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 INTRODUCTION TO INTRADAY

Intraday trading, also known as day trading, involves buying and selling stocks within the same trading day. One popular strategy used by intraday traders is scalping, which involves buying and selling stocks quickly in order to capture small price movements. Intraday trading requires a high level of discipline and risk management, as traders must be able to make quick decisions and control their emotions in response to market volatility.

RECORD MAINTAINANCE AND PENALTIES

Intraday trading can be lucrative and exciting way to make money in the stock market, but it comes with certain responsibilities, including the need to maintain accurate records of all trading activities. The Indian tax authorities require traders to maintain records of their intraday trading transactions and to file their tax returns on time. Failure to do so can result in penalties and fines.

Penalties for non-compliance with record maintenance and tax filing requirements can be significant. In case of failure to maintain proper records, the tax authorities can estimate the income and impose a penalty of up to 200% of the tax payable. Late filing of tax returns can result in penalties of up to Rs. 10,000.

CALCULATING INCOME TAX AND FILING DATES

Traders are required to file their tax returns on time. Filing income tax on intraday trading can be daunting, but with the right information and guidance, it can be done easily.

Let’s see how to file income tax on intraday trading and the important dates to keep in mind.

STEP 1: Determine your taxable income

The first step in filing income tax on intraday trading is to determine your taxable income. This include all sources of income including your intraday trading profits. Calculate your taxable income by subtracting your deductions and exemptions from your total income.

STEP 2: Determine your tax liability

Once you have calculated your taxable income you need to determine your tax liability. Use the current financial year income tax slab rates to calculate your tax liability.

STEP 3: Pay advance tax

If your tax liability for the year exceeds Rs. 10,000, you are required to pay advance tax in instalments throughout the year. The due dates for advance tax payments are:

- 15th June: 15% of the tax liability

- 15th September: 45% of the tax liability

- 15th December: 75% of the tax liability

- 15th March: 100% of the tax liability

Step 4: File your income tax return

Once you have paid the advance tax and determined your tax liability, you need to file your income tax return. The due date for filing income tax returns for intraday traders in India is July 31st of the assessment year. For example, the due date for filing income tax returns for the financial year 2022-23 is July 31st, 2023.

To file your income tax return, you can either do it online or offline. The easiest and most convenient way is to file it online through the Income Tax Department's e-filing portal. You will need to register on the portal, and then upload your income tax return form, which is available for download on the portal. Once you have uploaded your form, you can verify it electronically using your Aadhaar card or through net banking.

                  HOW TO SAVE MONEY ON INCOME TAX WHILE PERFORMING INTRADAY TRADES

Intraday trading can be a profitable activity but it also comes with many tax implications. Fortunately, there are several ways to save tax on intraday trading in India. Some ways to save tax on intraday trading: -

1. Claim deductions under Section 80C

Section 80C of the Income Tax Act allows taxpayers to claim deductions of up to Rs. 1.5 lakh on certain investments and expenses. Some investments that are eligible for deduction under Section 80C include Public Provident Fund (PPF), National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS), and tax-saving fixed deposits. By investing in these instruments, intraday traders can reduce their taxable income and save on tax.

2. Set off losses against gains

Intraday trading can result in both gains and losses. One way to save tax is to set off the losses against the gains. If a trader incurs losses in intraday trading, these losses can be set off against gains made in other intraday trades or even against gains made in other asset classes such as mutual funds or stocks held for the long term.

3. Keep accurate records

Maintaining accurate records of all intraday trading activities is crucial for tax-saving purposes. By keeping track of all transactions and expenses, traders can claim deductions on brokerage fees, STT (Securities Transaction Tax), and other transaction costs, thereby reducing their tax liability.

4. Opt for the lower tax rate under the Presumptive taxation scheme

The Presumptive taxation scheme is a simplified taxation method that is available to small businesses and professionals with a turnover of up to Rs. 2 crores. Under this scheme, traders can declare their income at a presumptive rate of 6% of turnover and pay taxes accordingly. This can help traders save tax as the tax rate under the presumptive taxation scheme is lower than the regular tax rate.

