ITR Filing: 'Trading profit is ₹21,000, but taxable gain ₹1 lakh - How's this Possible?' Reddit post sparks debate
Turning to social media, he wrote:
"Hey fellow traders, I'm really confused about my taxes and hope someone can shed some light. My PnL for last year shows a total profit of 21K
I gave this to my CA for ITR filing, and he told me my taxable profit is 1 Lakh."
He says my profits are taxable, but my losses are mostly "intraday" and can only be carried forward. They can't be used to reduce my current profit."
Elaborating on his trading style, he mentioned that, " I primarily do swing trading with a GTT stop-loss. Sometimes, a trade I intend to hold for several days hits the stop-loss and gets exited on the same day. I believe this is why they are being classified as intraday trades. Is a trade intended for swing but closed on the same day automatically considered an "Intraday/Speculative" trade for tax purposes? Is it true that these "intraday" losses cannot be set off against my swing trading (STCG) profits? Do I really have to pay tax on ₹ 1 Lakh even though my net PnL was only ₹ 21k? Is there any way to correctly offset these losses to reduce my tax liability?" ITR filing
Yes, it is absolutely possible. Under income tax laws, profit/loss from intraday trading and capital gains are taxed differently. Taxpayers cannot set off their intra-day losses against their long-term and short-term capital gains (LTCG and STCG).
The profit and loss statement shared by the user (shared above) reveals that his short-term profit was ₹ 1,03,297.57, while his intraday loss stood at ₹ 81,682.80 - making his realised profit about ₹ 21,600.
"As per the income tax laws, the individual will have to pay short term capital gains tax on ₹ 1,03,297.57 because intra-day trading losses can be set off only against intra-day trading gains. They cannot be adjusted against STCG or LTCG. Such losses can be carried forward to subsequent years and set off only against future intra-day trading gains," Abhishek Soni, CEO Tax2Win told Mint.
"Intraday trading is considered speculative business income. Because of this reason, such profit is taxed under the head "Profit and Gain From Business or Profession," as per the applicable slab rate of the taxpayer," he added.
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