How Can Reporting Intraday Losses Reduce Your Tax Liability?

Trading on the stock market can be both exciting and lucrative. But creating wealth in the stock market and paying your taxes go hand in hand. Intraday trading is no exception to that.

Intraday trading is known to be risky.You can end up making a high profit or suffer a significant loss. So, what happens when you incur a loss? From the tax point of view, you must report it when filing your income tax return. If you do so, you could get some benefits in return. Let’s take a closer look at intraday trading as well as intraday tips to reduce your tax outgo.

Intraday Losses Reduce Your Tax Liability

What is intraday trading?

Intraday trading refers to the buying and selling of stock within the same day. In this type of trading, the trader does not hold on to any position sat the close of the trading hours.

In recent years, this type of trading has gained popularity among traders.It is no longer restricted to full-time traders.Even the occasional trader like a salaried person or an entrepreneur can engage in intraday trading from time to time.

From the tax point of view, intraday trading is treated as a speculative activity, even though you must perform many calculations and invest time on research to be successful. It is reported as income from business under ‘Profit and Loss from Business and Profession’ while filing your income tax return. Income from intraday trading gets added to the total income of an individual and is taxed according to the tax slab the person falls under.

What happens when you face a loss in intraday trading?

The Income Tax Department has a provision for reporting losses from intraday trading. The loss amount can be offset by the gains from other speculative investments. However, it cannot be offset with income from non-speculative income sources like long-term capital gains or salary. Interestingly though, a loss in non-speculative investment can be set off by profits in a speculative business.

However, if the loss incurred is more than the eligible income to be offset, then this loss can be carried forward for up to four years. This is possible only when you report your loss and file your income tax returns for all the years.The provision of carrying forward your loss from speculative investments results in less payable tax in the future years.

Since gains from intraday trading fall under the business income category,you can also claim a few other expenses as tax deductions. These include the Security Transaction Tax (STT), any brokerage fees, cost of tech support and reading material, and so on.


Day trading, like any other business, can bring you profit or loss. It takes a lot of practice and research to be a successful day trader. Many online service providers offer intraday tips and guidance, making the process easier for new entrants. If you too want to start investing in shares, open an account with Kotak Securities and avail of expert help and advice.

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