Can I adjust the loss from intraday trading against other income?: Many people directly started trading in stocks after the pandemic.

There are many new accounts that were created during the pandemic.

With this, there were many profits and losses in every Demat account.

Video Credit: Trading Fuel || Research Lab

Meaning of Intraday Trading:

  • Intraday trading is the buying and selling of stocks on the very same day.
  • It is very much different from investing.
  • In intraday trading, the intention of the trader is more important because the intention here is to make foreseeable gains based on the volatility of the shares on that very particular day.

Also Like: How are Gains from Intraday Trading Taxed?

Taxability and Reporting of intraday profits and losses:

  • All the income from the intraday trading is either a speculation gain or loss, which will come under the head of business income and not capital gains or capital losses.
  • The same is also added to other income in other heads, such as the following:
Taxability and Reporting of intraday profits and losses
Image Credit: Trading Fuel || Research Lab
  • The intraday income will then be added to the above income and then taxed as per the normal slab rates of the person.
  • When you are arriving at the income or loss from the intraday trading of stocks, you can deduct the following charges and claim them as a deduction from the business income:

Also Read: How to Check Futures and Options (F&O) Margins?

deduction from the business income
Image Credit: Trading Fuel || Research Lab

How are the losses from intraday trading disclosed?

  • Losses that will arise from intraday trading are considered to be speculation losses.
  • Such losses are also allowed to be set off only against profit from the speculation business and not against any other income as disclosed above.
  • Speculation business losses can be carried forward for up to the next four years so as to set off against future speculative income.
  • However, it will be necessary to disclose the losses if we wish to carry forward and set off the same.

Reporting of intraday profits and losses:

  • A salaried person who is engaged either in F&O or intraday shall use ITR-3 to file the return.
  • However, ITR-3 is considered to be the most complicated ITR form for taxpayers.
  • You can also use ITR-2 if you have no loss in intraday trading.
  • The ITR-2 will be used to report the short-term capital gain (STCG) as well as the salary income.
  • Here, in ITR-2, you will have to completely ignore the trading loss.
  • For ITR-3, you can report the short-term capital gain as well as salary under the appropriate head.
  • Here, even if you have incurred losses from intraday trading, you can still report a profit of more than 6% of your annual turnover and then pay the required tax.

Reporting requirements for Futures & Options (F&O):

  • Futures and options are the stock derivatives that are traded in the stock market.
  • They are a type of contract between two parties for the trading of stocks or the index at a specific price level at a future date.
  • The income or the loss from the trading in F&O transactions would be treated as a business income or loss for the purpose of taxation.
  • This also suggests that taxpayers who have made money or incurred losses in the derivatives market will have to file their income tax return either through ITR-3 or ITR-4.
  • The following is the list of the ITR forms where you will be able to show the F&O loss:

Also Read: What is EBITDA?

Reporting requirements for Futures & Options (F&O)
Image Credit: Trading Fuel || Research Lab

Conclusion:

We hope that the above blog has given you clarity about how you can adjust the loss from intraday trading against other income.
Also Like: What Are The Tax Implications On Intraday Trading?

FAQs

Answer: They can only be set off against the speculative business income made during that period.
Answer: You are not required to conduct any audit for the carry forward of losses as you are not covered under sub-section 4.
Answer: You can disclose the same in ITR-3 or ITR-4
Answer: Loss that accrues from speculative business can only be set off against the profits from the speculative business.
Answer: Intraday trading income is treated as speculative business income and is also considered as business income rather than capital gains. The business income from the speculative business will be added to your overall income and then taxed as per your tax slab rate.

Also Know: How to Make Profits in Intraday Trading?

About Us:

Trading Fuel is our blog website where we provide knowledge about finance, economics, stock market training, intraday trading, and intraday trading tips. We hope that you like our blog “Can I adjust the loss from intraday trading against other income”.

~Stay tuned with us for more such blogs~

Author

Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.