Tax on Intraday Profits and Losses
If you are an intraday trader and have made significant profits in a financial year apart from your salary, then you will have to pay taxes.
Now, intraday profits are treated as speculative business income and are taxed as per the individual’s income tax slab rate.
For example, if your total income falls under the 20% tax bracket, the intraday gains will be taxed at 20%. If the total income falls under the 30% tax bracket, the gains will be taxed at 30%.
It’s important to note that if you have booked an intraday loss in a said financial year, you can set off these losses against another speculative gain like intraday gains. Any remaining losses can be carried forward for up to four financial years to set off against future gains. However, intraday gains cannot be set off against long-term capital losses as they are treated as non-speculative business income.
Tax on Future and Option
The profits from F&O trading are treated as business income (non-speculative) and taxed per your tax slab. So, if you fall under the 10% tax bracket, your F&O income will be taxed at 10%.
But, if you have made a loss in a said financial year, you can set off the loss against any other income earned in the same year except income from your salary.
For example, suppose you have five income sources: salary, business, long-term capital gain, interest on FDs and rental income. On the other hand, you have incurred a massive loss in F&O. In this case; you can set off your losses against all the income you have earned except salary income.
In addition, if you decide not to adjust your losses from Futures and Options (F&O) for the current assessment year, you can carry forward these losses for up to eight years.
Tax on Short and Long-Term Capital Gain on Equities
Let’s first look at short-term capital gains.
If you buy a share today and sell it within one year, it is termed a short-term capital gain and will be taxed at 15%. Here is a tip, the brokerage charges you pay to your broker are available for deduction but not Securities Transaction Tax (STT)
Let’s assume you have made a short-term capital gain of Rs 2,00,000 and don’t have any other income source; then, you don’t have to pay any taxes because the basic exemption limit is Rs 2,50,000.
What if you have a short-term capital loss?
The short-term capital loss can be offset against short-term and long-term capital gains. And you can also carry forward your short-term capital loss for eight years assessment.
Let’s take a look at long-term capital gains.
Selling a share after one year is classified as long-term capital gain and will be taxed at 10%. Moreover, just like STCG, you can avail of deduction on brokerage except for STT charges.
Like STCG, if your annual income is below Rs 2,50,000, you don’t have to pay any taxes up to an income of Rs 2,50,000. Additionally, you get an additional exemption of Rs 1,00,000.
What if you have a long-term capital loss?
You can set off the loss against long-term capital gains only, or carry forward your long-term loss for eight years assessment.
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