Unlike traditional investors who hold onto stocks for years, intraday traders capitalize on market volatility and aim to close all positions before the market closes each day.
Is Intraday Trading Considered Investment or Speculation?
Intraday trading is classified as speculative activity, not investment.
Since the intention is not to hold the stock for long-term growth, but to benefit from rapid price swings, income earned from intraday trades is treated as business income under the head "Income from Business or Profession" in your Income Tax Return (ITR).
What Is the Income Tax Rate on Intraday Trading?
The tax rate for intraday trading is not fixed — it depends on your income tax slab.
Since profits from intraday trades are added to your total taxable income, the applicable rate would align with your regular tax bracket (as per the income slabs under the old or new tax regime, whichever you opt for).
Can You Deduct Brokerage and Demat Charges?
Yes, you can.
When filing your income tax return for intraday trading income, you're allowed to deduct legitimate business expenses, including:
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Broker’s commission
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Demat account maintenance charges
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Internet bills used for trading
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Telephone/mobile expenses related to trading activities
These deductions help reduce your net taxable income from trading.
Which ITR Form Should You Use for Intraday Trading?
If you're an individual, including a salaried employee, and have intraday trading income (even as a side hustle), you need to file your tax return using ITR-3.
This form is specifically for those earning income from business or professional activities — including speculative income from stock trading.
What Is Long-Term Capital Gain in Stock Trading?
A long-term capital gain (LTCG) arises when you buy and hold a stock for more than 12 months, then sell it for a profit.
These are taxed differently from intraday trades. LTCG up to ₹1 lakh in a financial year is tax-free in India. Beyond that, it's taxed at 10% (without indexation benefit).
This is distinct from intraday trading, where holding is less than one day and income is speculative.
Final Thoughts
Intraday trading can be a high-reward, high-risk activity — and it’s important to understand both the tax rules and the financial risks before getting started.
If you’re diving into day trading, keep clean records of all transactions and related expenses, and consider consulting a tax professional to ensure accurate ITR filing.
Quick Recap: Key Points You Should Know
✔️ Intraday trading = buying/selling on the same day
✔️ Treated as speculative business income, not investment
✔️ Taxed according to your income slab rate
✔️ You can deduct expenses like broker fees and Demat charges
✔️ Use ITR-3 to file returns if you’ve done intraday trading
✔️ LTCG rules apply only when stocks are held for over a year
📌 Disclaimer: This blog is for educational purposes only. It does not offer investment advice or recommendations. Always consult a qualified financial advisor or tax expert before making investment or trading decisions. Past performance is not indicative of future results. Stocks are subject to market risk.
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