What is Intraday Trading?
Example
Suppose you:
- Buy 100 shares of Company A at ₹100 each.
- Sell the same shares on the same day at ₹110 each.
Profit:
₹10 × 100 = ₹1,000
Since the shares were bought and sold on the same day, this is considered intraday trading.
Intraday gain & loss is different from capital gain. In case of capital gains, the stock is kept in hand for at least one day before it is sold. In the case of intraday trading, the stock is bought & sold by the investor on the same day.
Intraday Trading vs Delivery-Based Trading
| Particulars |
Intraday Trading |
Delivery-Based Trading |
| Holding Period |
Same Day |
More Than One Day |
| Ownership of Shares |
No |
Yes |
| Income Head |
Business Income |
Capital Gains |
| Nature |
Speculative Business |
Investment |
| Tax Rate |
Slab Rates |
STCG/LTCG Rates |
| Loss Set-Off |
Against Speculative Income Only |
As Per Capital Gain Rules |
| Common ITR Form |
ITR-3 |
ITR-2 / ITR-3 |
Under Which Income Head Is Intraday Trading Taxable?
The objective behind intraday trading is to make short-term gains based on a share price. Hence, instead of being charged to capital gains, intraday gains & losses are taxed under business & profession. It is considered speculative because you are trading without intending to take the delivery (ownership) of the contract.
Long-term capital gains are taxed at concessional rates & some capital gains from equity/ mutual funds are exempt u/s 10(38). But intraday gain & loss is taxed at normal slab rates (as applicable to an individual).
Example
Suppose:
- Salary Income = ₹8,00,000
- Intraday Profit = ₹2,00,000
Total Taxable Income = ₹10,00,000
The intraday profit becomes part of your overall taxable income and is taxed at slab rates.
Knowing the correct ITR form before filing an income tax return is very important.
In case of intraday gain & loss, it will be considered under a business income, then ITR 3 is applicable. However, it is important to note that the applicability of ITR forms in the case of intraday trading varies as per circumstances. Such situations can be the number of transactions entered, the amount of turnover, the frequency of trading, etc.
Can ITR-4 Be Used?
ITR-4 may be applicable in certain cases if presumptive taxation provisions are adopted and other eligibility conditions are satisfied.
However, most traders with significant intraday activity generally use ITR-3.
How to Calculate Turnover for Intraday Trading?
Turnover for intraday trading is calculated using the absolute profit and loss method.
Example
Trade 1
- Buy: ₹10,000
- Sell: ₹11,000
Profit = ₹1,000
Trade 2
Loss = ₹1,000
Intraday Turnover
Absolute Profit = ₹1,000
Absolute Loss = ₹1,000
Total Turnover = ₹2,000
Even though the net result is zero, turnover is calculated as:
₹1,000 + ₹1,000 = ₹2,000
The same method applies to all intraday trades executed during the financial year.
Is Tax Audit Required for Intraday Trading?
Tax audit is not typically applicable solely based on engaging in intraday trading. However, whether a tax audit is required depends on the overall turnover and profit or loss from all your financial activities, including intraday trading.
Tax Audit May Be Required If:
Under Presumptive Taxation (Section 44AD)
- Turnover up to ₹2 crore (or prescribed higher digital limit).
- Declared profit is below the prescribed percentage.
- Total income exceeds the basic exemption limit.
Under Regular Taxation
Tax audit may become applicable if:
- Turnover exceeds prescribed limits.
- Minimum profit requirements are not met under applicable provisions.
Mandatory Audit
If turnover crosses the statutory threshold prescribed under the Income Tax Act, tax audit becomes mandatory.
Since audit provisions change periodically, traders should verify the latest limits applicable for the relevant tax year.
Can Intraday Trading Losses Be Set Off?
Yes.However, speculative losses have restrictions.
Allowed
- Speculative Loss against Speculative Profit
Not Allowed
- Speculative Loss against Salary Income
- Speculative Loss against House Property Income
- Speculative Loss against Capital Gains
- Speculative Loss against Interest Income
Carry Forward of Intraday Trading Losses
If speculative losses cannot be fully adjusted during the current year:
- Losses can be carried forward for up to 4 assessment years.
- They can only be adjusted against future speculative profits.
- The ITR must be filed within the due date.
Due Dates
| Category |
Due Date |
| Non-Audit Cases |
31 July |
| Audit Cases |
31 October |
(Subject to extensions notified by the Income Tax Department.)
How to Report Intraday Trading in ITR-3
Follow these steps:
Step 1: Download Broker Statements
Collect:
- P&L Statement
- Trade Book
- Tax P&L Report
- Ledger Statement
Step 2: Calculate Turnover
Use the absolute profit/loss method.
Step 3: Calculate Net Profit or Loss
Deduct eligible business expenses.
Step 4: Report Under Business Income
Disclose:
- Turnover
- Gross Receipts
- Net Profit or Loss
Step 5: Report Carried Forward Losses
If applicable, disclose speculative losses eligible for carry forward.
Step 6: Verify and File ITR
Complete e-verification through:
- Aadhaar OTP
- Net Banking
- Bank Account Verification
- Demat Verification
Common Mistakes While Filing Intraday Trading Taxes
Many taxpayers receive notices due to:
- Reporting intraday income as capital gains.
- Ignoring small profits or losses.
- Incorrect turnover calculation.
- Missing audit requirements.
- Not filing ITR on time.
- Claiming ineligible deductions.
- Failing to maintain broker statements.
Avoiding these mistakes can help reduce scrutiny and ensure compliance
CA-Assisted Filing
