How Are Gains From Intraday Trading Taxed

Intraday trading refers to buying and selling financial instruments within the same trading session. With intraday trading, positions are squared off within the same day, allowing traders to take advantage of short-term price fluctuations. It attracts investors looking to profit from market volatility rather than long-term gains. While this fast-paced strategy offers scope for quick returns, it demands precision, discipline, and a clear idea of its specific tax implications. 

 

Understanding what is intraday trading and how it is taxed can help you plan your trades better, avoid penalties, and stay compliant with income tax laws. Whether you're a beginner or active trader, knowing the tax rules is essential for financial discipline.

When you invest in stocks and hold them, they are treated as capital assets under the Income Tax Act, 1961. But, when you trade stocks or equity derivatives frequently, those become trading assets. Understanding the difference helps in knowing the right tax on intraday trading and income tax on intraday trading losses. It also clarifies how gains are classified—either as capital gains or business income—from a tax and reporting perspective.

What are Capital Assets

Capital assets are properties or investments held for long-term growth or income. These include listed shares, bonds, real estate, or other investment holdings. When you sell after holding more than a year, it is a long-term capital asset; selling within a year makes it short-term. Gains or losses are treated as capital gains or capital losses for tax purposes.

Types of Capital Assets

• Long-Term Capital Assets: Held for more than a year (e.g. shares held for 15 months). 

• Short-Term Capital Assets: Held for a year or less (e.g. shares sold after 6 months).

What are Trading Assets

Trading assets are stocks or derivatives bought and sold frequently to earn quick profits. All instruments held for intraday strategies or F&O trading fall under this category. Profits or losses from trading assets are treated as business income—not capital gains—and taxed under your income slab. This classification is central to understanding tax on intraday trading and prosecuting proper ITR forms (like ITR‑3).

Types of Trading Assets

• Speculative Trading Assets (Intraday): These are assets bought and sold on the same day, without delivery. Gains count as speculative business income. They cannot be offset against non‑speculative income and losses must be carried forward up to four years.

Example: You buy 100 shares in the morning and sell them before the market closes. The profit is speculative income and taxed under your slab. 

• Non‑Speculative Trading Assets (F&O, Delivery Stocks): These include delivery-based equity trades, equity futures and options, commodities, etc. When held beyond intraday, they’re treated as non-speculative business assets. Losses can be set off against other business income and carried forward for eight years. 

Example: You buy equity futures and hold them overnight, realising a profit or loss—this is non‑speculative business income.

Intraday trading is buying and selling stocks (or securities) within the same trading day. Traders need to close their positions before the market closes. This method focuses on profiting from short-term price movements, not long-term investment. Since trades don’t carry overnight risk, it’s popular among active participants following trends and technical signals. 

Income from intraday trading is treated under speculative business income. The Income Tax Act classifies gains or losses as business profits, not capital gains. Understanding the tax rules helps traders correctly report their trading activity and avoid surprises during ITR filing. 

Income Head

• Gains from intraday trades are taxed under ‘Profits & Gains from Business or Profession’, with a speculative tag under Section 43(5) of the Income Tax Act. 

• These profits are added to your total income and taxed as per your income slab. 

• Losses from intraday trades can only be set off against speculative gains, and can be carried forward for four years. 

Relevant ITR Form

• If you trade intraday regularly, you can use ITR‑3 to declare your speculative business income. 

• This form captures trading turnover, gross profit/loss, and allows deduction of expenses and STT paid. 

• Filing correctly helps you stay compliant with income tax on intraday trading. 

Due Date for Filing

• The usual due date for individuals filing ITR is 31st July following the financial year. 

• Since intraday trading is business income, you may need to pay advance tax in instalments.

• Remember to keep track of the quarterly due dates – 15th June, 15th September, 15th December, and 15th March 15 – to avoid paying extra interest. 

• Note that 31st October will be the due date for tax filing if tax audit is applicable.

Understanding the turnover thresholds shown below can help traders decide whether they must maintain audited accounts. 

Turnover up to ₹3 Crores

• If you use presumptive taxation under Section 44AD, no audit is needed when turnover is up to ₹3 Crores.

• If your profit is below 6% of turnover or you incur a loss, a tax audit is required—even if turnover is under ₹3 Crores. 

Turnover between ₹3 Crores and ₹10 Crores

• If over 95% of transactions are digital, the audit threshold rises to ₹10 Crores.

