Investments
The blog explains how intraday trading profits are taxed in India, including the classification of assets, the calculation of long-term and short-term gains, and the specific tax implications for intraday trades. It also provides guidance on managing tax liabilities effectively and offers insights on using HDFC Bank’s services for a smoother trading experience.
Today, intraday trading has become a popular option for many investors looking to leverage daily market fluctuations. However, any profit you make while participating in intraday trading is subject to tax laws. To ensure that you make informed decisions while trading stocks, you need to know how much tax you would have to pay and when. To learn more about the income tax on intraday trading profit in India, continue reading.
To determine the tax on shares you trade daily, you first need to classify them as either long-term or short-term assets. Shares held for over a year are considered long-term, while those bought and sold within a year are short-term.
For long-term shares, you are exempt from tax on gains up to ₹1.25 lakh. Any profit above this threshold is taxed at 12.5%. Conversely, gains from short-term shares are taxed at 20%.
Intraday trading is treated as a speculative business. Consequently, gains from intraday trades are added to your overall income and taxed according to your applicable income tax slab.
Gains tax is divided into two categories: Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG).
If you buy 1,000 company shares at ₹100 each on 10 August 2024 and sell them at ₹300 each on 19 December 2025, your total profit is ₹200,000. You will be exempt from tax on the first ₹1,25,000 of this profit. The remaining ₹75,000 is subject to LTCG tax at 12.5%.
Using the same example, if you sell the shares in December 2024 instead, your profit will be considered short-term. In this case, it will be taxed at 20%, plus any applicable surcharge and cess, as per the Income Tax Act.
Consider this scenario: you buy 50,000 shares of a company at ₹150 each and sell them on the same day at ₹175 each, making a profit of ₹12,50,000. This profit will be added to your total income and taxed according to your applicable income tax bracket.
Remember, losses from intraday trading cannot be offset against profits from long-term or short-term capital gains. They can only be offset against other intraday trading profits.
Being aware of these taxation rules helps you make more informed trading decisions and manage your capital effectively by considering the impact of taxes on your final profits.
You can always count on the HDFC Bank Demat and HDFC Securities’ Trading Accounts to make your intraday trading journey smoother. At HDFC, you can open a Demat Account, Trading Account, and Savings Account in just a few simple steps. Not only will you save time, but you can also oversee all your investments under one roof.
To open a Demat Account at HDFC Bank, click here!
Continue to learn more about the Best Intraday Trading Tips Here.
*Terms and conditions apply.
This is an information communication from HDFC Bank and should not be considered as a suggestion for investment. Investments in the securities market are subject to market risks; read all the related documents carefully before investing. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.