How Gains from Intraday Trading are Taxed

Profits from intraday trading are taxed under speculative business income and are calculated based on the profits earned within the same trading day. Taxes apply to all types of income in India, including intraday trading profits. Unlike long-term investments, where shares are held for extended periods, intraday trading involves buying and selling shares within the same day. The tax on intraday trading profit falls under the investor's income tax slab, with short-term capital gains tax applied if the securities transaction tax is relevant. Intraday trading is treated as business income, subject to the same income tax rates as salaries. 

Understanding Capital Assets and Trading Assets 

Shares fall into two categories, i.e capital assets or trading assets (stock-in-trade). Based on this classification, intraday trading income tax falls into the following categories: 

Capital Asset 

Capital assets are holdings maintained for investment purposes. These can include stocks, bonds, and various securities. Gains generated from selling capital assets are known as capital gains, which are classified into two categories:  

• Long Term Capital Gain (LTCG) and Loss 
• Short Term Capital Gain (STCG) and Loss 

Trading Assets: 

1. Speculative Business Income: It is generated from intraday transactions. These trades involve buying and selling shares within the same trading day without taking delivery. Due to their speculative nature, profits earned from such transactions are categorised as speculative business income. Tax on trading income in India is assessed under this classification. 
2. Non-Speculative Business Income: It encompasses all equity and commodity transactions that do not fall under the speculative category. This includes delivery-based equity transactions, equity futures and options contracts, commodity trades (covering both delivery and futures/options), and currency transactions (including delivery and futures/options). Profits derived from these trading activities are treated as non-speculative business income for taxation purposes. 

Intraday Trading Tax Regulations 

The intraday trading revenue is viewed as speculative business revenue. This is because the person is trading without planning to take possession (ownership) of the contract, it is seen as speculative. The individual needs to create financial statements and submit ITR-3 since intraday trading generates company revenue.  

ITR due date for profits from intraday trading:  

If a tax audit is not required, 15 September 2025 

If a tax audit is required, the deadline is October 31. 

Tax Calculation for Intraday Trading Profits 

The tax calculation for intraday trading profit uses the income tax slab rates applicable to the individual's total income bracket. These slab rates vary according to different income levels. The final tax liability includes the base slab rate plus any applicable surcharge and an additional cost. 

Old and New Tax Regime 

Example of Tax Calculation for Intraday Trading 

Consider the case of Amit, a 34-year-old trader engaged in intraday operations: 

The annual salary of Amit is ₹7.5 lakh 

His intraday equity trading income for the financial year is ₹2 lakh 

The earnings from futures and options trading is ₹1.8 lakh 

Capital gains is ₹75,000 

Interest earned from bank deposits (yearly) is ₹85,000 

The capital gains are classified as short-term and attract a tax rate of 20% (revised from the previous 10% following Union Budget 2025). This results in a capital gains tax obligation of ₹15,000. 

The total taxable income is calculated by combining income from various sources: salary, speculative business income, non-speculative business income, and interest from bank deposits. This brings Amit's aggregate income to ₹12,40,000 for the assessment year. 

Investment for the Long-term and Short term Capital Gains Tax 

Understanding how investments and trades are taxed helps an individual see the real impact on overall returns. 

It's important to calculate the short-term capital trading profit tax curately when assessing the overall profitability of the intraday trading strategies.  

Investment transactions lead to long-term or short-term capital gains based on the holding period. Long-term (over a year) capital gains on equity shares or equity-oriented funds exceeding ₹1 lakh are taxed at 10%, while short-term gains (with securities transaction tax) are taxed at 15%. 

Short-term capital gain tax on intraday trading is typically imposed on the profits earned from buying and selling financial assets within the same trading day.  

Distinguishing between an investor and a trader depends on whether assets are trading or capital assets. Capital assets generate revenue over a year while trading assets are bought and sold for profit. 

Intraday trading is considered speculative under Section 43(5) of the Income Tax Act, with profits categorised as speculative business income.  

Delivery-based trades, including commodities, currencies, futures, stocks and options, fall under non-speculative business income, which includes hedging arrangements to protect against market fluctuations.  

Advance Tax For Intraday Trading 

A person is liable for advance tax if their estimated tax payable is more than ₹10,000 for the year. 

Didn’t opt for presumptive taxation 

As an intraday trader, if an individual does not opt for presumptive taxation, the person must pay advance tax in the following four instalments: 

Opt for presumptive taxation 

As an intraday trader, if an individual opts for presumptive taxation, the person must pay advance tax in only one single installment, i.e. by 15th March. 

Disclaimer:  All investments are subject to market risks, economic conditions, regulatory changes, and other external factors. Returns are not guaranteed and may vary based on market performance and investment tenure. Investors should assess their risk tolerance and financial objectives, conduct their own research, and consult a qualified financial advisor before making any investment decisions. 

Conclusion 

Intraday trading profits are taxed as speculative business income under applicable slab rates in India. Traders must understand the distinction between capital assets and trading assets, as this determines tax treatment. Profits from intraday transactions are added to total income, which includes salary and other earnings, and taxed accordingly. Individuals engaged in frequent trading through an online trading app must maintain proper financial records and file ITR-3. Proper tax planning and timely compliance ensure traders meet their obligations while maximising gains from intraday trading activities.