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
- Income Head – Business Income under head PGBP (Profits & Gains from Business and Profession).
Equity Intraday Income or Loss is a speculative business income or loss as per the Income Tax Act.
- ITR Form – ITR-3 (ITR Form for individuals and HUFs having PGBP Income). Since Equity Intraday Income is a business income, prepare financial statements and file ITR-3 on Income Tax Website.
- 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
- Up to FY 2019-20
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.
- 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 Rs. 1 Cr
- If the taxpayer has incurred loss or the profit is less than 6% of Trading Turnover and total income is more than 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 Rs. 1 Cr and up to Rs. 2 Cr
- If the taxpayer has incurred 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 Rs. 2 Cr
- Tax Audit is applicable irrespective of the profit or loss.
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.
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.
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.
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
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.