The availability of online trading platforms and ease of trading with the help of technology has made Share Trading a popular activity amongst the taxpayers. However, most taxpayers are not aware of the income tax implications on their trading activities. One such form of trading is Intraday Trading. We would discuss about the following topics:

Meaning of Intraday Trading

Intraday Trading means buying and selling of stocks on the same day. All intraday transactions are squared off by the end of the trading day. The trader does not take actual delivery of shares. The intention is not to invest but to earn profits from fluctuations in prices of the stock.

Calculation of Turnover

Turnover = Absolute Profit

As per the Income Tax Act. the applicability of tax audit can be determined on the basis of Trading Turnover. The definition of turnover is different for each type of trading transaction. In case of Intraday Trading, the Turnover equals Absolute Profit. Absolute Profit is the sum of all positive and negative differences from all the transactions.

Example

Here are details of transactions of 2 trading days

10/07/2019: Mr. A buys 100 shares of ABC Ltd at a price of Rs.1000 per share. He sells them at a price of Rs.1050 per share at the day end and squares off his position. Profit = Rs.50 * 100 shares = Rs.5,000/-

11/07/2019: Mr.A buys 500 shares of XYZ Ltd at a price of Rs.100 per share. He sells them at a price of Rs.80 per share at the day end and squares off his position. Loss = Rs.20 * 500 shares = Rs.10,000/-

Solution:
Absolute Profit =  5000 + 10000 = Rs. 15,000/-

Applicability of Tax Audit

Tax Audit u/s 44AD is applicable in the following cases:

1. If the Turnover exceeds Rs.2 Cr

OR

2. If the taxpayer has incurred loss

For Tax Audit, the taxpayer should appoint a professional Chartered Accountant for:

  • Audit of books of accounts
  • Preparation of Financial Statements (P&L and Balance Sheet)
  • Preparation and Filing of Tax Audit Report (Form 3CD)
  • Preparation and Filing of Income Tax Return

Imp: If the taxpayer decides not to claim and carry forward the trading loss, he can avoid the hassle of tax audit

Income Head, ITR Form and Due Date

  • Income HeadPGBP (Profits & Gains from Business and Profession)
    Income from Intraday Trading is classified as Business Income for preparation of Income Tax Return.
    Equity Intraday Trading – Speculative Business Income
    F&O Intraday Trading – Non-Speculative Business Income
  • ITR Form – ITR-3 (For individuals and HUFs having income from profits and gains of business or profession)
  • Due Date to file Income Tax Return for FY 18-19 (AY 19-20)
    31st July, 2019 – If Tax Audit is not applicable
    30th September, 2019 – If Tax Audit is applicable

Calculation of Income Tax

Income Tax is calculated at the prescribed slab rates as per the chart below:

Calculation of Income TaxCalculation of Income Tax

Note: Surcharge is liable on the total income as per the prescribed slab rates. Cess is liable at 4% of (basic tax + surcharge)

Carry Forward of Loss

Loss under Intraday Trading can be claimed if Tax Audit u/s 44AD is performed by a professional Chartered Accountant. The loss can be carried forward and set off against future profits to reduce the income tax liability.

  • Speculative Loss can be carried forward for 4 years. It can be set-off against Speculative Business Income only
  • Non-Speculative Loss can be carried forward for 8 years. It can be set-off against both Speculative Business Income and Non-Speculative Business Income.

——————–

Understand what is Intraday trading and how to buy and sell stocks within the same day, Read this intraday trading guide on TradingPedia.

Author Bio

Qualification: CA in Job / Business
Company: Quicko.com
Location: Ahmedabad, Gujarat, IN
Member Since: 10 Jul 2019 | Total Posts: 2

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16 Comments

  1. Hardik says:

    Can someone help me, my pan card is flagged for non filing of ITR 2018-19,
    I did about Rs 65 lakhs turnovrr trading in equity market, made a net loss of Rs. 3 lack,
    I did intraday and delivery based trading using brokers margin money, now should i have to file return or i have to pay tax ?
    Can someone suggest me ?

  2. SANJAY K says:

    I have Intraday trading gain of Rs.1, 55,000, however have Short term capital loss of Rs. 3,67,000. I am in 30% slab. Please revert whether my Intraday gain can be offset against Short term capital loss.

  3. Jitendra gaur says:

    Hi,

    I got your contact on your website this is regarding FNO trading. I have done Fno trading in share market with loss of 4000 and turn over is only 1/- lakh I don’t have any other income should I need a audit for the same.. please adv

  4. Jitendra gaur says:

    Hi,

    I got your contact on your website this is regarding FNO trading. I have done Fno trading in share market with loss of 4000 and turn over is only 1/- lakh I don’t have any other income should I need a audit for the same.. please advise

    Regards
    Jitendra gaur

  5. Vikash Jhalani says:

    Can someone help me, my pan card is flagged for non filing of ITR 2018-19,
    I did about Rs 5 crore trading in equity market, made a net loss of Rs. 3 lack,
    I did intraday and delivery based trading using brokers margin money, now should i have to file return or i have to pay tax ?
    Can someone suggest me ?

  6. Krishnan says:

    1.I bought infosys for Rs. 10,000. My trading a/c had a balance of Rs. 60,000. I sold the same shares on the same day for profit. Is that speculation? I am not using margin. If I had not got expected profit, I would have carried the trade.
    2. I have 100 infosys in my DP a/c. I sold 50. Fortunately (Unfortunately) it went down 2% the same day. I bought it back. If it had not gone down the same day, i would have carried the trade. Is it speculation?

    1. Jay says:

      Obviously, what is there in your mind doesnt matter, but what you did actually that matters. You bought and sold same day means its speculation, no matter what you think.

  7. Arvind Verma says:

    I am a salaried person (5% tax slab), I had STCG of Rs 11000/;
    and Rs 4669/ loss in intra-day equity (Speculative) with turnover of Rs 5300/.
    1) Can information about intraday trade be omitted in ITR as it a loss and I file itr-2 by paying 15% tax on STCG? or
    2) information about intraday trade can not be omitted and I have to show it by filing ITR-3? If I file ITR-3, do I need audit even if the amount is such a small (Rs 5300)?
    Thanks in advance

    1. RAVI RANJAN says:

      May I expect any authentic reply as I have also the same query. I have an intraday loss of some INR35 with a single transaction and STCG of 1525. May I only fill iTR-2 by skipping the loss through intraday or filing ITR3 is mandatory ?

      1. CA Ashin Kurian Tom says:

        If your turnover is above tax audit limit then only audit is required. Otherwise you can file ITR-3 by filling Balance sheet and Profit and Loss within the due date and carry forward your speculative losses for next 4 AYs.

        1. Seeker says:

          The article Indicate that tax audit is required, if you want to carry forward the loss. You are saying otherwise. Article also written by CA. A bit confused .

      2. Chirag goel says:

        No, you do not need to get your tax audit done. Intraday trading tax audit is mandatory only if your turnover is more than the prescribed limit. since in your case your turnover is less than the prescribed limit you does not need to get your tax audit done.

        Note:- Turnover in case of Intraday trading is Absolute profits (i.e sum of all profits and losses in absolute terms)

    1. CA Ashin Kurian Tom says:

      Total of + & – is only for the purpose of determining the Tax Audit Turnover limit. Sale of securities as reflected in Books of Accounts will itself be reflected in 3CD

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