What is Intraday Trading? Intraday trading means buying and selling shares on the same day, where no physical delivery occurs only profit or loss occurs for the net trade position, Thus trader does not keep the shares after the market closes. The main purpose is to earn profit from Difference in price movements during the trading day. For example, if a person buys 100 shares of a company at ₹500 per share in the morning and sells them at ₹510 in the afternoon, the profit is ₹10 per share. If the price falls instead, the trader incurs a loss. Intraday trading is different from short or long -term investing. In investing with delivery, shares are purchased with the intention of holding them for days, months or years. In intraday trading, the transaction starts and ends on the same day. How is Intraday Trading Taxed? Many people believe that the profit earned from intraday trading is treated like gain from selling/ buying shares as a capital gain. However, this is not correct, since no delivery of shares is taken, the Income-tax Act treats intraday trading as a speculative business activity. Therefore, the profit or loss is considered Business Income instead of Capital Gain. This means the trader has to calculate the total profit or loss from all intraday trades during the financial year and report it under the head Profits and Gains from Business or Profession (PGBP) while filing the Income Tax Return. Tax on Intraday Trading Profit The profit earned from intraday trading is added to the taxpayer’s total income. There is no special tax rate for such income. It is taxed according to the income tax slab applicable to the taxpayer. Therefore, if the total income increases because of intraday trading profits, the tax liability may also increase. What if There is a Loss? Losses are common in trading. If a person incurs a loss from intraday trading, the Income-tax Act allows the loss to be adjusted only against speculative business income of the same year. If the loss cannot be fully adjusted in the current year, it can generally be carried forward for up to 4 assessment years, provided the Income Tax Return is filed within the prescribed due date. However , if the income tax return is not filed within the due date and filed either belated return or updated return, then loss will be dead loss. The carried-forward loss can be adjusted against speculative business income in future years as per the provisions of the Act. Expenses That Can Be Claimed A trader can claim expenses that are directly related to the trading activity. Some common examples are: – Brokerage charges – Securities Transaction Tax (here allowable under the Income-tax Act) – Proportionate Internet / mobile expenses used for trading – Demat and trading account charges – Research and advisory charges – Computer or laptop expenses used for trading – Professional’s consultation expenses Only genuine business-related expenses should be claimed and proper records should be maintained to support them. Importance of Maintaining Records Every trader should maintain and keep proper records of all transactions. These records help in calculating the correct profit or loss and are useful if any clarification/ assessment is done by the Income Tax Department. The following documents should be preserved: – Contract notes issued by the broker – Trading statements – Bank statements – Ledger provided by the broker – Bills and invoices for business-related expenses Maintaining proper records also makes income tax return filing easier and more accurate. Turnover in Intraday Trading For income tax purposes, turnover in intraday trading is not the total value of shares bought and sold. Instead, turnover is generally calculated by adding together the absolute value of all profits and losses from the trades. This figure is important because it helps determine whether certain tax compliance requirements, such as a tax audit under Section 44AB, may apply. Income Tax Return A person earning income from intraday trading is generally required to report it as business income while filing the Income Tax Return. Depending on the facts of the case and the applicable provisions of the Income-tax Act, the taxpayer may also need to maintain books of account or comply with tax audit requirements. Practical Tips for Traders Before starting intraday trading, every trader should remember a few important points: – Maintain complete records of every trade. – Keep copies of broker statements and bills (preferably in excel or csv format for most accurate calculations). – Report all profits as well as losses in the Income Tax Return. – File the Income Tax Return within the due date to preserve the benefit of carrying forward eligible losses. – Seek professional advice whenever there is uncertainty regarding tax compliance. Conclusion Intraday trading offers opportunities to earn profits, but also brings tax responsibilities, since the Income-tax Act treats intraday trading as a business activity, traders must report the income correctly, maintain proper records and comply with the applicable tax provisions. Understanding these basic tax rules helps traders avoid mistakes, reduces the risk of Income Tax notices or assessments and ensures smooth tax compliance. With proper planning and timely filing of returns, traders can focus on their trading activities while fulfilling their legal obligations. Written by:- Jyoti (B.Com, CA Finalist) Reviewed by:- CA (CPA) (CS) Mandeep Singh (B.Com, M.Com F&T, CA (India), CPA (Ireland, Europe), Company Secretary
Why Filing an Income Tax Return (ITR) is Necessary Even If Income Is Low Or Nil:-
