Income Tax on Intraday Trading

A taxpayer who has done Intraday Trading should file ITR and pay tax on this income. Intraday Trading means buying and selling 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.

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

  • ITR FormITR-3 (ITR Form for individuals and HUFs having PGBP Income). Since Equity Intraday Income is a business income, the taxpayer must prepare financial statements and file ITR-3 on the Income Tax Website.
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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  • Due Date
    • Up to FY 2019-20
      31st July – for traders to whom audit is not applicable
      30th September – for traders to whom Tax Audit is applicable
    • FY 2020-21 Onwards
      31st July – for traders to whom Tax Audit is not applicable
      31st October – for traders to whom Tax Audit is applicable

Turnover for Intraday Trading

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

Turnover for Intraday Trading = Absolute Profit

Absolute Turnover means the sum of positive and negative differences. Trading Turnover Calculation can be either through scrip wise method or trade wise method.

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.

  • Profit from Trade 1 = (88-85) * 100 = INR 300
  • Loss from Trade 2 = (450-500) * 200 = INR -10,000
  • Absolute Profit = 300+10000 = INR 10,300

Tax Audit on Intraday Trading

Trading Turnover up to INR 2 Cr

  • If the taxpayer has incurred a loss or the profit is less than 6% of Trading Turnover and total income is more than the basic exemption limit, Tax Audit is applicable.
  • If the taxpayer has a profit of more than or equal to 6% of Trading Turnover, Tax Audit is not applicable.

Trading Turnover more than INR 2 Cr and up to INR 10 Cr

  • If the taxpayer has incurred a loss or the profit is less than 6% of Trading Turnover, the Tax Audit is applicable.
  • If the taxpayer has a profit of more than or equal to 6% of Trading Turnover and has not opted for the Presumptive Taxation Scheme under Section 44AD, Tax Audit is applicable.
  • When the taxpayer has a profit of more than or equal to 6% of Trading Turnover and has opted for the Presumptive Taxation Scheme under Sec 44AD, Tax Audit is not applicable.

Trading Turnover more than INR 10 Cr

  • Tax Audit is applicable irrespective of the profit or loss.
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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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.

Slab Rates if Intraday Trader opts for Old Tax Regime

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

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

Slab Rates if Intraday Trader opts for New Tax Regime

Taxable Income (INR) Slab Rate
Up to 2,50,000 NIL
2,50,001 to 5,00,000 5%
5,00,001 to 7,50,000 10%
7,50,001 to 10,00,000 15%
10,00,001 to 12,50,000 20%
12,50,001 to 15,00,000 25%
More than 15,00,000 30%

Advance Tax for Intraday Trading

A taxpayer whose tax liability on the total taxable income from all the sources during the financial year exceeds INR 10,000 is liable to pay Advance Tax. Income for Intraday Trading is a speculative business income taxable at slab rates. Thus, an Intraday Trader is liable to pay Advance Tax as follows:

Advance Tax for Intraday Trader who does not opt for Presumptive Taxation

If an Intraday Trader does not opt for presumptive taxation under Section 44AD and has intraday profits, he/she must pay Advance Tax in four installments as per the table below:

Advance Tax Liability Due Date
15% of Tax Liability On or before 15th June
45% of Tax Liability On or before 15th September
75% of Tax Liability On or before 15th December
100% of Tax Liability On or before 15th March

Advance Tax for Intraday Trader who opts for Presumptive Taxation

If an Intraday Trader opts for presumptive taxation under Section 44AD and has intraday profits, he/she must pay the entire amount of Advance Tax in a single installment on or before 15th March.

New Tax Regime for Intraday Trading

Traders having income from intraday trading can opt for the new tax regime under Section 115BAC of the Income Tax Act. If the intraday trader opts for the new tax regime, here are the important points to note:

  • Tax liability should be calculated as per the slab rates introduced in the new tax regime
  • Trader cannot claim Chapter VI-A deductions
  • The trader cannot set off any brought forward business loss
  • The trader cannot carry forward the business loss to future years
  • Form 10IE must be filed on the income tax website
  • A trader having business income and opting for the new tax regime have an option to switch back to the old regime. However, if they opt for the new tax regime once again, they cannot opt for the old regime for the entire lifetime.

Carry Forward Loss for Intraday Traders

An equity Intraday Trader can claim and set off and carry forward the losses 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 intraday trader can carry forward a speculative loss for 4 years.

If the Intraday Trader has opted for the new tax regime, they cannot set off brought forward business loss against business incomes. Further, they cannot carry forward the business loss to future years.

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FAQs

How to calculate turnover for intraday trading?

Turnover for Intraday Trading is the Absolute profit i.e. the sum of positive and negative differences. Based on the turnover calculation, the intraday trader can determine the applicability of the Tax Audit. The turnover can be calculated either scripwise or tradewise.

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 intraday trader can carry forward the remaining loss for 4 years and adjust with future speculative profits.

Do I need to pay Advance Tax on my Intraday Profits?

Income from Intraday Trading is a speculative business income taxable at slab rates. If the tax liability of the intraday trader from all sources of income during the financial year exceeds INR 10,000, he/she is liable to pay Advance Tax in four quarterly installments as per the applicable due date.

Got Questions? Ask Away!

