Tax on Intraday Trading in India: Gains, Losses & ITR Rules
Understanding the tax treatment of intraday trading is important for every trader involved in buying and selling shares within the same day. Intraday trading is done to earn profits from short-term market fluctuations, and the income earned from such activities is taxed differently from normal capital gains.
Many taxpayers confuse intraday trading income with capital gains, which often results in incorrect ITR filing and income tax notices. This guide explains the taxation rules, applicable ITR forms, audit requirements, and treatment of gains and losses from intraday trading in India.
Budget 2026 Updates
- Share buybacks will now be taxed as capital gains for all shareholders.
- Promoters may also be liable to pay additional buyback tax to ensure fair taxation.
These provisions will apply from FY 2026-27 onwards.
Income Tax Act 2025 Update
The Income Tax Act, 2025 has replaced the terms “Previous Year” and “Assessment Year” with “Tax Year.” For instance, income earned during 2025-26 will now be referred to as Tax Year 2025-26. However, this guide continues using FY and AY terminology for easier understanding.
The new Act has also simplified compliance by reducing and renumbering various sections and schedules.
What is Intraday Trading?
Intraday trading refers to buying and selling shares on the same trading day. Traders aim to earn profits from fluctuations in stock prices during the day itself.
Since the shares are not held overnight, intraday trading is treated differently from delivery-based trading. Therefore, all profits and losses from intraday trading must be disclosed correctly while filing the Income Tax Return (ITR).
In delivery-based transactions, shares are held for at least one day before sale and are taxed under capital gains. However, in intraday trading, the purchase and sale happen on the same day.
Under Which Head is Intraday Income Taxed?
Income from intraday trading is taxed under the head “Profits and Gains from Business or Profession” and not under capital gains.
This is because intraday trading is considered a speculative business activity, where the intention is not to take actual delivery of shares but to profit from short-term price movements.
Unlike long-term capital gains, which are taxed at concessional rates, intraday profits are taxed according to the individual’s applicable income tax slab rate.
Key Changes in ITR Forms for AY 2025-26
Inclusion of LTCG in ITR-1 and ITR-4
Taxpayers having long-term capital gains up to ₹1.25 lakh from listed equity shares or equity mutual funds under Section 112A can now use simpler ITR forms such as ITR-1 and ITR-4, provided there are no carry-forward losses.
Separate Reporting of Capital Gains
Taxpayers are now required to disclose capital gains separately for transactions carried out before and after July 23, 2024, due to revised taxation rules announced in Budget 2024.
Reporting of Buyback Proceeds
From October 1, 2024, proceeds received from company buybacks will be treated as deemed dividends and reported under “Income from Other Sources.” Capital loss can still be claimed separately.
Enhanced Reporting in ITR-7
Trusts and institutions filing ITR-7 must separately disclose capital gains before and after July 23, 2024.
Increased Asset Reporting Threshold
The threshold for mandatory asset and liability disclosure in ITR-2 has been increased to ₹1 crore.
Which ITR Form is Applicable for Intraday Trading?
Since intraday trading income is considered business income, ITR-3 is generally applicable.
However, the correct ITR form may vary depending on factors such as:
- Frequency of trades
- Turnover
- Number of transactions
- Nature of trading activity
Losses from intraday trading are treated as speculative losses and can only be adjusted against speculative business income.
Carry Forward of Losses
- Intraday trading losses can be carried forward for up to 4 assessment years.
- Carry forward is allowed only if the ITR is filed within the due date:
- 31st July – Non-audit cases
- 31st October – Audit cases
Expenses Allowed
You can claim deductions for:
- Securities Transaction Tax (STT)
- Brokerage charges
- Internet expenses
- Trading software expenses
- Other expenses directly related to trading activities
Is Tax Audit Required for Intraday Trading?
Tax audit applicability depends on turnover and profit percentage.
Presumptive Taxation Scheme – Section 44AD
- If turnover is up to ₹2 crore (₹3 crore where 95% transactions are digital), tax audit is not mandatory if profits are at least 6% of turnover.
- If profits are lower than 6% or there is a loss, audit is required only if total income exceeds the basic exemption limit.
Regular Tax Regime – Section 44AB
- For turnover between ₹2 crore and ₹10 crore, tax audit is not mandatory if declared profits are:
- 6% for digital transactions
- 8% for cash transactions
- If profits are lower, audit becomes mandatory.
Turnover Exceeding ₹10 Crore
Tax audit becomes compulsory if turnover exceeds ₹10 crore.
How is Intraday Turnover Calculated?
Turnover in intraday trading is calculated by adding the absolute profit and loss values from all trades.
Example
First Trade
- Bought 100 shares at ₹100
- Sold at ₹110
- Profit = ₹1,000
Second Trade
- Bought 500 shares at ₹10
- Sold at ₹8
- Loss = ₹1,000
Absolute Turnover
₹1,000 + ₹1,000 = ₹2,000
Similarly, the total turnover for the year is calculated by adding all absolute profits and losses.
Tax Calculation on Intraday Trading
Intraday trading income is taxed according to applicable slab rates.
Old Tax Regime
| Income Slab | Tax Rate |
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
New Tax Regime
| Income Slab | Tax Rate |
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹6,00,000 | 5% |
| ₹6,00,001 – ₹9,00,000 | 10% |
| ₹9,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Applicable surcharge and 4% cess are charged additionally.
Conclusion
Intraday trading taxation can become complicated, especially when traders have income from multiple sources. Since intraday profits are treated as speculative business income, proper disclosure in the correct ITR form is extremely important.
Incorrect reporting may result in notices, penalties, or loss of carry-forward benefits. Understanding turnover calculation, tax audit applicability, and treatment of speculative losses can help ensure accurate tax compliance.
If you need assistance with intraday trading taxation, ITR filing, or tax audit compliance, expert guidance can help simplify the process and maximize your eligible deductions and refunds.
Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.
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FAQs
Q. How should intraday trading income be reported in the Income Tax Return (ITR)?
Income or loss from intraday trading is treated as speculative business income under the Income Tax Act. It must generally be reported in ITR-3 (or ITR-4 if eligible under presumptive taxation and applicable conditions are met). Proper disclosure of profits, losses, and expenses is important for accurate tax filing.
Q. Is intraday trading considered capital gains or business income?
No, intraday trading is not treated as capital gains because no delivery of shares takes place. It is classified as speculative business income, and taxation is based on your applicable income tax slab rate.
Q. Which ITR form should be used for intraday trading income?
Most taxpayers with intraday trading activity should file ITR-3. If you have opted for presumptive taxation and meet eligibility conditions, ITR-4 may apply in some situations.
Q. What documents should I maintain for intraday trading taxation?
Keep records such as:
- Broker trade statements
- Profit & Loss (P&L) reports
- Contract notes
- Bank statements
- Ledger reports from the broker
- Expense proofs (internet, advisory fees, software, etc.)
These documents help support your tax computation and are useful in case of notices or scrutiny.
Q. How is taxable income from intraday trading calculated?
Taxable income is calculated by deducting eligible trading-related expenses such as brokerage, internet charges, transaction costs, and advisory fees from your total trading profit. The resulting net income is taxed according to your slab rate.
Q. Can intraday trading losses be adjusted against other income?
No, speculative losses from intraday trading cannot be adjusted against salary, rental income, or capital gains. Such losses can only be set off against speculative business income.