TABLE OF CONTENTS: 1.Introduction 2.What is an Income Tax Return 3. Is ITR Filing Mandatory in each and every case? 4. Benefits of Filing ITR even with Low Or Nil Income With Practical examples 5. Conclusion INTRODUCTION Many People believe that ITR Filing is compulsory only when they have taxable income (i.e. income more than basic exemption limit). Myth is that if their annual income is less than basic exemption limit i.e. Rs. Rs. 250,000 (Old Scheme) Or 4,00,000 (New Scheme), they do not require to file income tax return, but this is one of the biggest misconceptions among taxpayers because filing ITR have several financial and legal benefits even if your income is less than basic exemption limit or you have Nil income. Firstly, if you file ITR even if your income is less than basic exemption limit, it indicates that you are a responsible citizen. Besides this, filing ITR have several financial benefits such as claiming tax refunds, maintaining proof of income, creating strong credit history, improving chances of getting loans and Visa, for carrying forward of Capital Loss and certain business Losses, Showing financial records in ITR, For calculation of deferred tax asset (DTA) and deferred tax liabilities (DTL). What is an Income Tax Return (ITR) Income Tax Return (ITR) is a form that a taxpayer (Individual, Firm, company, LLP, Others) file to the Income Tax Department to report income earned during financial year, to claim deductions and exemptions under income tax act, to calculate their total tax liability, to claim refund if they have paid extra advance tax or self-Assessment Tax or have been deducted TDS or TCS on purchases. In short, we can say that ITR is a financial report card that individual and entities use to declare income and taxes paid to the income tax department during a financial year. Is ITR filing Mandatory in each and every case? No, But exact answer depends on several factors, such as whether you are an Individual, a company or a partnership firm or any other specified entity, as well as ITR filing compulsorily also depends on your total income/Turnover in case of individual, companies, firms etc. in a particular financial year. If you are a company or a firm (including LLP), it is mandatory to file income tax return even if total income is zero or Nil. However, if you are an Individual having gross total income (i.e. total income without giving effect of SECTION 82, 83, 84, 85, 86 and deductions under chapter VIII) is less than basic exemption limit than it is not mandatory to file income tax return, but there are exemptions given under Income Tax Act, 2025 under section 263(1) and rule 163 in which filing ITR is mandatory even if income is less than basic exemption limit. Section 263(1): If any person who is resident and is beneficial owner of asset located outside India or having any foreign source of income, ITR filing becomes necessary in all cases. Rule 163: Conditions to be fulfilled for compulsory filing of ITR: Benefits of filing ITR with no income or NIL income with practical examples: 1. Act as proof of income: If an individual file income tax return even if there is low income or NIL income, it serves as a proof of income. Many banks, financial institutions and embassies consider ITR as a reliable document for calculating total income. Example – A person has total income of 2,49,000 in a financial year which is below the taxable limit. Two years later, he wants to apply for personal loan from bank. In this case bank asks for last two years income tax return, since he had filed all his ITR’s on time, the loan processing become smoother. Example – Two self-employed individuals earn almost the same income. One files ITR every year, while the other never files because his income is below than basic exemption limit. When both apply for home loan, the person who filed ITR consistently will get loan easier. 3. Essential for Visa Application by Embassies: Many countries ask applicants to submit ITRs while processing visa applications. It helps embassies to consider whether person applying for visa has genuine source of income or not. 4. Strong Credit History in Cibil: When an individual wants to apply for credit card, bank asks for income tax return as a proof of income to assess financial credibility. Regularly filing of Income Tax Return also helps to increase your credit score. 5. Helps carry forward certain Losses: If an individual incur losses from business, profession, capital losses, timely filing of income tax return allow you to carry forward those losses and set off those losses against future income/gains. Example: A person earns a salary of Rs. 300,000 in a financial year which is less than basic exemption limit under new regime and he has invested some part of his salary in share market and mutual funds. He sold all these shares and has incurred a loss in this financial year. In next financial year his total salary increases and he starts falling over taxable slab limit. In this case, if he had filed ITR in the year in which he has incurred losses and had carried forward losses then he can set off that loss against next year’s taxable income. 6. For calculating Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL): Deferred tax asset and liability is computed by comparing profit as per accounting records and income as per income tax act. ITR helps to determine DTA/DTL when; * Depreciation claimed under income tax act. *Brought forward business losses and unabsorbed depreciation is calculated. * Deductions claimed under various sections. *Calculated Taxable income after all adjustments. These values are compared with accounting records to identify timing differences and determine Deferred tax asset and Deferred tax liability. Example: – Depreciation in accounting records = 1,00,000 -Depreciation allowed in ITR = 1,50,000 -Suppose, Tax rate is 30% only Since tax depreciation is higher in
Tax Planning:- Where to Invest Capital Gains
