Subscribe for real-time financial insights on Trade Target’s WhatsApp Channels
Intraday trading means buying and selling stocks on the same day, without holding them overnight. It can be exciting because it offers the chance to earn quick profits. But along with opportunities, it also comes with important tax responsibilities.
Many beginners and even regular traders are unsure about how the tax on intraday trading is calculated. In India, income tax rules for intraday trading are very specific and not following them correctly can lead to penalties or tax notices.
That’s why understanding intraday trading taxability is essential, not just for staying compliant with the law, but also for managing your finances better. In this blog, we’ll explain everything you need to know about how gains from intraday trading are taxed.
Understanding Capital Assets vs. Trading Assets
Before understanding how taxes work for intraday trading, it’s important to understand a key concept: are your shares capital assets or trading assets? This distinction plays a big role in how your income from the stock market will be taxed under Indian income tax rules.
If you buy shares with the intention to hold them long term, earn dividends or benefit from their long term growth, then these are considered capital assets. Any profit you make by selling them is taxed as capital gains.
- If you hold the shares for more than 12 months, profit is called Long Term Capital Gain (LTCG).
- If you sell them within 12 months, it’s treated as Short Term Capital Gain (STCG).
Currently, long term capital gains exceeding ₹1.25 lakh are taxed at 12.5%, while short term capital gains are taxed at 20%. These rates apply when you’re investing, not when you’re actively trading.
If you’re buying and selling shares frequently like in intraday trading, your goal is to make quick profits. In this case, your trades are not considered investments but part of your business activity. That means the shares become trading assets.
Here, any profit earned is treated as business income, not capital gains. The tax on this income is calculated as per your income tax slab rate.
Types of Intraday Trading Income
The tax treatment of intraday trading gains depends on whether your income is considered speculative or non speculative. Here’s a simple breakdown:
- Speculative Business Income
In intraday trading, profits made from buying and selling shares on the same day are treated as speculative business income.
- Tax on intraday trading gains in this category is applied according to your regular income tax slab.
- If you make a loss, it can only be set off against other speculative business income, not any other type of income like salary or capital gains.
- These gains or losses must be reported under the business income head while filing your tax return.
- Non Speculative Business Income
Not all trades are speculative. For example, delivery based stock trades, futures and options (F&O), commodity trading and currency trades that are settled later fall under non speculative business income.
- Here too, taxes are calculated based on your income tax slab rate.
- The benefit is that losses from non speculative business can be adjusted against other types of business income, offering more flexibility in tax planning.
Tax Rules for Intraday Trades
Since there’s no delivery of shares in intraday trading, the profit or loss from such transactions is classified as speculative business income under the Income Tax Act. This means you’re taxed as you’re running a business, not investing for the long term.
When filing your income tax return, intraday traders must use the ITR-3 form, as the income is treated as part of your business and profession. You’ll also need to maintain basic financial statements, such as a profit and loss statement and balance sheet, even if you’re trading individually. Filing the wrong ITR form can lead to compliance issues, so it’s important to choose correctly.
As for deadlines, here’s what you should know:
- If your books don’t require a tax audit, the due date to file your return is 31st July.
- If your intraday trading turnover is high enough to require a tax audit, then the deadline gets extended to 31st October.
Intraday Trading Tax Calculation
To understand how tax on intraday trading works, the first thing to know is, profits from intraday trades. This means your earnings from intraday trades are added to your total annual income and taxed according to your income tax slab, whether you’ve opted for the old or new tax regime.
Let’s understand this better with an example.
Example:
Rahul is 30 years old and has the following annual income:
- Salary: ₹10,00,000
- Intraday Trading Profit: ₹1,00,000
- F&O Trading Profit: ₹1,50,000
- Bank Interest: ₹50,000
Now, we add everything to get Rahul’s total income:
Total Taxable Income = ₹10L + ₹1L + ₹1.5L + ₹0.5L = ₹13 lakh
Tax Calculation under old tax regime:
Let’s see how much tax Rahul would pay under old regime.
| Income Slab | Tax Rate | Tax Amount |
|---|---|---|
|
₹0 – ₹2.5 lakh
|
0%
|
₹0 |
|
₹2.5 lakh – ₹5 lakh
|
5%
|
₹12,500
|
|
₹5 lakh – ₹10 lakh
|
20%
|
₹1,00,000
|
|
₹10 lakh – ₹13 lakh
|
30%
|
₹90,000
|
|
Total Income Tax
|
₹2,02,500
|
|
|
4% Health & Edu Cess
|
₹8,100
|
|
|
Total Tax Payable
|
₹2,10,600
|
|
Tax Calculation under revised tax slabs for FY 2026-27:
| Income Slab | Tax Rate | Tax Amount |
|---|---|---|
|
₹0 – ₹4 lakh
|
0%
|
₹0 |
|
₹4 lakh – ₹8 lakh
|
5%
|
₹20,000
|
|
₹8 lakh – ₹12 lakh
|
10%
|
₹40,000
|
|
₹12 lakh – ₹13 lakh
|
15%
|
₹15,000
|
|
Total Income Tax
|
₹75,000
|
|
|
4% Health & Edu Cess
|
₹3,000
|
|
|
Total Tax Payable
|
₹78,000
|
|
The table below shows the total tax payable under both regimes:
| Particulars | Old Regime | New Regime |
|---|---|---|
|
Tax on Total Income
|
₹2,02,500
|
₹75,000
|
|
Add 4% Cess
|
₹8,100
|
₹3,000
|
|
Total Tax Payable
|
₹2,10,600
|
₹78,000
|
Advance Tax Rules for Intraday Traders
Intraday traders who do not opt for the Presumptive Taxation Scheme must pay advance tax in four instalments during the financial year, based on the prescribed due dates.
| Installment | Due Date | Tax Payable |
|---|---|---|
|
1st Instalment
|
15th June |
15% of total tax liability
|
|
2nd Instalment
|
15th September
|
45% of total tax
|
|
3rd Instalment
|
15th December
|
75% of total tax
|
|
4th Instalment |
15th March
|
100% of total tax (full)
|
Final Words
Paying tax on intraday trading is important to stay compliant with income tax rules in India. Whether you’re following the old or new tax regime or paying advance tax in parts, understanding how taxes work can help you avoid penalties and make better trading decisions. Always keep track of your profits and losses and if needed, take help from a tax expert to make filing easier.
Happy investing and thank you for reading!
Disclaimer:
This website content is only for educational purposes, not investment advice. Before making any investment, it’s important to do your own research and be fully informed. Investing in the stock market includes risks, and you should carefully read the Risk Disclosure documents before proceeding. Please remember that past performance doesn’t guarantee future results, and due to market fluctuations, your investment goals may not always be achieved.
