Intra-day trade along with investment in shares

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This discussion clarifies the tax treatment of intra-day share trading versus long-term share investments. Intra-day trading is considered speculative business income and does not qualify for Section 44AD. Shares held as investments are treated separately. The turnover for speculative activity is calculated as the aggregate of positive and negative differences for each scrip, with the net profit being the taxable income.

Neeraj Sharma

Neeraj Sharma (Querist)

08 June 2020 An Advocate, who usually invest some of his savings in shares performs some intra-day trades only on 2 days in F.Y. 2019-20. My question is how will he treat his intra-day trading activity for the purpose of income tax:

1)Will intra-trading done on 2 days be a part of speculation business? If yes, then can he file his return under 44AD? What will be the turnover in case of speculation activity? Will shares purchase and sold during the year as an investment will also be part of the turnover?

2)Will it be right for the purpose of income tax if he shows his income from day trading as speculation business income and show shows short term capital gain on sale of shares he held as investments?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

08 June 2020 1 yes, intra day trading is speculative and 44AD not available. Shares purchase and sale will not form part.
2 It will be right for the purpose of income tax if he shows his income from day trading as speculation business income and show short term capital gain on sale of shares he held as investments.

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Neeraj Sharma

Neeraj Sharma (Querist)

10 June 2020 thankyou sir for your expert advice. But, I have one more question that, how will be the computation on income,
(i) will we consider total of purchases reduced by total of sales as income? or,
(ii) will we consider the aggregate of both positive and negative differences of each scrip as the turnover (as given in the "Guidance Note on Tax Audit under Section 44AB of the Income Tax Act,1961"). If yes, then in such case what will be the income?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

10 June 2020 Consider the aggregate of both positive and negative differences of each scrip as the turnover (as given in the "Guidance Note on Tax Audit under Section 44AB of the Income Tax Act,1961").
Net of positive and negative will be income.

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