General

How are profits on Intraday trading taxed?

Gains from intraday trading are classified as speculative business income under Indian tax law. These gains are taxed according to your income tax slab rate, which ranges from 5% to 30%, depending on your total taxable income.

Unlike long-term investments, intraday trading gains do not benefit from capital gains tax exemptions. It is essential to maintain detailed records of your intraday trades for tax filing purposes and report the gains accurately.

Losses from intraday trading are called speculative business losses and can be carried forward up to four consecutive financial years. The said losses can be set off only against the speculative income and not against the any other income like normal business income or capital gain etc.

Let’s understand with this an example
Here are the income details of a 30-year-old intraday trader:

• Annual Salary = ₹10 lakh
• Income from intraday equity trading for the year = ₹2 lakh [speculative business income]

Given these income tax will be calculated as below

Total taxable income would be calculated by adding all the income heads like Salary and speculative income therefore the total income will be:
Total income = 10,00,000 (Salary) + 2,00,000 (Speculative income)
                   = 12,00,000
Hence, the trader has to pay income tax on ₹12 lakh. Based on the tax slabs.