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How Gains from Intraday Trading are Taxed

6 Mins 11 Nov 2021 0 COMMENT


Assets are classified into two categories. If you hold an asset for longer than a year, it is called a long-term asset. If you buy and sell an asset within a year, it is a short-term asset.

If you are a trader, and make a profit on selling long-term shares, you are exempted from paying tax on up to Rs. 1 lakh of profit earned. However, you will be taxed at 10% on the remaining profit. On the other hand, if you profit from the sale of shares held for less than a year, your gains are taxed at 15%.

Intraday trading comes under speculative business. Your gain from intraday trading is added to your income and taxed as per the relevant tax slab. Let’s assume that you earn an income of Rs. 15 lakhs per annum, and a profit of Rs 5 lakh from intraday trading. In this case, your total taxable income becomes Rs. 20 lakhs. This is taxed as per the applicable tax slab rate.

Here’s an example on how to calculate tax for all relevant scenarios:

Long-term capital gain (LTCG):

You buy 1000 shares of XYZ co at Rs. 500 each on August 3rd 2021 and sell them at Rs. 650 each on September 3rd 2022. Your profit will be (1000*650-5,00,000) = Rs. 1,50,000. For LTCG, you are exempted from paying tax on Rs. 1 lakh and will be charged 10% on the remaining Rs. 50,000, along with surcharge and cess.

Short-term capital gain (STCG):

In this scenario, you buy 1000 shares of XYZ co at Rs. 500 each on August 3rd 2021. You sell them each at Rs. 650 on December 3rd, 2021. Here your profit of Rs. 1,50,000 will be charged at the rate of 15%. Additionally, the applicable surcharge and cess as per the Income Tax Act will be charged.

An interesting point to note is that according to the Income Tax Act, Long-Term Capital losses can only be set off against long-term capital gains. Similarly, Short-Term Capital losses can only be set off against short-term capital gains. You can carry forward the loss for eight assessment years immediately following the assessment year in which the loss was first computed.

In day trading:

You buy 50,000 shares of XYZ co today at Rs. 150 each and sell all 50,000 shares during market-closing hours at a price of Rs. 175. Then, the gain of (50000*175- 50000*150) =Rs. 12,50,000 is added to your income and taxed according to the relevant income tax slab.

As per income tax rules, your loss from day trading cannot be set off against profit from long-term capital gain and short-term capital gain. It can only be set off against profit from day trading.


As a day trader, you would be aware of the risks arising from market volatility. Hence, it is important to understand how taxation works in day trading. This then enables you to make the right decisions to gain as much as possible after tax deductions.


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