What is meant by Speculative Business Income?

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As per section 43(5) of the Income Tax Act 1961, Speculative Business Income includes profits earned from trading intraday/non-delivery in equity shares (shares sold before they come into your demat account). 

Speculative Trading - It is called speculative as the income is based on some future event and not realized until after it has been earned. It is earned from a business activity in which the taxpayer has a substantial risk of losing money. 

In the world of trading, speculation means conducting a transaction that has substantial risk of losing value. The risk of loss is more than offset by the possibility of a substantial gain.

An investor who purchases a speculative investment is likely focused on price fluctuations. That is, the risk associated with the investment is high, but the investor is typically more concerned about generating a profit based on market value changes for that investment rather than on long-term investing.

Speculative business income is added to your total income, and taxes are applicable based on the tax bracket you fall under.

Income earned from F&O is classified as a Non-speculative business income.