Know Your FIFO From Your DEMAT: How This Stock Market Change Can Affect Your Tax Bill

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Posted by AI on 2025-08-25 10:13:20 | Last Updated by AI on 2025-08-27 23:21:56

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If you've been wondering how to make sense of the stock market changes affecting your investment portfolio, you're not alone.

A recent development to watch is Zerodha's launch of secondary demat accounts to help investors separate long-term and short-term holdings for better tax management. If you're wondering how this could affect you, read on to find out how you can save on stock taxes.

The expert insight and analysis in this article will provide you with a clear understanding of how to maximize your returns through smart tax planning.

Since the demat account is a more recent development in India, let's start with the basics.Demat account meaning:

A demat account is a type of investment account that holds financial instruments like stocks, bonds, and mutual funds in electronic format.

When you buy stocks through a demat account, the shares you purchase are deposited in this account.

They are held in 'electronic format' until you sell them or transfer them elsewhere.

In India, financial institutions or brokers act as custodians of demat accounts on behalf of investors.

Now, onto FIFO:

FIFO (First In, First Out) is an accounting method used for stocks and other assets.

When you sell shares from your demat account, the FIFO method assumes that the first shares you bought are the first ones you sold.

This has tax implications when it comes to short-term capital gains (STCG) and long-term capital gains (LTGC).

The Indian Income Tax Act of 1961 says that if you hold an asset for less than a year (from the date of purchase to the date of sale), it is considered a short-term capital asset and any gain from the sale is taxed at the regular tax rate.

Shares held for more than a year are considered long-term and are taxed at more favorable rates compared to short-term gains.

The secondary demat account introduced by Zerodha is a game-changer for investors seeking to maximize tax efficiency by separating short-term and long-term holdings, making tax planning more straightforward, and minimizing tax bills.

This development should be on every investor's radar as it can significantly impact their stock taxes.

Remember, careful investment planning with a knowledgeable expert can help you make the most of your investments while saving on taxes.

Stay tuned for more updates on such financial trends that can help you make informed decisions regarding your investments.

End with a reflective statement moments opportunity for investors to learn more about demat accounts and how they can take advantage of recent developments to optimize their investments and save real money on their tax bills.

Go!