Tax on Intraday Trading - Rates, Rules and Tax Calculation

You have mastered intraday trading and its techniques, and are finally earning profits. Isn’t that great? But do you know that your journey to make a stand in the market has just started? Earning profits is just the start, and now the next stage is to understand the tax on intraday.

Where every single money earned is going to add to your earning portfolio, there will be intraday taxes that you must take care of on time. Any delay in paying off trading tax in India can lead to penalties. And we are sure you are definitely not looking into this!

Hence, it is important that you manage your intraday trading properly from day one. This will ensure that you are well-prepared to manage your finances and there are no hiccups that will act as a roadblock for you. So, here in this article, we’ll explore how taxes work on intraday trading profits and what you need to know to stay on top of your financial responsibilities.

Intraday Trading and Its Features

Intraday trading is a common trade practice. It is also known as day trading. It involves same-day buying and selling of financial instruments. These can be stocks, currencies, or commodities.

The primary goals of intraday trading are:

• Capitalize on short-term price fluctuations. 

• Avoid overnight risks.

In the intraday trading, traders use various techniques to explore the market inefficiencies and price variations. These traders perform multiple trades daily to capture small profits from each trade within a trading day. All these trades can accumulate to a significant total by the end of the day.

Intraday trading requires consistent market monitoring as well as a deep understanding of market trends. The key is the need to react quickly to market changes and a strict discipline in risk management to avoid substantial losses.

At times, you will also get the intraday margins, which will help traders gain returns with reduced capital. Another important thing about intraday trading is there is no holding overnight, so the exposure to a broader range of risks is avoided. 

The Core of Intraday Trading Tax: Heads, Slabs, Forms

To calculate intraday tax, you must first know its nature. So, here are the 3 rules that you must know when calculating the tax for intraday trading:

1. Intraday Profits as Speculative Business Income

Profits from intraday trading are considered speculative business income. This is per Section 43(5) of the Income Tax Act. It is because the gains are based on market volatility. Since there is no surety, the income can fluctuate. Hence, it is called speculative.

2. Intraday Trading Tax and Income Slab Rates

Your intraday trading income is added to your overall income. Then, this total is taxed according to the applicable income tax slab rates. There is no separate slab for this, so make sure you calculate it right.

3. ITR-3 as the Filing Form

To report this income, fill out ITR-3. This is because it is considered as a business activity. The due date for filing ITR-3 is July 31st, 2025. However, if the taxpayer misses filing within the due date, they can still submit a belated return before December 31, 2025.

Now, before we find further details of intraday trading tax, let us understand turnover.

What is Intraday Trading Turnover?

To calculate the intraday tax, you first need to calculate the turnover. Turnover for intraday trading is the sum of profits and losses from all your trades during a financial year. The value is added in absolute terms to reach the right amount.

It represents the total value of transactions, regardless of whether they resulted in a profit or a loss. In other words;

Turnover for Intraday Trading = Absolute total of Profit/Losses

So, here, the absolute profits and losses from each trade throughout the financial year are considered. These are totaled up, and the derived value is the final turnover for your intraday tax calculation.

Example:

Suppose you made 5 trades in a day and earned/lost the following:

Trade 1: Profit of Rs.500

Trade 2: Loss of Rs.200

Trade 3: Profit of Rs.300

Trade 4: Loss of Rs.100

Trade 5: Profit of Rs.400

So, your turnover is:

Turnover = |Rs.500| + |-Rs.200| + |Rs.300| + |-Rs.100| + |Rs.400| = Rs.500 + Rs.200 + Rs.300 + Rs.100 + Rs.400 = Rs.1,500

Likewise, you will check and add all the trades done in a year to arrive at the the total turnover in a year.

Now, let us find out how much tax on intraday trading in India.

How Much Tax on Intraday Trading is There?

As shared, the intraday tax rate is based on your income tax slab. It is the speculative business income. These profits are added to your total income and taxed at the applicable slab rate. Here are the income tax slab rates under both regimes.

Old Regime

New Tax Regime (Applicable for FY 2024-25)

Advance Tax on Intraday Trading

So, if your estimated tax liability for the financial year (including income from intraday trading) exceeds Rs.10,000, you must pay advance tax on the specified dates.

If you opt for presumptive taxation, you must pay the entire amount in advance by March 15th.

Intraday Trading Losses in Tax Handling

Losses from intraday trading are termed "speculative business losses." These losses can only be offset against speculative business income (intraday profits).

If losses exceed profits, you can carry them forward for up to 4 assessment years, provided you file your return on time (July 31st or Oct 31st). Carried forward losses can only be offset against future speculative business income.

If you opt for the new tax regime, you cannot carry forward or offset these losses. Keep detailed records of all trades.

