Are you thinking of becoming a full-time trader? Or are you considering trading as a form of extra income? If you answered yes to either of the two questions, then you need to have an idea about tax on intraday trading.
In the stock market, people make money through trading and investing. An investor can hold a stock for a minimum of one day, up to many months, and several years.
If an investor holds a stock for more than a year, he is liable to pay long-term capital gains tax if he sells his stocks for a profit. Alternatively, if he sells stock in his portfolio within one year for a profit, it comes under short-term capital gains tax.
Intraday trading is also a taxable income from the stock market, but it comes under a different type of taxation compared to long-term and short-term capital gains tax.
In this article, we are going to cover various terminologies on taxes and also discuss tax on intraday trading.
Tax On Long-Term Investments & Capital Gains
When the Finance Minister announced the budget, the working class of India had their eyes on one key announcement – Taxation on incomes. Particularly, the tax slab for salaries in India. The fact is that every income is liable to some sort of tax. This includes gains made from the market – either through investing or intraday trading. But, the tax rates for all of them are not necessarily the same, though the income is from the stock market.
Long-Term Capital Gains
According to the law, long-term capital gains on the sale of equity shares or units of an equity fund will be exempt from taxes up to ₹1 lakh rupees per annum. Above ₹1 lakh rupees, an LTCG tax of 10% will be applicable.
Also, it is important to note that you will only be taxed on the equity shares if you realize the profits and sell the shares after one year or more.
Short-Term Capital Gains
Short-term capital gains are the profits made for the buying and selling of equity shares within a period of one year. The tax on STCG is higher than LTCG, at 15 percent. While LTCG has an exemption limit of ₹1 lakh, this however is not applicable under STCG.
Tax On Intraday Trading
Capital gains have a fixed tax rate, but that doesn’t apply to trading. In fact, trading profits itself is split into two different types of income – Speculative business income and non-speculative business income.
Both forms of income are added to your gross total income and taxed at normal slab rates.
Existing Tax Slab Vs. New Tax Slab
After the finance minister announced the budget for FY 2023-24, a majority of the viewers were curious about one key announcement – Tax slabs for salaried citizens. The current tax slabs will continue to exist and the new regime will be applicable from FY2023 if taxpayers wish to follow it.
As per the new tax slabs, the rates are given below –
| New Tax Slabs | Tax Rate | Existing Tax Slabs | Tax Rate |
| 0-3 Lacs | 0% | Upto 2.5 Lacs | 0% |
| 3-6 Lacs | 5% | 2.5-5 Lacs | 5% |
| 6-9 Lacs | 10% | 5-7.5 Lacs | 10% |
| 9-12 Lacs | 15% | 7.5-10 Lacs | 15% |
| 12-15 Lacs | 20% | 10-12.5 Lacs | 20% |
| Above 15 Lacs | 30% | 12.5-15 Lacs | 25% |
| Above 15 Lacs | 30% |
Losses From Trading
Intraday trading comes under speculative business income. A loss made from such income can be offset against profits, as with any speculative business.
This however can only be done against the profits of other speculative businesses only. Additionally, the losses made can also be carried forward to the next year, provided they are offset against profits from the year after that.
Taxpaying traders can carry their trading losses forward by up to four years after the year of the loss. This however is possible on the condition that the ITR is filed on or before the respective due dates.
Also Read: 8 Best Books For Intraday Trading – Top Reads For Beginners!
In Closing
Taxes are complicated for the everyday normal citizen. To know more about the different ways to save taxes, you should consult a tax expert or a chartered accountant, to get a more personalized solution to your tax returns.
There are different options, including investment options, that can reduce your tax liability by the end of the year. The common mistake that the working population makes is attempting to save taxes only when it’s tax filing season.
To actually implement tax saving schemes in your annual tax return, you should start at the beginning of the financial year, and only then will the full benefits of tax saving apply to your income.
We hope this article gave you a better understanding of Tax On Intraday Trading Thank you for reading!
Tags: Is it compulsory to file ITR for intraday trading?, Does Zerodha deduct tax on intraday?, How is intraday profit calculated for income tax?, How much tax on intraday trading in India, Tax on intraday option trading, How to save tax on intraday trading, Intraday trading tax audit, Income tax on intraday trading loss, How Gains from Intraday Trading are Taxed?, What is the taxation amount paid on intraday profits