Indian tax rules for intraday trading and capital gains

Taxpayers in India must distinguish between different types of investment income to ensure correct filing and avoid errors. Intraday equity trading is classified as speculative business income under Section 43(5) of the Income Tax Act and is taxed under 'Profits and Gains from Business or Profession.' This requires filing ITR-3, as ITR-1 and ITR-2 are not applicable once business income is involved.

In contrast, long-term capital gains (LTCG) from delivery-based shares held for over 12 months are taxed under Section 112A. Under the new tax regime, the Section 87A rebate applies when total income chargeable at normal slab rates does not exceed ₹12 lakh. Notably, this rebate cannot be adjusted against tax payable on income subject to special rates, such as short-term capital gains (STCG) on shares.

Consequently, an individual may receive a tax refund even if their total income exceeds ₹12 lakh, provided their normal income (such as salary and interest) remains below the threshold after standard deductions, while the excess is comprised of income taxed at special rates.