Intraday transaction in equity cash market -whether it is chargeable to Income tax as Speculation income ?

If there is a profit or loss in Intra day transaction in equity cash market arising out of daily on line trading during a financial year ,whether to treat it as speculation loss or loss arising out of business or profession or to treat it as short term capital gain. If during the on line trading, delivery is taken under BTST (Buy Today Sell Tomorrow) or sold subsequent days, whether the profit or loss arising, is short term capital gain or speculation income or income from business or profession?

Income from intra-day trading in shares is treated as speculative business insurance and come as the transaction is settled without delivery. Accordingly, it is charged under the head, ‘Profit and gain of business or profession’. As per Section 43(5) of the Income Tax Act, 1961 speculative transaction means a transaction in which a contract for the purchase or sale of any commodity including stocks and shares is settled otherwise than by the actual delivery or transfer of the commodity or scrip’s.

However, trading in derivatives, referred to in Section 2(ac) of the Securities Contracts (Regulation) Act, 1956, carried out on a recognized stock exchange is not deemed to be a speculative transaction. Recognized stock exchanges are NSE, BSE, MCX Stock Exchange, and the United Stock Exchange of India. The transaction will be treated as ‘Non-speculative business income’.

In intra-day trading, there is no actual delivery as the shares enter and exit from the trading account on the same date and do not enter the demat account at all. However, if shares are purchased on a particular day and sold next day, it is not treated as ‘Speculative business’. The profit or loss on sale of such shares is taxable as short-term capital gain or business income, as the case may be.

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