• No audit is necessary if your turnover is between ₹3 Crores and ₹10 Crores and profits are at least 6% of turnover. 

• If profit falls below 6% or you report a loss, you must get a tax audit—regardless of whether you opted for the presumptive scheme. 

Turnover above ₹10 Crores

• A tax audit under Section 44AB is mandatory when your trading turnover exceeds ₹10 Crores—irrespective of profit or loss. 

If you cross a limit or dip below the profit margin, you can consult a Chartered Accountant to handle Form 3CD and file ITR‑3 with audited statements.

Knowing how to calculate turnover is essential for managing income tax on intraday trading.

What is Turnover

In intraday trading, turnover is the absolute value of profits and losses from every trade. This is the sum of all your daily trading activity for the year, for income tax purposes. Both profits and losses are added up as positive values—nothing is netted off. It helps determine tax audit needs and taxable income. 

How is Turnover Calculated

• Trade-wise method: You calculate turnover by adding the absolute profit or loss from each individual trade in the year. 

• Scrip-wise method: You group all trades for a single scrip, find the net profit/loss, take its absolute value, and sum across scrips. 

Example

Suppose you do the following intraday trades in a day: 

• Trade 1 (Company XYZ): Loss of ₹3,000 

• Trade 2 (Company XYZ): Profit of ₹1,250

• Trade 3 (Company ABC): Profit of ₹2,000

Trade‑wise turnover: (–3,000) + (1,250) + (2,000) = ₹6,250

Scrip‑wise turnover:

• For XYZ: (–3,000) + (1,250) = –1,750

• For ABC: (+2,000) = (2,000)

• Total Turnover = ₹1,750 + ₹2,000 = ₹3,750

Importance of Calculating Trading Turnover

Turnover helps you identify whether your trading income is business income. It also determines if a tax audit is needed under Section 44AB. Keeping accurate turnover data makes filing easier and keeps you compliant with tax on intraday trading rules.

Profits from intraday trading are treated as speculative business income, and taxed under your slab in both old and new regimes. To estimate your exact tax, check both regimes and then apply your total income levels. 

Tax Rates: Old vs New Regime (FY 2025-26)

Income Slabs (New Regime)	Tax Rates (New Regime)	Income Slabs (Old Regime)	Tax Rates (Old Regime)
Up to ₹4 Lakhs	0%	Up to ₹2.5 Lakhs	0%
₹4 Lakhs – ₹8 Lakhs	5%	₹2.5 Lakhs – ₹5 Lakhs	5%
₹8 Lakhs – ₹12 Lakhs	10%	₹5 Lakhs – ₹10 Lakhs	20%
₹12 Lakhs – ₹16 Lakhs	15%	Above ₹10 Lakhs	30%
₹16 Lakhs – ₹20 Lakhs	20%	—	—
₹20 Lakhs – ₹24 Lakhs	25%	—	—
Above ₹24 Lakhs	30%	—	—

 

Example

Meet Rahul, a 30‑year‑old salaried professional and active intraday trader. Here’s his income breakdown for the financial year: 

• Salary: ₹10 Lakhs
• Intraday trading profit: ₹2 Lakhs
• F&O trading profit: ₹2 Lakhs (non‑speculative)
• Capital gains: ₹1 Lakh
• Interest: ₹1 Lakh

Tax Calculation as per Old Regime

1. Calculate total taxable income: ₹16 Lakhs (all income added)
2. Apply tax slabs & rates: 

• ₹2.5 Lakhs @0% = ₹0
• ₹2.5 Lakhs @5% = ₹12,500
• ₹5 Lakhs @20% = ₹1,00,000
• ₹6 Lakhs @30% = ₹1,80,000

• Total = ₹2,92,500

1. Add Old regime cess = ₹11,700 → Grand total ≈ ₹3,04,200
2. Include STCG (on ₹1 Lakh): Taxed at 15% = ₹15,000

Final tax liability in old regime = ₹3,04,200 + ₹15,000 = ₹3,19,200

Tax Calculation as per New Regime (estimated for FY 2025-26)

1. Apply standard deduction on salary (₹75,000): Salary taxable = ₹9,25,000
2. Calculate Total taxable income = ₹9,25,000 + ₹2,00,000 + ₹2,00,000 + ₹1,00,000 + ₹1,00,000 = ₹15,25,000
3. Compute Tax under new slabs: 