5. Seek professional advice

Intraday traders can benefit from seeking professional advice from a tax consultant or a financial advisor. These professionals can provide guidance on tax-saving strategies and help traders optimize their tax liabilities.

                                                              CONCLUSION

In conclusion, income tax on intraday trading is an important aspect that traders need to consider in India. Traders are required to pay tax on their intraday trading profits and file their tax returns on time, failure to do so can result in penalties and fines. It is essential for traders to stay up-to-date with the latest tax laws and regulations related to intraday trading. By doing so, they can ensure compliance with the law and avoid any legal or financial repercussions. However, by being aware of their tax liabilities and taking steps to minimize them, intraday traders can continue make benefit from there trading activities while remaining in compliance with the law.

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LEARN ABOUT INDIAVIX

INDIAVIX is a volatility index that measures the market's expectation of volatility over the next 30 days in the Indian stock market. It is also known as the India Volatility Index. The index is computed by the National Stock Exchange of India (NSE) based on the order book of the NIFTY 50 index options. The INDIAVIX index is calculated using the Black-Scholes formula and represents the expected annualized change in the NIFTY 50 index over the next 30 days, based on the option prices. A higher INDIAVIX level indicates higher market uncertainty or risk, while a lower level indicates lower market uncertainty or risk. The index is used by traders and investors as a tool for measuring market sentiment and gauging potential risks in the Indian stock market.

FACTORS AFFECTING INDIAVIX

There are several factors that can affect the INDIAVIX index, which measures the expected volatility of the Indian stock market. Here are some of the key factors:

1. Economic data: Economic indicators such as GDP, inflation, interest rates, and consumer spending can have a significant impact on the stock market and the level of market volatility.

2. Global events: Global events such as geopolitical tensions, trade wars, and natural disasters can create uncertainty and affect the stock market, leading to changes in the level of volatility.

3. Corporate earnings: The earnings reports of companies listed on the stock market can have a significant impact on the market sentiment and the level of volatility.

4. Market sentiment: The overall market sentiment can affect the level of volatility, as investors may react to news and rumors with increased buying or selling activity.

5. Option trading activity: The level of option trading activity in the market can also affect the INDIAVIX index, as options are used as a tool to hedge against market volatility.

PLANING TRADES AROUND INDIAVIX

  Here are some steps to plan trades around INDIAVIX:

1. Determine your risk appetite

The first step in planning trades around INDIAVIX is to determine your risk appetite. The INDIAVIX can provide an indication of the level of risk and uncertainty in the market, and you should adjust your trading strategy accordingly. For instance, a high INDIAVIX level may indicate a volatile market, which could mean higher potential returns but also higher potential losses. Traders with a higher risk appetite may choose to take on more aggressive trades during such periods, while those with a lower risk appetite may prefer to be more conservative.

2. Identify potential market movements

The INDIAVIX can also give you an idea of the expected level of market volatility over the next 30 days. By understanding this information, you can identify potential market movements and plan your trades accordingly. For example, if the INDIAVIX is high, it may be an indication that the market is likely to experience large price swings, which could present opportunities for traders to profit from short-term trades.

3. Use options to hedge against volatility

Options are a common tool used by traders to hedge against market volatility. By using the INDIAVIX to gauge the level of volatility, you can choose appropriate options strategies to hedge your positions. For instance, if the INDIAVIX is high, traders may consider buying put options to protect their long positions or selling call options to generate additional income.

4. Monitor the INDIAVIX regularly

As market conditions change, the INDIAVIX level can also change. You should monitor the INDIAVIX regularly to stay informed about the level of volatility in the market and adjust your trading strategy accordingly. This can help you avoid making trades that are overly risky or conservative based on outdated information.

