Income Tax on Intraday Trading Profits

Your assets are taxed based on the classification, long-term or short-term.

Any asset that is held longer than a year is called a long-term asset, and when you buy and sell an asset within one year then it is termed to be a short-term asset.

In intraday, you will buy and sell the stocks on the same day, and hence it will be accountable as business income.

Tax levied on short-term shares when sold will be 15 percent of the profit earned.

Tax on Long-term Capital Gains when sold:

When you make a profit up to ₹ 1 lakh, the profited amount shall be exempted.

If you can make a profit of more than ₹ 1 lakh, then your profited amount shall be subjected to 10 percent tax.

Intraday Trading Tax

When you earn income from Intraday Trading then it is taxed under business income.

You may be an individual or HUF and participated in Intraday trading then the taxation on the profit is levied in two ways:

New Tax Regime & Old Tax Regime

You will have to file ITR-3,  the income tax return form for Intraday Trading.

Every year, the due date to file your ITR-3 form will be before 31 July.

If Your intraday business turnover exceeds the limit (₹ 2 crore ) then it is subjected to Tax Audit, the ITR filing date will be October 31.

Example:

If you make a profit of INR 100,000.00 in a financial year then your marginal income tax rate shall be 30 percent and then you are liable to pay INR 3,000 against the tax on your intraday trading business.

Your total income shall be subjected to surcharges and the percentage shall be determined as per the slab rates.

Cess is liable at 4 percent of (basic tax + surcharge)

Carry Forward of Loss:

In case you incur a loss in your intraday trading then you can claim the loss through a procedure: ‘carry forward of loss.’

You will have to hire a professional chartered Accountant and perform the tax audit (u/s 44AD).

You can reduce the income tax liability in this way:

Carry forward the loss and it shall be set off against future profits to reduce the income tax liability.

The losses incurred in intraday trading are termed as speculative loss, they can be carried forward for 4 years and set off against speculative business only.

Non-speculative loss can be carried forward for 8 years, and it can be set off against the speculative business income and non-speculative business income.

Note:

For citizens below 60 and 60-80 years of age, the same taxation laws are applicable.