Intraday Trading Income Tax
13 February, 2023
Today, intraday trading has become a popular option for many investors looking to leverage daily market fluctuations. However, any profit you make while participating in intraday trading is subject to tax laws. To ensure that you make informed decisions while trading stocks, you need to be aware of how much tax you would have to pay and when. To learn more about the income tax on intraday trading profit in India, continue reading.
How are Assets Classified?
To understand how the shares you trade on a day-to-day basis would be taxed, you need to figure out what type of asset they would be considered. Usually, assets are classified into two categories; long-term and short-term. If you hold an asset for longer than a year, it is called a long-term asset. However, if you buy and sell an asset within a year, it will be deemed a short-term asset.
If you are a trader and are making a profit by selling long-term shares, you will be exempt from paying tax on up to ₹ 1 lakh of profit. However, the rest of your profit will be subject to tax at the rate of 10%. On the other hand, if you are earning profit from the sale of shares held for less than a year, your gains will be taxed at 15%.
To calculate the tax on intraday trading, you need to consider that it falls under the head of speculative business. Thus, gains earned via intraday trading are added to your income and taxed as per the corresponding tax slab.
How to Calculate Gains Tax?
Gains tax also falls under two categories; Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG).
Long-Term Capital Gains:
Suppose you purchase 1000 units of a company’s shares at ₹100 each on 19 November, 2022. You sell them at ₹ 300 on 19 December, 2023. Your profit will amount to ₹200,000. Thus, you will be exempt from paying tax on ₹100,000, while the remainder will be subject to LTCG at 10%.
Short-Term Capital Gains:
Let’s take the same scenario as the one mentioned above. However, instead of selling the shares in December 2023, you sell them in August 2023. The profit you earn will be taxed at 15% along with the applicable surcharge and cess as per the Income Tax Act.
How Does Intraday Trading Income Tax Work?
Now let’s get to understanding tax on intraday trading. Suppose you purchase 50,000 shares of a company today at the price of ₹150 each. You go on to sell the shares during closing hours on the same day at a price of ₹175. You will have earned a profit of ₹12, 50, 000. This profit will be added to your income, and you will be taxed according to the relevant tax bracket.
Do note that as per the prevailing tax laws, any loss you suffer during intraday trading cannot be set off against profit from long-term capital gain and short-term capital gain. It can only be set off against profit made via intraday trading.
Keeping the intraday trading taxation rules in mind helps you make informed decisions on a daily basis. You can execute trades keeping the final profit, after tax deductions, in mind to ensure you manage your capital well.
To make your intraday trading journey smoother, you can always count on the HDFC Bank Demat and HDFC Securities’ Trading Accounts. At HDFC, you can open a Demat Account, Trading Account, and Savings Account in just a few simple steps. Not only will you save time, but you can also oversee all your investments under one roof.
To open a Demat Account at HDFC Bank, click here!
Continue to learn more about Best Intraday Trading Tips Here.
*Terms and conditions apply. This is an information communication from HDFC Bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.
