Intraday vs delivery trading: what is the difference

What happens at the order level

When you place an intraday order you mark it as MIS (Margin Intraday Square-off) on most broker platforms. The broker extends extra leverage, sometimes 3 to 5 times your capital depending on the stock and the broker's risk policy. At a defined time before market close (typically 3:20 PM on NSE-timed systems), any open intraday position is auto-squared by the broker even if you have not placed the exit order. No shares move to your demat; the trade settles purely in cash.

A delivery trade is placed as CNC (Cash and Carry) with no leverage, meaning you need the full trade value in your account. After the trade executes and settles through the T+1 cycle, shares credit to your demat. You can hold them for a day, a decade, or anything in between. There is no auto-square-off pressure. The holding period starts from the trade date and determines whether your eventual gain is short-term (held 12 months or less) or long-term (held over 12 months).

Tax treatment: why the distinction matters

Intraday equity trading is classified as speculative business income by the Income Tax Act. Losses from speculative activity can only be set off against speculative gains, not against salary or other income, and can be carried forward for only 4 years. This is a meaningful restriction that delivery traders do not face in the same way.

Delivery-based trading is taxed under capital gains, which is a more favourable structure. Short-term capital gains (held 12 months or less) on listed equity are taxed at 20% as of 2026. Long-term gains (held over 12 months) are taxed at 12.5% on the amount exceeding 1.25 lakh rupees per financial year. If you are reporting stocks as investments, the capital gains treatment applies. If you are a frequent, high-volume trader even in delivery, the tax officer may reclassify your activity as business income, which is a nuance best handled by a chartered accountant.

Margin and risk differences

Intraday leverage magnifies both gains and losses. A 5x MIS position means a 5% adverse move wipes your entire deployed capital in that trade. Delivery requires full capital upfront, which is a built-in discipline against over-leveraging. For an investor building a portfolio, delivery is the default because it aligns the holding with actual conviction in the business.

There is a hybrid risk called BTST (Buy Today, Sell Tomorrow), where shares are sold the next day before they formally settle into your demat. This is technically a delivery trade but carries counterparty risk since the shares have not yet settled. Most brokers allow it but restrict it to securities with good liquidity to reduce the settlement risk.

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