Intraday Turnover Calculation

Intraday Turnover Calculation

In trading, intraday turnover calculation is a major concept, and it means the total value of stocks or securities that one buys and sells in a single day. This concept is a measure of how much an individual is active in the market on any given day. This turnover considers not just how often one makes trade, but also how easily one can buy and sell their assets.

Engaging in Intraday Turnover involves taking advantage of short-term price changes. All within a single day, you buy low and sell high. Although this concept may sound complicated, it is simply about how active one is in the trading account throughout the day. With the help of this blog, you will understand intraday trading turnover calculation and how to calculate it. 

What is Intraday Turnover

Intraday turnover can be named as a collective term for all the trading activities that take place in a single day. All the stock and investment purchases and sales made during that day are covered in this. Compared to traditional investments, in which one needs to hold the assets for a longer period, intraday turnover consists of fast moves, where trades are being made and settled during the same trading session. Traders use rapid price swings to catalyse decision-making and action to take advantage of opportunities and maximise profits. Let's now understand how to calculate turnover in the case of intraday trading. 

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Table of Content

  1. What is Intraday Turnover
  2. How to Calculate Trading Turnover?
  3. Absolute Profit for Trading Turnover Calculation
  4. Trading Turnover Calculation for Tax Audit Applicability

How to Calculate Trading Turnover?

To figure out the turnover for intraday trading involves careful calculation, as one needs to add up the absolute values of all the transactions that have been made throughout the day. This implies that one needs to check what they paid when they bought something and what they received by selling it. With this thorough calculation, one can get a clear picture of how active they have been in the market. By intraday trading turnover calculation, traders can understand how much they've been involved in trading and how well they've been doing.

There are multiple methods for calculating the income tax on trading depending on the type of trade like Equity Intraday, Equity Delivery, Equity F&O, Currency Trading, Commodity Trading, etc. Absolute profits from trading serve as the basis for calculating the trading turnover. 

Absolute Profit for Trading Turnover Calculation

When we talk about intraday turnover calculation, absolute profits play an important role as it is not just about adding profit and losses, instead it adds up the positive and negative variations that come from trading. The two main approaches that are mostly used for this calculation are Trade wise method and Scripwise method. Through these methods, special perspectives are provided in the assessment of intraday trading, like a comprehensive understanding of profitability and risk control. 

Trade wise Turnover Method:

In the tradewise turnover method, absolute profit is calculated by summing up the absolute profit and loss from each trade throughout the financial year. Here is an example turnover in case of intraday trading: 

Imagine a trader made several trades within a financial year. For example: 

Trade 1: On January 25, 2023, the trader got 300 units of a company for INR 120, and on January 26, 2023, he sold them for INR 110.   
Trade 2: On February 25, 2023, the trader got 250 units of a company, for INR 50, and on February 26, 2023, sold them for INR 55.

Let's now determine the absolute profit:

Profit from Trade 1: (110 - 120) * 300 = (-3000) Loss  
Profit on Trade 2: (55 - 50) * 250 = Rs. 1,250 Profit  
Sum of the absolute values of Absolute Profit = Rs. 4,250

Scripwise Turnover Method:

In this method, the absolute profit is evaluated by adding up the absolute values of the profit and loss from each scrip (or stock) throughout the financial year. Let’s continue with the same example:

Net Loss from the company = -3,000 (loss from Trade 1) + 1,250 (profit from Trade 2) = -1,750

Absolute Profit = |-1,750| = INR 1,750

It's important to note that while the profit or loss remains the same under both methods, the intraday turnover calculation can vary significantly. The trade-wise method provides a more detailed assessment but may be more complex, whereas the scrip-wise method offers simplicity in the calculation. It is essential to understand absolute profit for accurate trading turnover calculation, helping traders to analyse financial performance effectively.

Trading Turnover Calculation for Tax Audit Applicability

When we talk about taxes, understanding the trading turnover is important, as tax authorities use these figures to determine if one will need a tax audit or not. The rules can change depending on your location, but the basic idea is the same everywhere i.e., if turnover extends a certain limit, then you are subject to a tax audit. Let's break down how trading turnover calculation is done for different types of trading:

Equity Intraday Trading:

Here is equity intraday trading: 

CompanyQuantityBuy DateBuy PriceSell DateSell PriceProfit/Loss
XYZ 525/10/20215,39025/10/20215,350-200
XYZ 1724/11/20214,83024/11/20214,880850

For Equity Intraday Trading, the turnover is calculated simply as the Absolute Profit.

  • Tradewise Turnover: INR 1,050
  • Scripwise Turnover: INR 650

Equity Delivery Based Trading:

Here is equity delivery-based trading: 

CompanyQuantityBuy DateBuy PriceSell DateSell PriceProfit/Loss

For Equity Delivery Based Trading, the turnover is calculated as the Sale Value.

  • Tradewise Turnover: INR 1,540
  • Scripwise Turnover: INR 980

Equity / Currency / Commodity Futures & Options Trading: H3 Table Format 

Here is Equity / Currency / Commodity Futures & Options Trading:

CompanyQuantityBuy DateBuy PriceSell DateSell PriceProfit/Loss

For Futures Trading, the turnover is calculated as the Absolute Profit.

  • Tradewise Turnover: INR 11,255
  • Scripwise Turnover: INR 6,905

It's important to keep in mind that tax rules can change, so it's always a good idea to stay updated and consult with a tax professional to ensure compliance with regulations. 

To sum up, understanding how much one trades in a day is important for traders as it helps them to make more stable financial decisions by following the rules regarding taxes. By doing accurate calculations, traders can do great in the ever-changing world of trading. To improve your trading experience and financial performance, try out a reliable online trading app for doing informed intraday trading in India.

FAQs for Intraday Turnover Calculation

To calculate trade turnover, add the absolute values of all the transactions conducted within a day, including both buy and sell orders.

While trading turnover is related to the value of securities purchased and sold within a trading day, contract turnover relates to the total value of contracts traded in derivatives markets.

F&O traders can calculate the trading turnover by considering the absolute profits from derivative transactions to ascertain tax audit applicability.

No, trade turnover is the total of the buy and sell transactions' absolute values throughout the day's trading activity.

The turnover rate in trading means the frequency with which assets are bought and sold within a specific period, reflecting the liquidity and activity in the market.