The taxation of any profits made in intraday trading is a commonly questioned subject by rookie intraday traders. Intraday trading is defined as squaring off positions on the same day. If you are new to intraday trading and have just recently created an account, it is critical that you grasp intraday trading tax and its ramifications.
When someone invests, the transaction might result in long-term or short-term capital gains, depending on how long the security is kept. Long-term investing is defined as holding a stock for more than a year, whereas short-term investing is defined as holding a stock for less than a year. Where securities transaction tax is applicable, long-term capital gains of more than Rs 1 lakh on the sale of equity shares or units of equities-oriented funds are taxed at 10%, while short-term capital gains are taxed at 15%.
Whether the item in issue is a capital asset or a trading asset is a key factor that separates an investor from a trader. Over the course of a year or longer, capital assets produce revenue. An individual's trading assets are securities that he or she buys and sells in order to profit.
Your trading asset might bring either speculative or non-speculative company revenue. A speculative transaction, according to Section 43 (5) of the Income Tax Act of 1961, is one that is "periodically or eventually resolved other than by the actual delivery or transfer of the commodity" Intraday trading is classified as speculative under this criteria, and profits earned from it are classified as speculative business revenue.
Gains from delivery-based trading are classified as non-speculative business income. Futures and options, commodities, and money are examples of these. Hedging contracts for stocks and shares are deemed non-speculative since they are engaged to safeguard against the loss of holdings due to market fluctuations.
If you profited from intraday trading, your income is deemed business income rather than capital gain, as previously stated. This means that the profits are added to your total income, which includes your wage and other sources of income such as dividends and interest, and then taxed at the slab rate.
Any loss from a speculative company can only be countered by speculative business revenues. Unlike losses from other companies, which may be deducted from earnings, this loss cannot be deducted from the profits of any firm. Furthermore, a loss from a speculative company that is carried forward to the next year may only be offset against the profit from that firm in the year after the carried forward year. As a taxpayer, you may carry over a loss from intraday equities stock trading for up to four assessment years from the year in which the loss occurred.
Intraday trading revenue from stock transactions is considered speculative business income rather than capital profits. A speculative business's business income is added to your total income and taxed at your tax slab rate. If you have an intraday trading account, keeping track of your profits or losses might help you determine your intraday trading tax due.
Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account | Upcoming IPO | LIC IPO