Taxes on Intraday Trading Income

CA_Niyati_Mistry · March 27, 2023, 6:16am

Intraday trading means buying and selling securities on the same day. Intraday Trading involves settling the transactions by adjusting the differential amounts in the price fluctuations.

Turnover:
The total turnover of the Intraday Trading Business is calculated by considering the total absolute profit and loss. Meaning thereby, the negatives of losses will be ignored and they will be added to the profits to arrive at total turnover.

If the turnover from Intraday Trading exceeds certain specified limits i.e. ₹10 Crores then Tax Audit shall be applicable and the taxpayer is required to get the books of accounts audited by a CA.

Income Head and Type:
Intraday Trading is considered a business income. Under the business head, it is considered Speculative business income. A person can claim all the expenses incurred in relation to the income from Intraday Trading.

Taxation:
Income from Intraday trading shall be taxed at the normal slab rates, depending upon the regime opted for by the taxpayer. The taxpayer is required to file ITR-3 for reporting Intraday Trading Income.

Set off and Carry forward losses:
The losses can be set off against Speculative business only, i.e. the losses from Intraday Trading cannot be adjusted against any other income. However, losses from Non-speculative businesses (e.g. F&O Trading Business, Clothing Business, etc) can be adjusted against Profits from Intraday Trading in the same year. The unadjusted losses of Intraday Trading can be carried forward till next 4 Financial Years.

Let’s understand better with the help of examples:

Example 1: Mr. Bala is engaged in the business of Intraday Trading the details are in the table below:

He has incurred certain expenses like a Brokerage of ₹200 and paid ₹1,000 for training and seminars related to the Intraday Trading Business.

Solution: Calculation of Taxable Income from Intraday Trading Business:

From the above example, it can also be seen how turnover is calculated for Intraday Trading Business which is the absolute profit.

Example 2: Mr. Sinha has a profit of ₹10,00,000 from Intraday Trading Business. He also trades in the F&O trading segment out of which he has incurred losses of ₹2,00,000. Apart from this, Mr. Singh also has a salary income of ₹15,00,000. Assuming he has opted for New Regime, calculate his tax liability.

Solution: Calculation of Tax Liability of Mr. Sinha:

For any more queries, comment below!

Sudip · May 1, 2023, 1:46am

Hello,

I am a fulltime trader trading in FnO and Commodity. This is my only source of income. I am estimating in 2023-24 my turnover, as it is calculated for trading in these segments, will surpass 3 cr leaving me ineligible for filing return under Presumptive Taxation Scheme. I have one issue to be clarified.

Do I need to pay quarterly advance taxes? It is difficult for a trader to assume, in advance, the amount of profit. For tax purposes, it is treated as a non-speculative business but the speculation component is inherent there. So if I pay at regular tax rate and by 15th March without payment of the quarterly advance taxes, is that possible?

Please Let me know. Thanks in anticipation.

Shrutika_Shah · May 1, 2023, 6:05am

Hi @Sudip

As per the recent budget announcement, the limit for Presumptive Taxation Limits has been revised to up to ₹3 crores for FY 2023-24 under section 44AD for small businesses.
Note: The limit increase is subject to a condition that 95% of the receipts must be through online channels.
Hence, if it exceeds 3 crores, you are ineligible to file a return under the presumptive scheme.
Income for F&O Trading is a non-speculative business income taxable at slab rates.

If you have NOT opted for the presumptive scheme, you are required to pay advance tax on a quarterly basis.
Only if one opts for the presumptive scheme, he/she can pay the advance tax in one installment by 15 March of the financial year.

So, yes in case you are opting for the regular scheme, you will be required to pay advance tax quarterly.
If you pay ar regular tax rate by 15th March without quarterly advance tax payment, then interest will be levied at 1% per month or part thereof u/s 234C.

Hope this helps.

Sudip · May 7, 2023, 1:57am

Thanks for your reply.

Atharv_Talnikar · July 20, 2023, 7:43am

I imported my trades from Zerodha. My capital gains are zero. My Zerodha intraday trade shows up as a business income. I dont have any business and thus cannot enter the mandatory business info because of which it wont let me file taxes.

Shrutika_Shah · July 20, 2023, 7:49am

Hi @Atharv_Talnikar

Since you’ve intraday trades, you will be filing ITR 3 as intraday trading is considered as a speculative business income.
You can enter the turnover, profits/losses etc, and proceed to file your ITR.

Here’s how you can Prepare your Income Tax Return : Help Center on Quicko.

In case you need expert assistance with your taxes, you can book a MEET.

Atharv_Talnikar · July 20, 2023, 7:53am

Hi @Shrutika_Shah
But I cant proceed without filling a balance sheet. I dont have a business

Shrutika_Shah · July 20, 2023, 8:12am

Hi @Atharv_Talnikar

You have intraday trades which is a business income as per the law.
Sp, you can enter the balance with broker in the balance sheet and proceed.

Atharv_Talnikar · July 20, 2023, 8:28am

Hi @Shrutika_Shah
Okay
What about Liabilities. Even they cant be zero it seems.

Shrutika_Shah · July 20, 2023, 8:37am

Hi @Atharv_Talnikar

The balance sheet prepared here pertains to your Intraday trading business. Please enter the values accordingly.

You can Submit a ticket : Help Center or Ask an Expert and proceed with filing ITR 3.

enigma · December 31, 2023, 4:53am

Hi,

Just wanted to understand the tax implications on Intraday and FnO trading. I have incurred loss on both Intraday and FnO trading. I do not have any profits here.

Do I still need to add this as speculative business income. What I meant here is that do I need to file ITR-3 just to add this loss details?

Also I have been filing ITR-2 under old regime and I am planning to switch to New Regime. I am already a salaried person and also have this Intraday/FnO . Will it be a problem if I switch now to new tax regime?

Surbhi_Pal · December 31, 2023, 6:43am

Hey @enigma,

Yes, even if you have losses, ITR-3 needs to be filed in case of Intraday and F&O trading.

As the due date to file the ITR for assessment year 23-24 was 31st July 2023, you can still file a belated or revise return till 31st December 2023, however, you will not be able to switch regimes.

But, if you are considering to switch regime in the next Assessment Year, i.e. AY 24-25, you can definitely do that. Moreover, next year onwards, new regime is made the default regime, hence if you do not specifically opt for the old regime, your return will be processed under the new regime by default.

enigma · December 31, 2023, 7:31am

Hi @Surbhi_Pal ,

Thank you for clarification. I have some more questions regarding this :

So let’s say if I avoid any Intraday or FnO Trading in the next Financial Year, in that case I can go back to ITR-2 right? There will not be any impact while filing ITR-2 again in the next FY cycle?
This financial year I have some losses on Intraday and FnO. Can I offset the loss? If so then in which category I can do it?

Surbhi_Pal · December 31, 2023, 9:10am

Hey @enigma,

ITR Form is filed based on the sources you have in a particular FY. Hence, yes, you can file ITR 2.

Moreover, Intraday and F&O losses are considered business losses and can be set-off against all kinds of income except salary in the same year, but once they are carried forward, they can be set off against only business profits.

Here’s a read on Set Off and Carry Forward of Losses under Income Tax Act.

Hope this helps!