  1. Hey,

    Currently Schedule FA is not incorporated on the Quicko DIY App, however we have taken your feedback for including the same. You can write to us on help@quicko.com with your contact details and one of our team members can get in touch with you with a plan for your needs.

  2. Hi @reema, it is in our pipeline it will be released in the second phase in the coming few months.

  3. Hey @Niraj1,

    Profit can be reported as 6% or more of turnover under ITR-4, however, expenses cannot be claimed under the presumptive taxation scheme & losses cannot be carried forward.

    The Nature of business code - Since no specific head available related to trading in the stock market, one can show the nature of the business under code “09028- Retail sale of other products n.e.c”. You should not be using “Financial Intermediation Services” as you are not providing service as Stockbrokers, sub-brokers, and related activities.

    If equity delivery is shown as presumptive income, every year it should be considered as business income only and not capital gains. If equity delivery is shown as capital gains and intraday trading as presumptive business income, ITR-3 should be filed.

  4. Hi
    Iam also a senior all these days filing ITR1 with bank interest as income.
    This year I have to file ITR3 as I have intraday equity, delivery equity (only STCG), equity F&O, Currency (CDS) F&O & Commodity Futures.

    1. Equity intraday Profit/loss & intraday equity spec turnover is clear.
    2. But for equity delivery trades - we have to take in to account Sales value or profit/loss absolute value in determing trading tiurn over under this head?3) For all Futures {equity/currency/commodity ) only abosolute sum of profit/loss or sale values to calcialte Tax turn over under this head ?
  5. Hi @Skinny_Vegan

    1. In case of Equity Intraday absolute value of profit/loss is considered in determining trading turnover.
    2. In case of equity delivery trades you need to consider the actual sale value to calculate capital gains.
      3a. In case of futures absolute value of profit/loss is considered in determining trading turnover.
      3b. In case of options absolute value of profit/loss in addition to its sale value is considered in determining trading turnover.

    Hope this helps!

  6. Hi Ms Laxmi Navlani
    1.you have clarified clearly calculation of tax turn over for F&O (Equity F&O,Commodity Futures, Currency Futures .)
    2. Also Intraday cash Equity Speculative turn over / specualtive P&L is clear.
    3. when it comes to delivery cash equity (from selling next day to less than a year STCG )
    you are you saying i have to take in to consideration of total sale value or absolute value of profit & loss for calculating tax turn over?
    I uploaded my Zerodha Tax P&L for Fy2020-21 in to quicko-
    zerodha’s intraday equity turn over, all F&O turnover matches in quicko.
    zerodha has given seperately all delivery trades scrip wise with all taxes paid .
    My sale vaue of cash equity delivery trades is around 78 lakhs
    Quicko is showing only intraday equity turnover+ combined F& O turn over (excludes equity delivery trade salevalue in turn over calculation but taking only account of STCG loss
    In summary Quicko recommends ITR-3 with out audit!
    4**)so if we file itr3 with stock trading as a business ** only STCG is considered & sale value of delivery equity trades is not needed to be added in to tax turn over? ( i took screen shots of quicko’s summary)- *so clarification needed on delivery equity turn over to be added in to tax turn over * or just combined STCG figure!
    5) I have another brokerage Finvasia who dont give a tax PNL in zerodha like format & can not upload in to quicko.
    6) If I have to use your services how to add data from Finvasia - what package you recommend to file ITR-3 {with or with out tax audit -in total a loss so tax audit audit may be must)

  7. hi @Skinny_Vegan

    Trading in F&O (Equity F&O, Commodity Futures, Currency Futures, etc) and Intraday is considered as a business whereas trading in delivery cash equity is considered an investment. For investments, there is no need to calculate turnover in any different manner. You just need to calculate the gain (sale value - purchase value) and pay taxes on that gains that may be short term or long term gains.

    If you file ITR-3 there will be two parts of trading
    1.Business Part - includes profit/loss and turnover of F&O trading
    2.Capital Gains Part - includes capital gains from delivery cash equity.

    If you need our help in filing returns you can reach out to us at support@quicko.com we will be glad to help you.

  8. Hi Thanks for your reply…
    I now understand why Quicko did not calculate turn over for Zerodha STCG equities & took only tax turn over from intra day equity & F&O trades.
    Next I have to figure out the same method for finvasia data which is not in the same fashion like zerodha’s .I have to figure out how to upload in to quicko.

    Also I found this eiether in your site or in zerodha university
    Delivery based transactions**

    • guidance note on tax audit under Section 44AB by ICAI (Institute of chartered accountants of India, the governing body for CA’s). The article on Page 23, Section 5.12 of this guidance note has a guideline on how turnover can be calculated. It says:
      But remember that calculation of turnover for delivery trades is only applicable if you are declaring equity delivery based trades also as a business income. If you are declaring them as capital gains or investments, there is no need to calculate turnover on such transactions. Also, there is no need for an audit if you have only capital gains irrespective of turnover or profitability.
  9. hi @Skinny_Vegan

    For Finvasia data, You can download Tax PnL excel template from Quicko and put details in that excel sheet then import it.

    Moreover, The guidelines you have mentioned here are correct.
    a) Equity delivery based trades if considered an investment there is no need to calculate turnover in any different manner. You also have an option to declare capital gains as business income with certain conditions. You can refer to article linked below.
    b) If you only have capital gains income from equity delivery based trades, there is no need for audit.

    Hope this helps!

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