Slab Range	Rate	Tax Amount
Up to ₹4 Lakhs	0%	₹0
₹4–₹8 Lakhs	5%	₹20,000
₹8–₹12 Lakhs	10%	₹40,000
₹12–₹15.25 Lakhs	15%	₹48,750
Subtotal		₹1,08,750

1. Apply Section 87A rebate (₹60,000): ₹1,08,750 − ₹60,000 = ₹48,750 
2. Add Health & Education Cess @4%: ₹1,950 
3. Add STCG @15% (on ₹1 Lakh): ₹15,000 

Total tax payable under new regime = ₹48,750 + ₹1,950 + ₹15,000 = ₹65,700

This example clearly shows how your trading profits are added to total income and taxed as business income. You can compare both regimes to choose the most beneficial option based on your total earnings, income types, applicable deductions and available rebates.

Advance tax is the payment of your estimated tax liability in instalments during the financial year. Intraday traders must pay advance tax if their total tax due exceeds ₹10,000. This ensures timely compliance and helps avoid interest penalties as per Sections 234B and 234C of the Income Tax Act.

For Traders Not Using Presumptive Taxation

• Intraday trading income is treated as speculative business income and follows standard advance tax instalment rules.

• You must pay: 

  • 15% by 15 June

  • 45% by 15 September

  • 75% by 15 December

  • 100% by 15 March

• Missing deadlines may invite interest charges, so mark your calendar carefully.

For Traders Using Presumptive Taxation

• Traders who opt for the presumptive scheme under Section 44AD can simplify tax compliance.

• Choose this if your turnover is within the prescribed limit and profit declaration is at least 6%. 

• Here, you need to pay your entire tax liability in one go by 15th March, with no quarterly instalments.

• This method reduces paperwork and streamlines compliance—but won’t suit all traders.

Whether you opt for presumptive taxation or not, timely advance tax payments are crucial to avoid interest under Sections 234B (non-payment) and 234C (deferment). 

• Brokerage and Transaction Charges: You can claim brokerage fees, transaction charges, GST, and stamp duty as business expenses against intraday profits.
• Securities Transaction Tax (STT)
  STT paid on intraday trades is allowed as a deduction under trading expenses.
• Speculative Losses Set‑Off: Intraday trading losses are speculative and can only offset speculative gains in the same year.
• Loss Carry‑Forward (4 years): Unused speculative losses can be carried forward for up to 4 assessment years, but only against future speculative gains.
• No Set‑Off Against Salary or Capital Gains: Speculative losses cannot be adjusted against income from salary, capital gains, or non‑speculative business income.
• Maintain Proof of Expenses: Keep all bills, contract notes, and trade statements to claim deductions and for any tax audit or scrutiny.

Proper deductions and set-off handling can significantly reduce your tax on intraday trading and ensure compliance. 

1. Gather Your Records: Collect trade-wise profit and loss statements, contract notes, bank transactions, and STT receipts.

2. Calculate Turnover and Profit: Use the trade-wise or scrip-wise method to compute your absolute turnover and net speculative profit/loss.

3. Choose the ITR Form: File under ‘Profits & Gains from Business’ using ITR‑3 (or ITR‑4 for presumptive taxpayers).

4. Report Income Details: Enter turnover, profit, expenses (brokerage, STT), and speculative loss adjustments in the P&L section.

5. Set‑off/Carries Forward Loss: Adjust current year’s speculative losses against gains, and list any unabsorbed losses to carry forward.

6. Compute Tax Liability: Add speculative income to your total income and apply slab rates; include STCG, cess, and surcharge.

7. Pay Advance Tax (if applicable): Deposit advance tax instalments based on your total due, especially if speculative tax exceeds ₹10,000.

8. Upload and E-Verify ITR: Submit your return on the Income Tax e-filing portal and complete verification via Aadhaar OTP, net banking, or EVC.

9. Carry Forward Losses: Make entry in Schedule CFL to carry forward speculative loss for future adjustment.

10. Keep Audit Reports (if needed): If turnover or profit thresholds are crossed, get your accounts audited and attach the audit report (Form 3CD) with your ITR.

Following these steps ensures your intraday trading income tax return is accurate, complete, and compliant. 

To sum up, intraday trading earnings fall under speculative business income and are taxed as per your income slab after adding STCG and cess. You must maintain records, calculate turnover, and choose the right ITR form. Timely advance tax and audit compliance ensure smooth filing. Clear awareness of deductions, set‑off rules, and filing steps helps you stay tax-smart. Stay compliant to protect your profits and avoid penalties.