CONCLUSION

In conclusion, incorporating the INDIAVIX into your trading plan can help you better manage risk and potentially improve your chances of success in the Indian stock market. By determining your risk appetite, identifying potential market movements, using options to hedge against volatility, and monitoring the INDIAVIX regularly, you can develop a trading plan that is tailored to your individual needs and objectives. As always, remember to conduct thorough research and analysis before making any trades, and never invest more than you can afford to lose.

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Hedging in future market

Introduction

Hedging is a risk management strategy that seeks to reduce the risk of loss by taking an offsetting position in another asset. In the context of future stock, hedging can be used to protect against losses in the value of a stock by taking a short position in a futures contract on the same stock.

For example, if you own 100 shares of ABC stock and you are concerned that the price of the stock may fall, you could hedge your position by selling a futures contract on ABC stock. This would effectively lock in the price of the stock at the current level, even if the price of the stock falls in the future.

How to do Hedging In future Stocks

Hedging in future stocks is a risk management strategy that can be used to protect against losses in the value of a stock by taking a short position in a futures contract on the same stock.

To hedge a future stock position, you will need to open a futures account with a brokerage firm. Once you have opened an account, you can then select the futures contract that you want to use to hedge your position. The futures contract you choose should be for the same stock that you own and it should have the same expiration date as your stock position.

Once you have selected the futures contract, you can then enter an order to sell the contract. The amount of contracts you sell will depend on the number of shares of stock that you own. For example, if you own 100 shares of stock, you would need to sell 100 futures contracts.

When you sell the futures contract, you will be locking in the price of the stock at the current level. This means that if the price of the stock falls in the future, you will not lose any money on your stock position. However, if the price of the stock rises in the future, you will miss out on any gains.

Ways to do Hedging

Hedging is a risk management strategy that seeks to reduce the risk of loss by taking an offsetting position in another asset. There are many different ways to hedge, depending on the asset or portfolio of assets being hedged. Some of the most common hedging strategies include:

Using derivatives: Derivatives are financial instruments that derive their value from another asset. For example, an option is a derivative that gives the holder the right to buy or sell an asset at a specified price on or before a specified date. Options can be used to hedge against both upside and downside risk.

Diversifying your portfolio: Diversification is the practice of investing in a variety of assets. By diversifying your portfolio, you can reduce your risk by spreading your money across different asset classes and industries.

Using stop-loss orders: A stop-loss order is a type of order that tells your broker to sell an asset if it falls to a certain price. Stop-loss orders can be used to protect your profits or limit your losses.

Using insurance: Insurance is a contract that protects you from financial loss in the event of an unexpected event. For example, you can buy insurance to protect yourself against the loss of your home or car.

Risks involved in hedging

Hedging is a risk management strategy that seeks to reduce the risk of loss by taking an offsetting position in another asset. However, hedging does not eliminate all risk. There are a number of risks involved in hedging, including:

Cost: Hedging can be expensive. The cost of hedging will vary depending on the type of hedge you use, the asset you are hedging, and the brokerage firm you use.

Complexity: Hedging can be complex. It is important to understand the risks and mechanics of hedging before you use it.

Ineffectiveness: Hedging may not be effective in all situations. The effectiveness of hedging will depend on the specific risk you are trying to mitigate.

Market movements: Hedging can limit your upside potential. If the market moves in your favor, you may miss out on some gains.

Leverage: Hedging with derivatives can magnify your losses. If the market moves against you, you could lose more money than you originally invested.

It is important to carefully consider the risks involved in hedging before you decide to use it. Hedging can be a useful tool for managing risk, but it is not a guarantee against loss.

Conclusion

Hedging in future stocks is a risk management strategy that can be used to protect against losses in the value of a stock by taking a short position in a futures contract on the same stock. Hedging can be a useful tool for investors who are concerned about the risk of loss in their portfolios. However, it is important to remember that hedging does not eliminate all risk. The price of the futures contract may also fall, so you could still lose money if the market moves against you.