.75lakh₹(profit).

    So, in which year I need to do tax audit?

    And if I limit my turnover below 25lakh and profit less than 2.5 lakh will I be supposed to do tax audit this FY20-21?

    Also if I limit my intraday profit below 2.5lakh will it be mandatory to file ITR this year?

    Please give answer to each of the above question separately if possible.

  • vishnu says:

    Hi, if we have profit of 30 lakhs and turnover is less than 90 lakhs and if i opt for presumptive and i have to pay tax on 6% of 90 lakhs or 30 lakhs

  • Ashfaque Ahammed M says:

    INTRADAY TRADING IS SPECULATION BUSINESS. CAN I SHOW SPECULATION BUSINESS INCOME IN PRESUMPYIVE TAXATION?
    LOTS OF REPORTS IN GOOGLE SAYS NO FOR THIS.

    • Maharshi - Quicko Customer Success Representative says:

      Hello Ashfaque, you cannot show speculative business income under presumptive taxation.

  • Arnavi says:

    Hi, I have incured a loss of 11761 Rupees (Speculative Loss : 9678 Rupees & Charges 2083 Rupees) and My Turnover is 10038 Rupees Only. My total income comes in tax bracket. can i ignore this loss and fill ITR-1 or should i go for audit and fill ITR-3.

    • Maharshi Shah says:

      Hello Arnavi,
      It is always advised that you disclose your trading income and file your returns. Having mentioned that, yes, it is possible to ignore the losses and file an ITR 1 if you are a salaried individual.

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