01 August 2024
Intraday gains and losses are treated differently from other types of capital gains, such as those from delivery-based trading. Here's how you should handle intraday trading income and losses in your Income Tax Return (ITR) filing:
### **1. **Intraday Trading Income in ITR Forms:**
**Intraday trading gains/losses are categorized as "Business Income" rather than "Capital Gains"**. This is because intraday trading is considered a speculative activity, and the income or loss from such activities falls under the category of business income. Therefore, it should not be reported under "Capital Gains" in the ITR forms.
### **2. **ITR Forms for Intraday Trading:**
**ITR 2**: - **Not Suitable**: ITR 2 is used for individuals and HUFs who have income from salary, house property, capital gains, and other sources, but it does not include business income or speculative income from intraday trading.
**ITR 4**: - **Suitable**: ITR 4 is appropriate for individuals and HUFs who are engaged in a business or profession and have income from a profession or business, including speculative business income. - **Where to Enter**: You should file ITR 4 if you have intraday trading income. In ITR 4, you would report your intraday trading gains or losses under the "Business or Profession" section, specifically in the "Income from Business or Profession" sheet.
**ITR 3**: - **Alternative Option**: ITR 3 is another option for individuals and HUFs having income from business or profession. It includes a section to report business income and is also suitable for those with intraday trading gains or losses.
### **3. **Filing Process:**
- **Filing ITR 4**: - **Step 1**: In the ITR 4 form, go to the "Income from Business or Profession" section. - **Step 2**: Fill in the details of speculative income in the appropriate section under “Income from Speculative Business”. - **Step 3**: Provide details of your trading activities, such as turnover, profits/losses, and other relevant information.
- **ITR 2**: - If you mistakenly file ITR 2 for speculative income, it may not capture your business income appropriately, and you may not be able to claim the correct deductions or accurately reflect your income.
### **4. **Filing Method:**
- **Online Filing**: You can file ITR 4 online through the Income Tax e-filing portal. Make sure to select the correct form (ITR 4) and fill in all the necessary details related to your speculative income.
- **Offline Filing**: If you prefer offline filing, you can download the ITR 4 form from the Income Tax website, fill it out, and submit it manually. Ensure that all the details related to your intraday trading income are accurately reported.
### **Summary:**
- **Intraday Trading Income** should be reported as "Business Income" and not as "Capital Gains". - **ITR 4** is the correct form to use for reporting intraday trading gains or losses. - **ITR 2** is not suitable for reporting speculative income; it should be used for other types of income such as salary, capital gains, and other sources.
Make sure to consult with a tax professional or Chartered Accountant if you have any doubts or need assistance in filing the correct ITR form.
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