Income from intra-day trading is considered as speculative income and taxed as per standard slab. Section 43(5) of the Income Tax Act, 1961, deals with speculative transaction. It states that a transaction of purchase or sale of a commodity including stocks and shares settled otherwise than by actual delivery or transfer of the commodity or scrip is a speculative transaction. In intra-day trading in shares, there is no actual delivery as the shares enter and exit from the trading account on the same date and it does not enter the demat account at all.

Many salaried who get stock options from their company sometime end up with doing a day trading even without knowing. For instance; an employee exercises his stock options on the date of vesting and without holding it, he sales at the same time. For him, it just a conversion of stock option into cash, but in actual he does both buy (i.e. exercise of options) and then sale those options on the same day. In this case not only he incurs tax as perquisite by exercising the options, but also gets into speculative income for which he will have to pay tax as per his tax slab. Hence, intraday trading in shares for a salaried employee will also be treated as speculative business.

However, if shares are purchased on a particular day and are sold the next day, it is not treated as a speculative business. The profit or loss on sale of such shares is taxed as short-term capital gain. Now you should know the diffrent  rules applicable to the time frame for holding periods for the stock listed in recognised stock exchange in India and stock not listed in India (both Forgien Company & Indian Company).

Read: Some common queries on ESOP being answered!

Read: Know all about Employee Stock Option Plan (ESOP), its Taxation & Tax Planning

Also, Section 73 mentions that loss from speculative business can only be set off against profit from such kind of business.

  1.  As per Section 43 of the Income Tax Act, it is a speculative business.
  2. The income will be computed normally & taxed as per standard rate slab.
  3. Any amount paid towards STT paid shall be allowed as deduction.
  4. Loss, if any can be set off only against another speculative business.
  5. Loss which is not set off can be carried forward for 4 Assessment Years and can be set off only against speculative business.

Do you have any questions? Let me know in the comment section.

What is Speculative Income & what is the Tax Treatment?

20 thoughts on “What is Speculative Income & what is the Tax Treatment?

  • July 6, 2016 at 6:56 PM
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    Is audit mandatory for such Speculative Income or loss?

    Reply
    • March 25, 2017 at 10:56 AM
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      Hi Arvind,

      Since Speculative losses aren’t business losses, thus audit is not mandatory.

      Reply
  • August 20, 2016 at 12:03 PM
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    its very useful sir but what about F&O share trasaction. is that comes under PGBP or what else

    Reply
    • March 25, 2017 at 11:00 AM
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      Hi Vidya,

      Yes! it will come under PGBP (Profits and Gains of Business or Profession).

      Reply
  • January 3, 2017 at 5:58 PM
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    Hi, I want to pay tax on my intraday profit from shares trading. Can you please guide me whether STT paid can be deducted from the profit or not.

    Like if the Tax is around 12000 but I have paid STT as 5000, how much tax do I need to pay? Will it be 12000 or 7000(after deducting STT)

    Please advise.

    Reply
    • March 25, 2017 at 11:03 AM
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      Hi Nikhil,

      Sorry for late reply. Yes, STT paid will be treated as expenses that can be adjusted with gains. In your case, Rs. 7,000 will be net gains.

      Reply
  • March 11, 2017 at 10:57 PM
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    Sir, I had loss in intrday trading worth Rs. 5 lacs. Now, what tax amount I have to pay?

    Reply
    • March 25, 2017 at 10:40 AM
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      Hi Ravi Kumar,

      No tax to be paid for the losses, but you should declare these losses while filing ITR so that you can carry them forward to set off through future speculative income and can be carried forward up to four assessement years.

      Reply
  • March 30, 2017 at 2:41 PM
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    dear sir i earned 396000 purely intraday trading in equity…pls tell me hou much tax i have to pay

    my STT 18000 BROKARAGE 55000

    PLS REPLY AS EARLY AS POSSIBLE

    Reply
    • April 2, 2017 at 7:26 PM
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      Hi Deepak,

      Here net income from intraday trading would be Rs. 3,23,000 (after deducting STT & Brokerage as expenses). With this your tax liability would be 2,369 (including cess) as per tax normal slab (assuming you have no other income) for the AY 2017-18. Let me know if there is additional income or other input to be considered.

      Reply
  • May 30, 2017 at 10:13 AM
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    Dear Sir,
    If an assessee has both Short Term Capital Gain and Speculative loss how to treat the same in ITR? Short term capital gain in Capital Gain Schedule, but what about the Speculative loss? Where to show? In P & L A/c Speculative loss or in Short term Capital gain itself? As it is a speculative loss the same to be carried forward to next 4 Assessment years. Guide me.

    Reply
    • June 3, 2017 at 9:13 PM
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      Hi Vani,

      It can not be shown as capital loss, but under speculative loss only as Profit & Gains from Speculative Business . Such losses will be allowed carry forward for 4 assessment years.

      Reply
  • June 7, 2017 at 2:12 AM
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    I have incurred intraday loss of Rs. 40,000/- including STT.

    May i also claim my internet expense ?
    I was getting stipend too , if i am not wrong i ja have to File ITR 4 . But, still ITR 4 is not approved.

    What should i do?

    Reply
    • June 16, 2017 at 7:10 AM
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      Hi Gurmeet,

      You can only claim expenses related to trading transactions. For intraday profit/losses ITR 4 is applicable.If ITR is not processes, then you need to submit Grievance through you income tax login account.

      Reply
  • June 7, 2017 at 2:14 AM
    Permalink

    I have incurred intraday loss of Rs. 40,000/- including STT.

    May i also claim my internet expense ?
    I was getting stipend too , if i am not wrong i have to File ITR 4 . But, still ITR 4 is not approved.

    What should i do?

    Reply
    • June 16, 2017 at 7:11 AM
      Permalink

      Hi Gurmeet,

      You can only claim expenses related to trading transactions. For intraday profit/losses ITR 4 is applicable.If ITR is not processes, then you need to submit Grievance through you income tax login account.

      Reply
  • June 24, 2017 at 5:36 PM
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    Sir,
    I have made a speculative income of Rs 52000 and short term capital loss of 5700 . I have no other income. should i file income tax return or pay tax?

    Reply
    • June 27, 2017 at 7:21 AM
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      Hi Raj,

      Yes, you should file ITR. Of course you will have no tax liabilities to pay, but at least your short term capital loss will become eligible to carry forward for next 8 assessment years.

      Reply
      • June 30, 2017 at 9:27 PM
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        Thank you Sir. Is it compulsory to file ITR if i am not carrying forward short term capital loss to the next years?

        Reply
        • July 11, 2017 at 8:14 AM
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          Hi Raj,

          You can ignore, if you don’t wish to carry it forward. But showing these transactions are required to avoid future queries from ITD in case of high value transactions.

          Reply

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