What is the difference between expenses related to speculative and non speculative business activity?

Income from trading is divided into speculative and non-speculative. For Income Tax purposes the profits/losses from intra-day trading is considered as speculative business and profits/losses from F&O is treated as non-speculative business.

Profits from speculative and non speculative trading are classified under business income. However, the tax treatment for losses is different.

If there is a loss from non-speculative trading then it can be carried forward for 8 years. Non-Speculative Business Loss for the current year can be set off against all heads of Income except Salary. Brought forward Non-Speculative Business loss can be set off against Non-Speculative Business Income or Speculative Business Income.

However loss from speculative trading can be carried forward for next 4 years. Speculative Business Loss for the current year and brought forward loss can be set off against Speculative Business Income only. 

Read more about Set off and Carry forward losses on our Learn Center.