Intraday Tax Audit Conditions

Until now, you have gathered information on calculating the tax on intraday profit and loss. But is the intraday trading income tax audited? Well, the answer is yes. At times, you would need to get this audited as well. Here are the situations:

1. Presumptive Taxation Scheme (Section 44AD)

You are not required to perform the audit when:

• Annual turnover is up to Rs.2 crore.

OR

• In the case of annual turnover up to Rs.3 crore, 95% of transactions are digital. 

AND

• The profit is at least 6% of your turnover.

Now, the audit becomes mandatory when;

• Your profit or loss is less than 6% of the turnover.

• Your total income from all sources is more than the exemption limit, which is Rs.2.5 lakhs.

2. Regular Tax Regime (Section 44AB)

If you choose not to be taxed under the presumptive taxation scheme (Section 44AD), and your turnover falls between Rs.2 crore (or Rs.3 crore if at least 95% of your transactions are digital) and Rs.10 crore, the following applies:

• Audit NOT Required: Your profit is at least 6% of the turnover for non-cash transactions (or 8% for cash transactions, though this is less relevant for intraday trading).

• Audit IS Required: Your profit is less than 6% of your turnover1. This applies regardless of whether you ultimately make an overall profit or incur a loss.

• Key Consideration: If the income declared is less than 50% of the gross receipts, and the assessee has opted for section 44ADA, then a tax audit is mandatory.

3. Turnover Exceeds Rs.10 Crore

If your turnover exceeds Rs.10 crore, a tax audit is mandatory, irrespective of your profit or loss. This Rs.10 crore limit generally applies to intraday traders, as over 95% of their transactions are typically digital.

Steps to Calculate Intraday Trading Tax

Now, that you know all the slabs and conditions linked to the intraday tax, let us quickly look at the following steps.

1. Find Total Speculative Income: Add all positive and negative differences from intraday trades to determine the total turnover. Then, deduct all trading-related expenses such as brokerage, transaction charges, etc. This will give you the net speculative business income (or loss).

2. Evaluate and Settle Your Income: In the case of profits, you would need to pay taxes. But if there is a loss, you can set it off against any other speculative income. Ensure that you do not settle it against income from other sources.

3. Carry Forward, if Needed: If you cannot set the losses, you can carry them forward to next year. There is a limit of 4 years to do so. Hence, ensuring that your speculative losses are set off against speculative income in these 4 years is important.

4. Apply Slab Rates: Check the slab, and based on it, your tax will be evaluated.

5. Account for Advance Tax: Make sure the advance tax is deducted. The amount left is the tax to pay.

Example:

Suppose Mr.X is a trader. Now, after trading for an entire year, he has the following data with him:

Intraday Turnover: INR 15,00,000

Trading-related Expenses: INR 3,00,000

Now, based on this the actual speculative profit that Mr.X gained is; 

Speculative profit = Turnover - Expenses = INR 12,00,000

This is the speculative profit that is now part of tax calculation.

Now say, he was carrying forward a speculative loss of INR 2,00,000 from the previous year. So, the actual speculative income for this financial year will be;

Speculative income = Earned this year - set off of previous year = INR 10,00,000.

This gives the actual taxable income.

Tips For Right Intraday Tax Estimation

To calculate the intraday profit tax in the right manner, here are a few tips that you must consider:

• Calculate total turnover carefully, adding all positive and negative differences.

• Maintain meticulous records of all transactions for accurate tax filing.

• Remember that intraday profits are speculative business income, offsettable only against other speculative income.

• Strategically carry forward speculative losses for up to four years, using them against future speculative profits.

• Know the tax rate slabs and changes made, if any.

• Pay advance tax in installments if your total tax liability exceeds Rs.10,000 to avoid penalties.

• Consult a tax expert for personalized advice.

Conclusion

How gains from intraday trading are taxed? Well, with this, you now have all the details needed to make the right evaluation. It is quite clear that the tax implications linked to intraday trading require careful analysis. The gains are treated as speculative business income and taxed at your income tax slab rate.

Hence, you must consider all these points when evaluating the tax. And if needed, consult a tax expert to avoid penalties in the future.

FAQs

Q. How are gains from intraday trading taxed?

Intraday trading gains are taxed as speculative business income, added to your total income, and then taxed according to your applicable income tax slab.

Q. What is the ITR form for intraday trading?

ITR-3 is used for filing income tax returns. It is used for filing intraday trading income returns too.

Q. What if I have losses from intraday trading?

Losses can be carried forward for four assessment years and offset only against speculative business income.

Q. Is a tax audit compulsory for intraday trading?

A tax audit is not always compulsory. It depends on your turnover and opting for the presumptive taxation scheme. If your turnover exceeds Rs.10 crore, a tax audit is mandatory.

Q. When is the due date for filing the ITR for intraday trading?

The due date is generally July 31st of the following year. However, if a tax audit is required, the due date is extended to October 31st.