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Intraday trading taxes are treated as speculative business income under section 43(5) of Income Tax Act. This means tax on intraday trading falls under Profit and Gain from Business or Profession and is taxed as per your applicable slab rate.
When calculating income tax on intraday trading, any intraday profit is added to your total income and taxed accordingly. However, intraday losses can only be set off against gains from other speculative business activities and can be carried forward for up to four assessment years.
Understanding intraday trading taxation is crucial to know how much Income tax on intraday trading applies to your profits and losses. In this blog, we’ll explain everything you need to know about how gains from intraday trading are taxed.
What Is Intraday Trading?
Intraday trading is a type of trading, refers to buying and selling stocks within the same trading day. Traders aim to take advantage of short-term price movements and close all positions before the market ends. Since there is no delivery of shares, any profits or losses are treated differently for tax purposes.
Understanding Capital Assets vs. Trading Assets
Before understanding Income tax on 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
Tax on intraday trading gains depends on whether your income is considered speculative or non speculative. Here’s a simple breakdown on Income tax on Intraday trading:
- 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.
Income Tax Rules On Intraday Trading – Income Head, ITR Form And Due Date
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 15th September.
- If your intraday trading turnover is high enough to require a tax audit, then the deadline gets extended to 31st October, and audit report to be filed by by 30 Sep 2025.
Whether Tax Audit Is Applicable for Intraday Trading?
Understanding when a tax audit applies to intraday trading is important for managing your intraday trading taxation effectively. The rules differ based on whether you choose presumptive taxation or not.
1. If You Opt for Presumptive Taxation
- Tax audit is NOT applicable if:
- Your intraday trading turnover is up to ₹3 crores, and
- You report profits of at least 6% of your trading turnover.
- Tax audit IS applicable if:
- You have losses or report profits less than 6% of turnover, and
- Your total income exceeds the basic exemption limit.
2. If You Do NOT Opt for Presumptive Taxation
- You cannot choose presumptive taxation if your turnover exceeds ₹3 crores, in such cases, a tax audit is mandatory.
- If your intraday trading turnover is less than ₹1 crore, a tax audit is not required even without presumptive taxation.
3. If Your Trading Turnover Exceeds ₹10 Crores
- When your trading turnover crosses ₹10 crores, a tax audit is always applicable,
- This rule applies irrespective of profit or loss.
Intraday Trading Tax Calculation
To understand how Income 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 intraday tax 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 2025-26 or paying advance tax in parts, understanding how Intraday tax 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.
FAQs on Income Tax on Intraday Trading
How are day trading gains taxed?
Day trading or intraday gains are treated as speculative business income. Tax on intraday trading is applied as per your income slab under business income taxation rules.
Is there any tax on intraday trading?
Yes, profits from intraday trades attract intraday trading tax. They’re considered business income and taxed according to your applicable income tax slab rate.
Is it compulsory to file ITR for intraday trading?
Yes, filing ITR is mandatory if you earn from intraday trading. Intraday trading tax must be reported under business income in your ITR.
How to file intraday profit in ITR?
Declare intraday profits under “Profit and Gain from Business or Profession” in ITR-3 and pay applicable intraday trading income tax based on slab rates.
What tax do you pay on trading
For intraday trades, you pay intraday trading income tax based on your total income slab. Delivery-based trades attract capital gains tax, not business income taxation.
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.
