Earning profits from intraday trading feels rewarding until tax season arrives and confusion takes over. Many discover too late that short-term trades aren’t taxed like regular investments, leading to errors in filing and unexpected tax liabilities. With over 11 crore active traders registered on NSE as of 2025, understanding how intraday income is treated under Indian tax law is more important than ever. This blog discusses the rules of income tax on intraday trading to make sure you file your returns accurately and confidently.
What Is Intraday Trading from a Tax Perspective?
Intraday trading is the simple process of buying and selling securities within the same day without taking delivery, classified as speculative business under Section 43(5) of the Income Tax Act. Profits qualify as business income, not capital gains, taxed at slab rates. Losses set off only against speculative gains and carry forward up to four years.
How Intraday Income Is Categorised under Income Tax
Intraday trading income is categorised under the Income Tax law of India in the following manner:
Intraday Trading as Business Income (Not Capital Gains)
According to the Income Tax Act, 1961, specifically Section 43(5), intraday trading (where positions are squared off on the same day without delivery) is not considered investing. Therefore, the income generated is categorised as Speculative Business Income. It is strictly treated as “Profits and Gains of Business or Profession” (PGBP) and not “Capital Gains.” Income tax on intraday trading thus mandates slab-rate taxation without capital gains treatment.
Section 43(5) excludes intraday from capital assets under Section 2(14), as no ownership transfers, classifying it as speculative business activity. Delivery-based trades attract capital gains (STCG/LTCG) per Section 45, but intraday routes solely to PGBP. This denies capital gains benefits like indexation or exemptions.
Tax Rules for Intraday Trading
The applicable income tax on intraday trading in India is governed by set of rules, which includes:
- Taxation applies slab rates to net PGBP after allowable deductions like brokerage, advisory fees, internet, and depreciation on computers; STT, GST on brokerage is deductible indirectly as costs, but stamp duty non-deductible.
- Advance tax is mandatory if total liability exceeds ₹10,000, paid in instalments: 15% by June 15, 45% by September 15, 75% by December 15, 100% by March 15.
- Books of accounts required under Section 44AA if the income is higher than ₹2.5 lakh (business) or turnover is greater than ₹25 lakh without presumptive opt-in, including cash book, ledger, and trade vouchers.
- Speculative losses set off exclusively against speculative gains the same year; carry forward up to 4 assessment years per Section 73, mandating ITR filing by Section 139(1) due date (31 July/31 October).
- ITR-3 mandatory for non-presumptive traders, capturing details in Part A (trading summary) and Schedule BP; presumptive uses ITR-4 with deemed income declaration.
- Tax audit under Section 44AB if turnover is greater than ₹10 crore (95% digital receipts applicable to intraday).
These intraday trading tax rules ensure transparency, with penalties for non-compliance up to 0.5% of turnover for audit defaults. Income tax on intraday trading demands meticulous record-keeping via broker statements.
What Is Intraday Turnover?
Intraday turnover aggregates the absolute value of profits and losses from all trades in a financial year, crucial for audit applicability and presumptive taxation eligibility. Unlike delivery trades using sale value, intraday excludes net profit/loss, summing positive and negative differences to reflect trading volume. This applies scrip-wise (per stock) or trade-wise, with trading being 100% digital aiding higher audit thresholds up to ₹10 crore.
This calculation is vital because it determines whether you are required to get your accounts audited under Section 44AB.
How to Calculate Turnover for Intraday
To calculate your intraday turnover correctly for tax audit purposes, you must sum the absolute value of every trade’s result, ignoring the negative sign on losses.
Formula:
Intraday Turnover = Absolute Profit + Absolute Loss
For example, if you buy shares for ₹1,00,000 and sell them for ₹1,05,000, your profit is ₹5,000. If you buy shares for ₹50,000 and sell for ₹45,000, your loss is ₹5,000.
For a normal investor, the net position might be zero (₹5,000 Profit – ₹5,000 Loss). However, for tax turnover calculations, you do not net them off. You add the absolute profit (5,000) to the absolute loss (5,000) to arrive at a turnover of ₹10,000. This method reflects the volume of risk and activity undertaken by the trader rather than just the final financial outcome.
Tax Rate Applicable on Intraday Trading
Intraday trading income does not enjoy the concessional tax rates provided to capital gains. Instead, it is treated as normal business income and taxed based on the personal income tax slabs chosen by the trader (New Regime or Old Regime). This means your trading profit is clubbed with other income sources like salary or interest to determine the final tax liability.
The rates applicable to income tax on intraday trading are based on the individual’s total income slab such as follows:
| Income range | New tax regime (FY 2025-26/AY 2026-27) | Old tax regime (FY2025-26/AY 2026-27) |
| ₹0 – ₹2,50,000 | Nil | Nil |
| ₹2,50,001 – ₹4,00,000 | Nil | 5% |
| ₹4,00,001 – ₹5,00,000 | 5% | 5% |
| ₹5,00,001 – ₹8,00,000 | 5% | 20% |
| ₹8,00,001 – ₹10,00,000 | 10% | 20% |
| ₹10,00,001 – ₹12,00,000 | 10% | 30% |
| ₹12,00,001 – ₹16,00,000 | 15% | 30% |
| ₹16,00,001 – ₹20,00,000 | 20% | 30% |
| ₹20,00,001 – ₹24,00,000 | 25% | 30% |
| Above ₹24,00,000 | 30% | 30% |
How STT, GST, and Brokerage Affect Taxable Income
Since intraday trading is classified as a business, Section 36 of the Income Tax Act allows you to claim all direct intraday trading charges incurred to earn that income as a deduction. This is a major advantage over Capital Gains, where Securities Transaction Tax (STT) is strictly not deductible.
