Taxation of intraday share trading
This query is : Resolved
13 May 2014
Dear Sir, I m Sudeep From Raipur an assessee doing share trading personally. In ay 2013-14. I hv a loss of 34107 from intraday share trading. Being speculation loss Whether it should be audited? And if yes under which section? Books of ac's is required to be maintained? I hv heard that capital income and speculation income doesn't attract tax audits. Only normal business income comes under it. Also I hv admit it on my itr for carry forward without audit. And after sone time I hv received a notice u/s 143(1). In which department has added that loss of 34107 as profit under business and profesion head. And claim a demand of tax. What I hv to do? Pls clarify me thank you.
Dear Sir, I m Sudeep From Raipur an assessee doing share trading personally. In ay 2013-14. I hv a loss of 34107 from intraday share trading. Being speculation loss Whether it should be audited? And if yes under which section? Books of ac's is required to be maintained? I hv heard that capital income and speculation income doesn't attract tax audits. Only normal business income comes under it. Also I hv admit it on my itr for carry forward without audit. And after sone time I hv received a notice u/s 143(1). In which department has added that loss of 34107 as profit under business and profesion head. And claim a demand of tax. What I hv to do? Pls clarify me thank you.
13 May 2014
1. it is covered under business income
2. audit shall be applicable if the turnover exceeds Rs 1 cr or where the turnover is less than and income is less than 8% of turnover but overall income exceeds the basic exemption limit.
3. once the income is properly reported, loss will automatically be carry forwarded.
4. well without audit, you cannot claim loss 9as explained in Point 2.
2. audit shall be applicable if the turnover exceeds Rs 1 cr or where the turnover is less than and income is less than 8% of turnover but overall income exceeds the basic exemption limit.
3. once the income is properly reported, loss will automatically be carry forwarded.
4. well without audit, you cannot claim loss 9as explained in Point 2.
15 May 2014
Thanks for ur rply. BT I hv heard that its being a speculation income not come under audit. Pls clarify more in this.
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28 May 2014
Thanks for ur rply. BT I hv heard that its being a speculation income not come under audit. Pls clarify more in this
26 July 2025
Here’s a detailed explanation to clarify your queries about **taxation and audit requirements for intraday share trading losses treated as speculation business**:
---
### 1. **Nature of Intraday Trading Income/Loss**
* **Intraday trading** is considered **speculative business** under Income Tax law (because shares are bought and sold on the same day, without delivery).
* Hence, profits or losses from intraday trading are treated as **speculative business income/loss** and reported under **“Profit and Gains of Business or Profession”** in your ITR.
---
### 2. **Requirement of Audit for Speculative Business**
* **Section 44AB** of the Income Tax Act mandates tax audit if:
* Turnover of business exceeds Rs. 1 crore (Rs. 10 million) (limit enhanced to Rs. 10 crore from FY 2016-17 for certain businesses, but that may not apply here).
* Or, if turnover is less but income is less than 8% of turnover and total income exceeds basic exemption limit.
* **Speculative business is treated like any other business for audit purposes.**
* So, **if your speculative business turnover is less than Rs. 1 crore, audit is generally not mandatory**.
* But if turnover exceeds Rs. 1 crore or other criteria are met, **audit is required**.
---
### 3. **Turnover for Speculative Business**
* **Turnover for intraday trading/speculative business** includes:
* Sum of positive and negative differences in respect of all contracts of sale and purchase of shares (or securities).
* Even if net loss is reported, turnover is calculated on gross basis.
---
### 4. **Claiming Loss and Carry Forward**
* **Loss from speculative business can be carried forward for 4 years**, but only if the loss is declared in the return of income filed within due date.
* **Without audit, if audit is mandatory, the loss claim may be disallowed.**
---
### 5. **Your Case**
* You reported a **loss of Rs. 34,107** from intraday trading.
* You filed ITR without audit.
* Department added this loss back as profit and raised demand.
---
### 6. **What To Do?**
* **Check your turnover from speculative business.**
* If turnover is below Rs. 1 crore and income criteria is met, no audit needed.
* If audit is needed but not done, loss may be disallowed.
* **Respond to the notice under section 143(1)** by:
* Filing a revised return with audit report if turnover criteria met.
* Or, filing an appeal/rectification if you believe loss is correctly claimed.
* **Maintain proper books of accounts** and evidence of transactions.
---
### Summary Table
| Issue | Speculative Business (Intraday) |
| ------------------------ | ----------------------------------------------- |
| Tax Head | Business Income (Speculative) |
| Tax Audit Applicability | If turnover > Rs. 1 crore or other criteria met |
| Turnover Calculation | Sum of absolute values of gains and losses |
| Loss Carry Forward | Allowed for 4 years if return filed on time |
| Without Audit Claim Loss | Risk of disallowance if audit mandatory |
---
If you want, I can help draft a reply to the notice or help calculate the turnover for audit applicability. Would you like that?
---
### 1. **Nature of Intraday Trading Income/Loss**
* **Intraday trading** is considered **speculative business** under Income Tax law (because shares are bought and sold on the same day, without delivery).
* Hence, profits or losses from intraday trading are treated as **speculative business income/loss** and reported under **“Profit and Gains of Business or Profession”** in your ITR.
---
### 2. **Requirement of Audit for Speculative Business**
* **Section 44AB** of the Income Tax Act mandates tax audit if:
* Turnover of business exceeds Rs. 1 crore (Rs. 10 million) (limit enhanced to Rs. 10 crore from FY 2016-17 for certain businesses, but that may not apply here).
* Or, if turnover is less but income is less than 8% of turnover and total income exceeds basic exemption limit.
* **Speculative business is treated like any other business for audit purposes.**
* So, **if your speculative business turnover is less than Rs. 1 crore, audit is generally not mandatory**.
* But if turnover exceeds Rs. 1 crore or other criteria are met, **audit is required**.
---
### 3. **Turnover for Speculative Business**
* **Turnover for intraday trading/speculative business** includes:
* Sum of positive and negative differences in respect of all contracts of sale and purchase of shares (or securities).
* Even if net loss is reported, turnover is calculated on gross basis.
---
### 4. **Claiming Loss and Carry Forward**
* **Loss from speculative business can be carried forward for 4 years**, but only if the loss is declared in the return of income filed within due date.
* **Without audit, if audit is mandatory, the loss claim may be disallowed.**
---
### 5. **Your Case**
* You reported a **loss of Rs. 34,107** from intraday trading.
* You filed ITR without audit.
* Department added this loss back as profit and raised demand.
---
### 6. **What To Do?**
* **Check your turnover from speculative business.**
* If turnover is below Rs. 1 crore and income criteria is met, no audit needed.
* If audit is needed but not done, loss may be disallowed.
* **Respond to the notice under section 143(1)** by:
* Filing a revised return with audit report if turnover criteria met.
* Or, filing an appeal/rectification if you believe loss is correctly claimed.
* **Maintain proper books of accounts** and evidence of transactions.
---
### Summary Table
| Issue | Speculative Business (Intraday) |
| ------------------------ | ----------------------------------------------- |
| Tax Head | Business Income (Speculative) |
| Tax Audit Applicability | If turnover > Rs. 1 crore or other criteria met |
| Turnover Calculation | Sum of absolute values of gains and losses |
| Loss Carry Forward | Allowed for 4 years if return filed on time |
| Without Audit Claim Loss | Risk of disallowance if audit mandatory |
---
If you want, I can help draft a reply to the notice or help calculate the turnover for audit applicability. Would you like that?
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