Intraday describes trading actions or market movements that happen within one trading session, from market open to close. It applies to stocks, forex, commodities, and cryptocurrencies, where traders buy and sell assets within the same day.
Intraday Trading Income
- Classification: Income from intraday trading is considered "speculative business income" under the head "Profits and Gains from Business or Profession."
- Applicable ITR Form: If you have business income, you must file ITR-3. ITR-1 (Sahaj) and ITR-2 cannot be used for declaring business profits.
- Compulsory Filing Requirement: Regardless of whether you make a small profit or a loss from intraday trading, you must file ITR-3 if you engage in this activity. This is essential to declare your trading as a business activity and to carry forward any speculative losses (which can be offset against future speculative profits).
STCG (Short-Term Capital Gains) is the profit earned when you sell an asset after holding it for a short duration. In India:
- For stocks, equity mutual funds & certain securities: Holding period < 12 months
- For real estate, debt funds, gold, etc.: Holding period < 36 months.
Short-Term Capital Gains (STCG) from Stocks:
Tax Treatment of STCG on Equity Shares
Short-term capital gains (STCG) from the sale of listed equity shares (where STT is paid) are taxed at:
- 15% (for transactions until July 22, 2024)
- 20% (for transactions from July 23, 2024 onwards)
This applies under Section 111A of the Income Tax Act.
Correct ITR Selection
While STCG from equity sales alone may qualify for ITR-2, you must file ITR-3 if you also have intraday trading income, as it's classified as business income.
Mandatory Disclosure of Capital Gains
Even when your total income (including STCG) falls below taxable limits, you should still file your Income Tax Return (ITR) to properly declare capital gains. This is particularly important for STCG under Section 111A, which attracts a fixed tax rate (15%/20%), as non-disclosure may lead to compliance issues.
Major Updates in ITR Forms for AY 2025-26 (FY 2024-25)
New ITR Forms Introduced
- ITR-1 (Sahaj) & ITR-4 (Sugam) now have simplified structures but with additional disclosures.
- ITR-2 & ITR-3 have expanded fields for capital gains, foreign assets, and business income.
Mandatory Disclosure of High-Value Transactions
- Cash deposits ≥ ₹1 crore in savings accounts (reported by banks via SFT006).
- Electric vehicle (EV) purchases ≥ ₹10 lakh (to claim deduction u/s 80EEB).
- Expenses on foreign travel ≥ ₹2 lakh (to check TCS compliance).
Enhanced Reporting for Capital Gains
- Separate disclosure for STCG (Equity & Non-Equity) under
- Sections 111A, 112A, 115AD.
- New field for "Zero Coupon Bonds" (taxable as per maturity value).
Cryptocurrency & Virtual Digital Assets (VDAs)
- Mandatory disclosure of crypto/VDAs (even if no trading was done).
- 30% tax + 1% TDS reporting required under Section 115BBH.
Business Income & Presumptive Taxation (ITR-4)
- Digital turnover threshold increased to ₹3 crore (for 6% presumptive tax u/s 44AD).
- Separate disclosure for UPI/QR code-based transactions.
Foreign Income & Assets (Schedule FA)
- Stricter reporting for foreign bank accounts, trusts, and crypto holdings.
- Clarity on "Residential Status" due to new tax regime changes.
FAQs
Do I have to pay capital gains tax if my total income is less than 2.5 Lakh?
If your total income, including capital gains, is below the basic exemption limit of ₹2.5 lakh, you generally won't have to pay capital gains tax.
How should I report intraday trading profits in my Income Tax Return (ITR)?
Intraday trading profits and losses should be declared as 'Business Income' under the head 'Profits and Gains from Business or Profession' (PGBP). You must file your return using ITR-3 or ITR-4 (if opting for the presumptive taxation scheme under Section 44AD). Maintain proper records of your trades, as these may be required for verification.
How can I reduce or avoid tax on Short-Term Capital Gains (STCG)?
- Offsetting Gains with Losses: Sell underperforming assets to realize short term capital losses, which can be set off against STCG.
- Holding for Long-Term: Convert short-term holdings into long-term (held for >12 months for stocks/equity funds) to benefit from lower LTCG tax rates.
- Investing in Tax-Efficient Instruments: Consider equity-linked savings schemes (ELSS) or index funds/ETFs with lower turnover to reduce taxable gains.
- Using Basic Exemption Limit: If your total income (including STCG) is below ₹2.5 lakh, no tax applies.
Under what conditions is capital gains tax exempted?
- Full Exemption: If the investment in a new qualifying asset (like a house under Section 54 or bonds under Section 54EC) is equal to or higher than the capital gains, the entire gain is tax-free.
- Partial Exemption: If the new asset's cost is lower than the capital gains, the exemption is limited to the amount invested, and the remaining gain is taxable.
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