Taxation of intraday trading gains

A share can be held either as a capital asset or a trading asset (stock-in-trade). Understanding the difference between the two is important since taxation laws differ for both of them.

1. Capital Assets

For the purpose of taxation, let’s look at how the tax laws define capital assets:

“As per Section 2 – Subsection 14 of the Income Tax Act, 1961, a capital asset includes property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions.”

2. Trading Assets or Stocks-in-Trade

Gains earned from intraday trading are treated as business income. It is added to your salary and taxed according to the income tax slab you fall in. So if you’re wondering that intraday trading taxable under which head, the answer is business income.

Gains earned from long term investing are treated differently. Your shares are then considered as capital assets.

Based on the classification, your income will be divided into the following types:

1. Capital Assets

      1. Long Term Capital Gain (LTCG) and Loss

      2. Short Term Capital Gain (STCG) and Loss

2. Trading Assets

      1. Speculative Business Income

      2. Non-Speculative Business Income

Since we are talking about taxation for intraday trades, let’s look at income from trading assets in detail, i.e. speculative and non-speculative business income.

Speculative Business Income

Intraday transactions are speculative in nature and hence, the income from these trades is called speculative business income. Income tax on intraday trading profit in india comes under this category. There is no separate speculative income tax rate in India as it is taxed according to your income tax slab.

Non-Speculative Business Income

All share transactions that are not speculative in nature fall under the category of non-speculative transactions. These include delivery-based equity trades, equity futures and options, commodity trades (both delivery and futures/options), and currency trades (both delivery and futures/options). Hence, the income from these transactions is called non-speculative business income.

Tax Rules on Intraday Trades

Both speculative and non-speculative business incomes are added to your overall income including salary, other business income, interest on deposits, income from rentals, etc. and taxed according to the applicable.