For a business entity (including an individual trader), expenses such as Brokerage, GST on Brokerage, STT, exchange transaction charges, and internet/software costs are treated as “expenses.” You pay tax only on the “Net Profit” (Gross Profit minus Expenses).
Brokerage and the 18% GST qualify as direct business expenses under Sections 28-37, subtracted from gross trading profits; STT at 0.0025% on sell side remains non-deductible per Section 36(1)(ii) post-2015 amendment, treated as application of income. Stamp duty (0.015% buy side) and SEBI fees are also non-deductible.
Audit Rule for Intraday Traders
Intraday traders are legally obligated to undergo a tax audit as per the Income Tax of India if their trading turnover or declared profits trigger specific statutory criteria:
- When Audit Is Mandatory Under Section 44AB
Tax audit under Section 44AB is compulsory for intraday traders whose business turnover or declared profits breach specified limits, which include enhanced digital thresholds and presumptive scheme conditions as follows.
- Turnover exceeds ₹10 crore where 95% or more receipts/payments are digital (fully applicable to intraday via electronic platforms, up from ₹1 crore cash-based); lower ₹1 crore if cash dominant.
- Declared income falls below presumptive rate, 6% for digital receipts or 8% otherwise of turnover after opting out of Section 44AD, provided total income > basic exemption limit.
- Books of accounts maintenance obligatory under Section 44AA if business turnover > ₹25 lakh or profession income > ₹2.5 lakh without presumptive taxation, with audit verifying compliance.
- Audit report in Form 3CD must precede ITR filing: by 31 October for individuals (AY 2026-27), 30 September for companies; non-filing attracts 0.5% monthly penalty on turnover excess u/s 271B.
Presumptive Taxation for Intraday Traders (Section 44AD)
Section 44AD provides presumptive taxation relief for small intraday traders, deeming taxable income at 6% of turnover for 95%+ digital receipts, up to ₹3 crore (₹2 crore non-digital), exempting detailed books and audit requirements, with eligibility criteria and rules as follows.
- Applicable to individuals, HUFs, partnership firms (excluding LLPs/professionals) with total turnover ≤ ₹3 crore if predominantly digital, treating intraday as eligible business.
- Taxpayers must declare at least presumed profit rate; actual lower profits disallowed, ensuring minimum revenue to the exchequer.
- Continuous availing for 5 years mandatory; opting out with profits < presumed rate in any year bars scheme for next 5 years, preventing cherry-picking.
- Single advance tax instalment by 15 March covering 100% liability; no quarterly splits, simplifying cash flow.
ITR Form to File for Intraday Trading
Since intraday trading is classified as a business, you cannot use ITR-1 (Sahaj) or ITR-2, which are meant for salaried individuals and capital gains respectively.
- ITR-3: This is the standard form for individuals and HUFs having income from “Profits and Gains of Business or Profession.” If you are maintaining books of accounts, declaring actual profit/loss, or subject to a tax audit, you must file ITR-3.
- ITR-4 (Sugam): This form is applicable only if you are opting for the Presumptive Taxation Scheme under Section 44AD (declaring >6% profit on turnover < ₹3 Cr). It is a simpler form requiring fewer details than ITR-3.
Carry Forward of Intraday Losses
Speculative business losses from intraday trading can only be set off against speculative profits in the same assessment year under Section 73, with carry forward allowed up to four succeeding assessment years exclusively against future speculative gains, subject to strict filing timelines. ITR must be filed by the due date u/s 139(1), 31 July (non-audit) or 31 October (audit) or losses lapse entirely; belated returns ineligible. Non-set-off portion auto-adjusts via Schedule CFL in ITR-3, limited to PGBP-speculative head, barring offset against salary, house property, or capital gains.
Final Conclusion
Treating your market moves as a structured business is important for long-term growth. Beyond chasing profits, maintaining clean records and seeking professional advice prevents future complications. Effectively managing income tax on intraday trading not only ensures compliance but also protects your capital, allowing you to focus entirely on your strategies and financial goals without any second thoughts.
FAQs
Yes, intraday trading is taxable as Speculative Business Income under Section 43(5) of Income Tax Act. Classified as PGBP, not capital gains. Taxed at slab rates after deducting brokerage, internet costs. STT non-deductible.
Intraday profits are taxed as business income at slab rates (new or old regime). Turnover equals absolute profit plus loss values. Deduct brokerage, GST on brokerage, but not STT. Advance tax required if liability exceeds ₹10,000, paid in instalments.
Intraday losses are speculative business losses, deductible only against speculative gains in the same year. Excess losses can be carried forward up to 4 assessment years against future speculative profits, provided ITR is filed by the due date.
Yes. ITR-3 for regular traders maintaining books. ITR-4 for presumptive taxation (6-8% deemed profit up to ₹3 Cr turnover). Mandatory if income is greater than exemption limit or losses to carry forward.
Tax audit under Section 44AB is mandatory if turnover exceeds ₹10 crore (95% digital receipts) or declared profits are below 6%/8% of turnover after presumptive opt-out. Form 3CD required by 31 October; penalty 0.5% of excess turnover for non-compliance.