Selling a capital asset often results in a Income Tax liability. However, the Income Tax Act, 2025 provides several exemptions that allow taxpayers to reduce or even eliminate capital gains tax by investing gains or Net sale Consideration in specified assets within prescribed time limits. This article explains where you can invest your capital gains, the conditions for claiming exemption and the important provisions that every taxpayer should know. Section 82: – Capital gains on sale of Residential house property (Corresponding provision under the Income Tax Act, 1961: Section 54) Asset Transferred: Long term Residential House Property or lands appurtenant thereto Assessee: Individual/HUF Investment In: New Residential House Property Time Period for investment: ->In case of Purchase- Within 1 year before or within 2 years from the date of transfer of Original Asset ->In case of construction: Within 3 years from the date of transfer of Original Asset Quantum of Exemption: Lower of Lock in Period: 3 years. Otherwise, the long-term capital gain exempted earlier shall be reduced from the cost of acquisition of new asset. Treatment of Unutilized amount: Deposit in Capital Gains Account Scheme (CAGS) before date of furnishing the return or before due date of filing the return, whichever is earlier. If during any tax year, the assessee has exercised the option to purchase or construct 2 residential houses in India, he shall not be subsequently entitled to exercise the option for the same tax year or any other tax year i.e. for future transfers of eligible residential houses you can still claim exemption u/s 82 but you can invest only in 1 residential house. Section 83: – Capital gains on transfer of Agricultural Land (Corresponding provision under the Income Tax Act, 1961: Section 54B) Asset Transferred: Urban Agricultural Land Assessee: Individual/HUF Investment In: Agricultural Land (Urban or Rural) Time Period for investment: Within 2 years from the date of transfer Quantum of Exemption: Lower of Lock in Period: 3 years. Otherwise, the long-term capital gain exempted earlier shall be reduced from the cost of acquisition of new asset. Treatment of Unutilized amount: Deposit in Capital Gains Account Scheme (CAGS) before date of furnishing the return or before due date of filing the return, whichever is earlier. Section 84: – Capital gains on compulsory acquisition of lands and buildings of an industrial undertaking (Corresponding provision under the Income Tax Act, 1961: Section 54D) Asset Transferred: Land or building or any right in land or building forming part of an industrial undertaking belonging to assessee. Assessee: Any assessee Investment In: New Land or Building for Industrial Undertaking Time Period for investment: 3 years from the date of transfer Quantum of Exemption: Lower of Lock in Period: 3 years. Otherwise, the long-term capital gain exempted earlier shall be reduced from the cost of acquisition of new asset. Treatment of Unutilized amount: Deposit in Capital Gains Account Scheme (CAGS) before date of furnishing the return or before due date of filing the return, whichever is earlier. Section 85: – Capital gains not chargeable on investment in certain bonds (Corresponding provision under the Income Tax Act, 1961: Section 54EC) Asset Transferred: Long term Land or Building Assessee: Any assessee Investment In: Specified bonds issued by: – Time Period for investment: Within 6 months from the date of transfer of Land or Building Quantum of Exemption: Lower of Lock in Period: 5 years. Otherwise, the long-term capital gain exempted earlier shall be taxable in the year in which the asset is sold or converted into money. Treatment of Unutilized amount: Not applicable Section 86: – Capital gains in case of investment in Residential House (Corresponding provision under the Income Tax Act, 1961: Section 54F) Asset Transferred: Any Long-term Capital Asset Except Residential House Property Assessee: Individual/HUF Investment In: New Residential House Property in India Time Period for investment: In case of Purchase- Within 1 year before or within 2 years from the date of transfer, In case of construction: Within 3 years from the date of transfer Quantum of Exemption: Lower of Lock in Period: 3 years. Otherwise, the long-term capital gain exempted earlier shall be taxable in the year in which the asset is sold. Treatment of Unutilized amount: Deposit in Capital Gains Account Scheme (CAGS) before date of furnishing the return or before due date of filing the return, whichever is earlier. Capital Gains Account Scheme (CGAS) Written by:- Miss Khushboo (CA Finalist) Reviewed by:- CA (CPA) (CS) Mandeep Singh (B.Com, M.Com F&T, CA (India), CPA (Ireland, Europe), Company Secretary)
Taxation of Future and Options
Financial market offers different investment opportunities one of them is future and options. Future and options are derivative contracts and gets its value from underlying asset such as stocks, commodities (gold, silver etc.), currencies. For example: A stock is trading at Rs. 1000 We buy one future contract at Rs. 1000 A) Let’s assume stock price rises to Rs.1100 Then our gain is Rs.100 Then our loss is Rs.100 2. Options: – Options give buyer a right to buy or sell an underlying asset at a future date, but not an obligation. However, if the buyer exercises his option, it becomes an obligation for the seller. A buyer pays a premium to acquire the right. Options have two types: – For example: – We buy a call option with a strike price (deal price) = Rs. 5000 Premium= Rs.50 Lot size = 100 Total premium paid = Rs.5000 Case A – Market price = RS.6000 Now we will exercise our right Profit = (6000-5000-50)100 = Rs. 95000 Case B – Market price = Rs. 4000 Since there is a decrease in price we will not exercise our right. Therefore, our loss = premium paid only = Rs. 5000 (50*100). For example: – Current Reliance price = Rs. 3000 We buy put option Strike price (deal price) = Rs. 3000 Premium = 100 Lot size = 50 Premium paid = Rs. 5000 Case A– Market price = Rs. 2000 We will exercise our right As a result, our profit will be (3000-2000-100)50 = Rs.45000 Case B– Market price = Rs. 4000 Since there is an increase in price, we will not exercise our right Therefore, our loss = premium paid only = Rs. 5000 Nature of income: – Loss from future and options is treated as non- speculative business loss under Income tax Act from 1st April, 2006. Carry forward period: – It can be carried forward for 8 assessment years immediately succeeding the assessment year in which the loss was incurred. Set- off rules: – Miss Prachi CA Mandeep Singh