Know About Income Tax on Intraday Trading

Intraday trading is a popular way to earn profits from daily price movements in the stock market. Many young investors in India try it because it promises quick returns. However, what most people forget is that intraday trading comes with tax rules. The income you earn from intraday trading does not fall under capital gains but under business income. Knowing how taxes apply can help you avoid penalties and plan your finances better.

In this blog, we will explain intraday trading, its tax treatment, turnover rules, ITR forms, audit requirements, and advance tax. By the end, you will have a clear view of how to report your intraday profits and losses correctly.

What is Intraday Trading?

Intraday trading means buying and selling shares on the same day. You do not hold the shares for long. Instead, you book profit or loss within market hours. Traders do this to benefit from small price movements.

For example, you may buy 100 shares of a company in the morning and sell them before the market closes. You do not become a shareholder because you never take delivery of the stock. The goal is quick gains, not long-term investment.

Since intraday trades are short-term and speculative, the Income Tax Act treats them differently from investments.

Tax Treatment of Intraday Trading

The Income Tax Act treats intraday trading as speculative business income under Section 43(5). It is not capital gains. You must report your profit or loss under the head “Profits and Gains from Business or Profession”.

This means the tax on intraday trading depends on your income tax slab. If you earn more, you pay more. The highest slab goes up to 30%, plus surcharge and 4% cess.

• If you earn only from intraday trading, you pay tax as per slab rates.
• If you earn salary, rent, or interest, intraday income gets added to that.
• Losses from intraday trades can be set off only against speculative income.

So, if you made a loss in intraday but a profit in futures, you cannot adjust them against each other.

Turnover Rules for Intraday Trading

Turnover is important because it decides whether you need an audit. For intraday trades, turnover is not the value of total transactions. It is the absolute sum of profits and losses.

For example:

• You buy 100 shares at ₹75 and sell at ₹80 → Profit ₹500.
• You buy 200 shares at ₹500 and sell at ₹460 → Loss ₹8,000.
• Turnover = ₹500 + ₹8,000 = ₹8,500.

This figure decides if you need a tax audit.

ITR Form for Intraday Trading

Since intraday income is business income, you must file ITR-3. This form requires you to report profit and loss, balance sheet, and expenses. If your turnover is small, you may also explore presumptive taxation, but intraday has specific conditions.

The due dates for filing are:

• 15 September 2025 – if the audit is not applicable.
• 31 October 2025 – if the audit is applicable.

Tax Audit Rules

Audit rules depend on turnover and profits.

• If you opt for presumptive taxation:
  • No audit if turnover is up to ₹3 crore and profit is at least 6% of turnover.
  • Audit applies if profit is below 6% or if you report losses with income above the basic exemption limit.
• If you do not opt for presumptive taxation:
  • No audit if turnover is below ₹1 crore.
  • Audit is mandatory if turnover is above ₹10 crore (as intraday is 100% digital).

Tax Rates on Intraday Trading

Intraday profits are taxed at slab rates.

Old Tax Regime (FY 2024-25 onwards)

• Up to ₹2.5 lakh → Nil
• ₹2.5 lakh – ₹5 lakh → 5%
• ₹5 lakh – ₹10 lakh → 20%
• Above ₹10 lakh → 30%

New Tax Regime (FY 2024-25 onwards)

• Up to ₹4 lakh → Nil
• ₹4 lakh – ₹8 lakh → 5%
• ₹8 lakh – ₹12 lakh → 10%
• ₹12 lakh – ₹16 lakh → 15%
• ₹16 lakh – ₹20 lakh → 20%
• ₹20 lakh – ₹24 lakh → 25%
• Above ₹24 lakh → 30%

Advance Tax for Intraday Traders

If your tax liability exceeds ₹10,000 in a year, you must pay advance tax.

• Without presumptive scheme: Pay in four instalments (June 15, Sept 15, Dec 15, Mar 15).
• With presumptive scheme: Pay in one instalment (March 15).

Paying advance tax helps avoid interest penalties.

Carry Forward of Intraday Losses

If you make a loss in intraday trading, you can carry it forward for four years. But you must file your ITR before the due date. You can adjust these losses only against future speculative gains, not against salary, rent, or other income.

Conclusion

Intraday trading can look attractive because of the chance to earn quick profits. But it is important to remember that the tax rules are strict. You must treat intraday profits as business income and file ITR-3. If your turnover is high or your profits are low, you may also need an audit.

Keep track of your turnover, pay advance tax when required, and file your returns on time. If you make losses, you can carry them forward for four years, but only if you meet the filing deadlines.

Intraday trading may be risky, but handling taxes correctly will help you stay compliant and avoid unnecessary penalties. In the long run, discipline with both trading and taxes can help you build wealth steadily.