Intraday trading in the stock market involves buying and selling stocks within the same trading day, and it is considered speculative in nature. Reporting income and loss from intraday trading in your Income Tax Return (ITR) for AY 2024-25 can be complex due to its speculative nature. This comprehensive guide will walk you through the process of reporting intraday trading income and loss, including the classification of income, the reporting process, and tax-saving strategies.

Understanding Intraday Trading Income

Intraday trading income is classified as speculative business income under the Income Tax Act. Here’s an overview:

Speculative Business Income: Income from intraday trading, where transactions are settled without actual delivery of shares.

Tax Implications: Speculative business income is taxed at normal slab rates applicable to the taxpayer.

Reporting Process

To correctly report your intraday trading income and loss in the ITR for AY 2024-25, follow these steps:

Step 1: Determine the Appropriate ITR Form

ITR-3: For individuals and HUFs having income from business or profession, including speculative business income.

ITR-4 (Sugam): For individuals, HUFs, and firms (other than LLPs) opting for presumptive income scheme under section 44AD, 44ADA, or 44AE (not applicable for speculative income).

Step 2: Maintain Proper Records

Transaction Records: Date, amount, and value of intraday trades.

Broker Statements: Details of all trades and brokerage fees.

Bank Statements: Reflecting the amount credited and debited.

Expenses: Internet charges, advisory fees, and other related expenses.

Step 3: Calculate Income and Loss

Net Speculative Business Income:

Total Profit from Intraday Trades – Total Loss from Intraday Trades – Related Expenses

Step 4: Fill in the Relevant Schedules in ITR

Schedule BP (Business or Profession):

Gross Receipts: Enter the total turnover from intraday trading.

Income Computation: Calculate net income after deducting expenses from the gross receipts.

Balance Sheet and Profit & Loss Account: Provide details of your business's financial position if turnover exceeds ₹2 crore.

Schedule CFL (Carry Forward and Set off of Losses):

Speculative Losses: Report losses that can be carried forward to offset against future speculative income.

Example: Reporting Intraday Trading Income and Loss

Mr. Mehta, an individual trader, has the following intraday trading transactions for FY 2023-24:

Profits from Intraday Trades: ₹4 lakh

Losses from Intraday Trades: ₹1.5 lakh

Related Expenses: ₹50,000

Net Speculative Business Income:

Net Income: ₹4 lakh - ₹1.5 lakh - ₹50,000 = ₹2 lakh

He will report ₹2 lakh as speculative business income in Schedule BP and provide necessary details in the Profit & Loss account.

Step 5: Verify and Submit ITR

Review all the information entered in the ITR.

Verify your ITR using Aadhaar OTP, Net Banking, or by sending a signed ITR-V to CPC, Bengaluru.

Tax-saving Tips

To minimize your tax liability on intraday trading income, consider the following strategies:

1. Claim All Eligible Expenses

Ensure to claim all expenses directly related to intraday trading, such as brokerage fees, internet charges, and advisory fees.

2. Maintain Proper Records

Keep detailed records of all transactions and expenses to substantiate your claims during tax assessment.

3. Set Off Losses

Speculative Losses: Can be set off only against speculative income.

Carry Forward: Unabsorbed speculative losses can be carried forward for 4 years.

4. Advance Tax Payment

Since intraday trading income is considered business income, ensure to pay advance tax to avoid interest penalties. Estimate your quarterly income and make advance tax payments accordingly.

Case Study Examples

Example 1:

Ms. Sharma, a salaried individual, also engages in intraday trading with the following details for FY 2023-24:

Profits from Intraday Trades: ₹5 lakh

Losses from Intraday Trades: ₹2 lakh

Related Expenses: ₹30,000

Net Speculative Business Income:

Net Income: ₹5 lakh - ₹2 lakh - ₹30,000 = ₹2.7 lakh

She will report ₹2.7 lakh as speculative business income in Schedule BP.

Example 2:

Mr. Verma, an entrepreneur, has the following intraday trading transactions for FY 2023-24:

Profits from Intraday Trades: ₹6 lakh

Losses from Intraday Trades: ₹3 lakh

Related Expenses: ₹40,000

Net Speculative Business Income:

Net Income: ₹6 lakh - ₹3 lakh - ₹40,000 = ₹2.96 lakh

Additionally, Mr. Verma can set off his speculative losses against future speculative income within 4 years.

Conclusion

Reporting income and loss from intraday trading in your ITR for AY 2024-25 requires careful documentation and understanding of tax provisions. By following the steps outlined in this guide, you can ensure accurate reporting and compliance. Maintain detailed records, claim all eligible deductions, and utilize loss set-off provisions to optimize your tax liability. Consult with a tax professional if needed to navigate the complexities of intraday trading income reporting and maximize your tax savings. This proactive approach will help you stay compliant and make the most of your intraday trading activities in the stock market.
 

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