profit/loss from Intra day day trading can be taxed either short term capital gain tax or speculative business income ,yes both,how ,lets explain
1)treatment of these type of transaction is depended on intention of the assesses ,quantum of transaction ,frequency of transaction etc etc
suppose if a person do intra day transaction 1-2 times in a month and that is also with in his net worth value he can treat that income loss as short term capital gain.
but if he purchase in lots heavier than his net worth than its look like speculation
short selling is always speculative trading
take a example:i buy rnrl 1000 shares on 60 rs on 21.09.2007 and sold intra day @ 78 rs .in this case if my intention is to earn speculative profit than it will be treated as speculation profit but if i claim that while purchasing the share my intention was to retain the share for one month i have also arranged or will arrange the money to pay for them but share is appreciate on same day 30 from my purchasing price & sold the share same day as my target is archived so in this case i can claim my profits as short term capital gain Evan transaction is square off same day intra day.
one more point if you buy first & sold later even that type of transaction can also be treated as speculation if the volume of transaction is heavy. like if i have a net worth of only 50000 rs & i buy share worth rs 500000 than it appears that i have purchased these share with a intention of speculative profit & i have no intention to retain the share & to take delivery of share.
so treatment is dependent on so many factors .
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