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How to Save Tax on Intraday Trading in India: A Comprehensive Guide
Intraday trading, a popular form of investment in India, involves the buying and selling of stocks within a single trading day. While this method can yield considerable profits, it’s essential to note that these earnings are subject to income tax. This article provides a comprehensive guide on how to save tax on intraday trading in India.
How To Save Tax On Intraday Trading Complete Guide Profits Loss
What is Intraday Trading?
Intraday trading refers to the purchase and sale of stocks within one trading day. Traders profit from the price fluctuations of the stocks during the day, without holding any stocks overnight.
Taxation on Intraday Trading in India
The profits from intraday trading are considered business income and are taxed according to the trader’s income tax slab2. Since no actual delivery of stocks occurs, the income is classified as speculative business income.
How to Save Tax on Intraday Trading in India
1. Claim Business Expenses
Traders can claim expenses related to their trading activity as business expenses. These could include internet charges, telephone bills, advisory fees, depreciation on computers, and more.
2. Invest in ELSS
Equity Linked Saving Schemes (ELSS) are mutual funds that not only provide tax benefits but also help grow your money. Investments in ELSS are eligible for deduction under Section 80C of the Income Tax Act.
3. Pay Advance Tax
Intraday traders are required to pay advance tax. Ensuring timely payment can help avoid interest charges under Sections 234B and 234C of the Income Tax Act.
4. Set Off and Carry Forward Losses
Losses incurred in intraday trading can be set off against speculative business income. If not entirely set off, these losses can be carried forward for four years.
Frequently Asked Questions
1. Can I avoid taxes on intraday trading profits?
No, all income in India is liable to taxes. Therefore, you must pay income tax on intraday trading profits.
2. How can I reduce the amount of tax I pay on intraday trading?
You can reduce your tax liability by claiming business expenses, investing in ELSS, paying advance tax, and setting off and carrying forward losses.
3. Can I set off intraday trading losses against other income?
No, losses from intraday trading can only be set off against profits from speculative business income.
In conclusion, while intraday trading can be profitable, it’s essential to understand the tax implications associated with it. By following these tips, you can minimize your tax liability and maximize your profits.
Intraday Trading Income Tax Treatment In India Calculation Guide