Intraday Trading: -
Ø Intraday
Trading refers to a single day trading in a stock market.
Ø Traders
earn money by buying or selling stocks and derivatives on the same day
from price fluctuations at a given point of time during the operation
of the stock market.
Ø Every
intraday trade needs to be closed by the end of the day even if the
desired price has not been achieved.
Ø The
trader does not take the actual delivery of shares.
Ø Intraday
trading is not an investment but more of business-like activity. Hence
income from Intraday is considered as Business Income.
Income Head: -
Ø Income
from intraday trading is taxable under the head “Profits & Gains from
Business or Profession”.
Ø Profit from
Intraday Trading will be considered as Speculative Gain.
Ø Loss from
Intraday Trading will be considered as Speculative Loss.
Types of business income
from intraday trade: -
Ø Speculative
income– (Intraday “Equity” Trading): -
Profits made from intraday trading of equity shares are classified as
speculative income. This is so because those investing in a stock for less than
a day are presumably not investing in the company but only keen on speculating
its price volatility to turn a profit.
Ø Non-speculative
income- (Intraday “F&O” Trades): -
Profits made from intraday or overnight trading of Futures and Options are
considered to be non-speculative income. This is so because certain F&O
contracts still have a delivery clause whereby the underlying
shares/commodities exchange hands between traders on the expiry of contracts.
Computation of income from
Intraday Trading: -
Business income from
intraday trading must be clubbed with the income from all other sources to
arrive at a total income. For instance, if you made profit Rs 1,00,000
from intraday equity trading, Rs 50,000 from intraday F&O trades and Rs
10,00,000 from your salary, then your total income is Rs 11,50,000. The income tax
payable by you will be depend upon your tax slab and applicable deductions.
ITR form: -
Intraday Trader has to file
his income tax return using Form ITR-3/ITR-4.
Taxation of Intraday
Trading: -
Ø Taxpayers (traders) have the option under Income tax to declare the trading profit as per Presumptive provisions u/s 44AD or as per normal provisions.
Ø In
case of Presumptive Provisions: -
· Declare
minimum of 6% of turnover as profit from Intraday, even if the trader has
loss in actual.
· The
trader is not required to maintain regular books of accounts under
this scheme.
· Traders
having turnover up to 2 crores in a year can opt for the Presumptive
Business option.
· No
further deduction for expenses is allowed under Presumptive Business.
· Tax
will be calculated as per the slab rate on total taxable income.
· Cannot
carry forward losses if you treat your income under presumptive business
income.
Ø In
case of normal provisions: -
· The
trader can claim deductions for expenses such as Office rent, Telephone
Expense, Electricity, Internet Charges, etc, and income so derived after
considering these expenses will be the taxable income.
· Tax
will be calculated as per the slab rate on total taxable income.
· The
trader will be required to maintain books of accounts under this system.
Calculation of turnover in
case of intraday equity: -
Turnover in the case of
Intraday Trading is Absolute Turnover, Absolute Turnover is the sum total of
absolute profits and absolute losses made on daily transactions. For Example:
Mr. X buys 1,000 shares
of ABC Ltd at Rs.100. He sells the shares at the end of the day at Rs.110. Profit
= Rs.10 x 1,000 shares = Rs. 10,000/-
On the next day, he buys 200
shares of PQR Ltd at Rs.300. At the end of the day, he sells the shares at Rs.280.
Loss = Rs. 20 x 200 shares =
Rs. 4,000/-
Absolute Turnover = Rs.
10,000+Rs. 4,000 = Rs.14,000/-
Calculation of turnover in
case of intraday F&O trades: -
Turnover in the case of
Intraday F&O is the total of favourable and unfavourable differences and in
case of options premium received on sale of options to be included in turnover.
For Instance: -
if you buy 25 units of Nifty
futures at 8000 and sell at 7900, Rs.2500 (25 x 100) the negative difference or
loss on the trade is turnover.
In options, if you buy 100
Nifty 8200 calls at Rs.20 and sell at Rs.30. Firstly, the favourable difference
or profit of Rs 1000 (10 x 100) is the turnover and also premium received on
sale of option has to be considered as turnover, which is Rs 30 x 100 = Rs
3000. So total turnover on this option trade = 1000 +3000 = Rs 4000.
Applicability of tax audit:
-
Tax audit will be applicable in following cases: -
If profits from intraday is declared u/s 44AD by virtue of section 44AD(4) and profit shown is less than 6.00% and total income exceeds basic exemption limit; {Section 44AB(e) & 44AD(4)}; or
Where turnover during the year exceeds Rs. 10 crores.
|
Case |
Turnover (Rs.) |
Section 44AD(4) |
Income Shown |
Total Income |
Tax Audit |
|
1. |
75
Lakh |
Not
Applicable |
Below
6.00% |
Above
Exemption Limit |
Not
required |
|
2. |
75
Lakh |
Applicable |
Below
6.00% |
Above
Exemption Limit |
Required |
|
3. |
75
Lakh |
Applicable |
Below
6.00% |
Below
Exemption Limit |
Not
Required |
|
4. |
75
Lakh |
Applicable |
Above
6.00% |
Above
Exemption Limit |
Not
Required |
|
5. |
125
Lakh |
Applicable |
Below
6.00% |
Above
Exemption Limit |
Required |
|
6. |
125
Lakh |
Applicable |
Above
6.00% |
Above
Exemption Limit |
Not
Required |
|
7. |
125
Lakh |
Not
Applicable |
Irrelevant |
Irrelevant |
Required However,
if cash receipts and payments below 5% then not required. |
|
8. |
300
Lakh |
Not
applicable since turnover exceeds Rs. 2 Cr |
Irrelevant |
Irrelevant |
Required However,
if cash receipts and payments below 5% then not required. |
|
9. |
1100
Lakh |
Not
applicable since turnover exceeds Rs. 2 Cr |
Irrelevant |
Irrelevant |
Required |
Carry forward and set off of
intraday trading loss: -
Speculative Loss can be
carried forward for 4 years. It can be set-off against Speculative Income
only. However, to enjoy carry forward of losses, you need to file the
income tax return before the due date. Non-Speculative Loss can be carried
forward for 8 years.
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