Intra Day trading and taxation

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What Is Intraday Trading?


Shares bought and sold (long trades) or sold and bought (short trades) within a single trading day is known as intraday trading. The trader’s purpose in intraday trading is not to own the equity shares, but they want to take advantage of the short-term price movements and make profits the very same day. These profits are taxable. There is no separate speculative income tax rate in India as it is taxed according to your income tax slab. 

Speculative Business Income: Intraday transactions are speculative in nature, and hence, the income from these trades is called speculative business income. Income tax on intraday trading profit in India falls under this category.

Income Tax Rules On Intraday Trading – 

Income Head, ITR Form And Due Date


Income Head: Profits and Gains from Business and Profession. Your income from intra-day trading will be considered as speculative business income. It is considered speculative because you are trading without intending to take the delivery (ownership) of the contract. 

ITR Form for intraday trading: Since intraday trading is a business income, you must file ITR-3 and prepare financial statements. 

ITR due date for intraday trading income: 
31st July - if Tax Audit is not applicable
30th September- if Tax Audit is applicable.

 

Whether Tax Audit Is Applicable For

Intraday  Trading? 


Case 1: If your Intraday Trading Turnover is more than ₹10 Cr 

TAX AUDIT IS MANDATORY.

Case 2: If your Intraday Trading Turnover is up to ₹3 Crore (if you opt for presumptive taxation)

You have to declare MINIMUM profits @6% on the turnover. (Absolute profits shall be considered as turnover). TAX AUDIT IS NOT APPLICABLE.

Case 3: If your Intraday Trading Turnover is up to ₹3 Crore (if you do not opt for presumptive taxation)

You can calculate profit/loss based on actual sale value and buy value. TAX AUDIT IS NOT APPLICABLE.

Case 4: If your Intraday Trading Turnover is between ₹3 Crore to ₹10 Crore 

You can calculate profit/loss based on actual sale value and buy value. TAX AUDIT IS NOT APPLICABLE.


What Is Turnover For Intraday Trading in 

case of Presumptive basis?


Turnover for Intraday Trading = Absolute amounts of Profit/Losses

Absolute turnover means the sum total of positive and negative differences (the loss amount will not be deducted but added to the profit amount). Trading Turnover can be calculated either as a scrip-wise or a trade-wise method.
Note: Profit shall be disclosed as min 6% of Turnover.


What Is Turnover For Intraday Trading in other than Presumptive basis?

Turnover for Intraday Trading= Total sell value as per the trading P&L Statement.

Note: Buy Value and expenses on transfer shall be claimed to calculate profit/loss.


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