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Taxation of Intraday Trading

03 September 2019

hii,

any one pls guide me in full how intraday on shares deal in Income tax( calculation,setoff with other income,tax rate)

thanks in advance.!

pranav

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10 Replies

sabyasachi mukherjee (27574 Points)
Replied 03 September 2019

Same as capital gains calculation.

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Pranav Aggarwal (525 Points)
Replied 03 September 2019

it is not speculative profit??

A B Kundu (Professional) (1422 Points)
Replied 03 September 2019

Intraday trading is to be treated as separate business speculative in nature. The loss incurred from such activity can't be setoff with other heads of income as well as other non speculative business income. It can only be carried forward for 4 years and adjusted with the speculative business profit.

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Pranav Aggarwal (525 Points)
Replied 03 September 2019

thanks

any basic exemption or deduction allowed for this income.

A B Kundu (Professional) (1422 Points)
Replied 03 September 2019

Originally posted by : Pranav Aggarwal
	thanksany basic exemption or deduction allowed for this income.

Just treat it like another heads of income. If you are individual then normal basic exemption limit is applicable.

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A B Kundu (Professional) (1422 Points)
Replied 03 September 2019

And, as it would be treated as Business Income , so you can deduct related expenses from such income also.

Suresh Thiyagarajan (Student) (3986 Points)
Replied 03 September 2019

1. Buying and selling of stocks from the same day will be categorized under intraday trading and such business will be considered as a speculative business for the purpose of Income-tax act.
2. The net result (gain or loss) will be treated as speculative gains or speculative loss and the same shall be set off only against same income and it will not be allowed to be set off against any other income.
3. Loss under speculative business is dealt under sec 73 and it shall be set off only against such type of income and the remaining loss will be allowed to be carried forward for a period of 4 AY immediately the AY in which the loss was incurred.
4. With respect to rate, it will be as per slab rate applicable to the assessee. If you are an individual and below 60 years of age, up to Rs.2.5 lakhs will not be taxable.
Please correct me if the above solution has an alternative view.

sabyasachi mukherjee (27574 Points)
Replied 03 September 2019

Subject : TAXATION

Title : Whether Shares Purchased/sold By Taking Physical Delivery Be Treated As Speculative Transaction For The Purposes Of Income Tax If The Company Has Any Other Source Of Income Also?

Speculative transaction is defined in section 43(5) of the Act, which says that it is a contract for purchase or sale of any commodity, including shares, which is settled otherwise than by delivery or transfer of the commodity or scrips. The exception to this being given in proviso (b) and (c) of the above said section. This implies that physical delivery of shares shall not be regarded as speculative transaction.

According to the explanation to section 73, where any part of the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads ”interest on securities”, “income from house property”, “Capital gains”, and “Income from other sources”, or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.

Let us understand the query with a few examples: -

Case A: ABC Pvt. Ltd. is a share broker company and its main source of income is from brokerage. It also does trading of shares by taking actual delivery for itself. It earns a profit on brokerage, etc. of Rs. 1000000/- and a loss on account of share trading of Rs. 800000/-. Net profit as per P&L A/c is Rs. 200000/-

Case B: PQR Ltd. is a manufacturing concern and its main source of income is from business i.e., manufacturing. It also does trading of shares by taking actual delivery. It earns a profit from manufacturing activity of Rs. 500000/- and a loss on account of share trading of Rs. 700000/-. Net Loss as per P&L A/c is a loss of Rs. 200000/-

Case C: XYZ Ltd. is a trading concern and its main source of income is from business i.e., trading of cloth. It also does trading of shares by taking actual delivery. It earns a profit from trading in shares Rs. 500000/- and a loss on account of trading in cloth of Rs. 700000/-. Net Loss as per P&L A/c is a loss of Rs. 200000/-

It is clear that all the three companies have main source of income from ‘Income under the head Business’ hence the exceptions to explanation to section 73 is not applicable.

All the companies have two businesses one of them being trading in shares by taking physical delivery. As per section 43(5) purchase / sale of shares by taking physical delivery is not speculative transaction, hence ABC Pvt. Ltd. shall have to pay tax on Rs. 200000/- and PQR Ltd. and XYZ Ltd. shall not pay any tax and shall be allowed to carry forward the loss of Rs. 200000/- to be set off in next 8 years.

But this is not Correct. Because profit/losses from two businesses are to be adjusted intra head as per section 70 to section 80 of the Income Tax Act, 1961. Explanation to section 73 is a deeming provision, the question whether the transaction is speculative transaction in terms of section 43(5) or not is irrelevant in this case. Even if a transaction is not speculative because it satisfies the condition of physical delivery stipulated in section 43(5), the transaction will have to be regarded as a speculative transaction as it is a part of the business of the purchase and sale of shares by a company, which does not fall into the expected categories mentioned in Explanation to section 73.

Hence in all the three the cases the trading in shares shall be treated as speculative transactions.

In case A income tax shall be charged on Rs. 1000000/- and loss of Rs. 800000/- shall be carried forward to be adjusted against speculative income in next 8 years. In case B the income tax shall be charged on Rs. 500000/- and loss of Rs. 700000/- shall be carried forward to be adjusted against speculati

Kapadia Pravin (17259 Points)
Replied 03 September 2019

Trading in shares is a business income. It is not speculative business income.
And hence set off of intra-head profit & loss is available and the result will be net business income.

Whereas intra-day trading is speculative business income and it is independent from business income.

While showing (item 65 of ITR3) speculation profit or Loss , you have to fill turnover figure also