A buyback of shares, often called a stock repurchase, is a corporate action where a company buys back its own outstanding shares from the marketplace. This process effectively reduces the number of shares held by the public, concentrating ownership and often signaling a strong financial position to the market.

1. Objectives of a Share Buyback

Companies typically initiate buybacks for several strategic reasons:

* Enhancing Shareholder Value: By reducing the total number of shares, the Earnings Per Share (EPS) increases, even if net profits remain stagnant.

* Signaling Undervaluation: A buyback often sends a message to the market that the management believes the current stock price is too low.

* Utilizing Excess Cash: When a company has surplus cash and no immediate high-return investment opportunities, returning that capital to shareholders via a buyback is a common strategy.

* Tax Efficiency: In many jurisdictions, buybacks are taxed more favorably than dividends, making them a preferred way to reward investors.

* Preventing Hostile Takeovers: By reducing the number of shares available in the open market, a company makes it harder for an outside entity to acquire a controlling interest.

2. The Buyback Process

While specific regulations vary by country (such as SEBI in India or the SEC in the U.S.), the general procedural flow is as follows:

Step 1: Board Approval

The process begins with a meeting of the Board of Directors. They must pass a resolution authorizing the buyback, specifying the maximum price and the total amount of capital to be used.

Step 2: Shareholder Approval

If the buyback exceeds a certain percentage of the company’s paid-up capital and free reserves (usually 10%), a Special Resolution must be passed by the shareholders through a general meeting or postal ballot.

Step 3: Public Announcement

Once approved, the company makes a formal public announcement. This disclosure includes:

* The buyback price (usually at a premium to the current market price).

* The method of buyback (Tender Offer or Open Market).

* The Record Date to determine which shareholders are eligible to participate.

Step 4: Execution Methods

Companies generally choose between two primary routes:

* Tender Offer: The company offers to buy a specific number of shares directly from shareholders at a fixed price within a set timeframe.

* Open Market Purchase: The company buys shares through the stock exchange over a longer period, much like a regular investor.

   > Note: As of 2025, some regulators (like SEBI) have moved to phase out the open market route in favor of tender offers to ensure greater transparency.

   >

Step 5: Settlement and Extinguishment

After the shares are purchased, they are “extinguished” or destroyed. Unlike shares held by an individual, a company cannot hold its own shares as an investment indefinitely (unless they are held as “Treasury Shares” in specific jurisdictions). The company’s share capital is then reduced accordingly.

3. Impact on Financial Health

A buyback alters the company’s balance sheet by reducing cash (asset) and equity (liability/equity section). While this improves return on equity (ROE) and EPS, it can also lead to a higher debt-to-equity ratio, which analysts monitor closely to ensure the company isn’t over-leveraging itself to artificially inflate stock prices.

Taxation of buyback

The taxation of share buybacks has undergone a monumental shift in 2024. Historically viewed as a tax-efficient way for companies to return cash to shareholders, the Finance (No. 2) Act, 2024 has completely restructured the landscape.

Effective October 1, 2024, the tax burden has shifted from the company to the shareholder, fundamentally changing the math for investors and corporate treasuries alike.

1. The Pre-October 2024 Regime: Tax at Source

Before the recent amendment, the taxation of buybacks was governed by Section 115QA of the Income Tax Act. Under this regime:

* Company Liability: The domestic company was responsible for paying a “Buyback Tax” (BBT) at an effective rate of approximately 23.296% (20% tax + 12% surcharge + 4% cess).

* Shareholder Exemption: Since the company had already paid the tax on the “distributed income,” the proceeds received by the shareholders were exempt from tax under Section 10(34A).

* Calculation: The tax was calculated on the difference between the buyback price and the original issue price of the shares.

2. The New Regime: Tax as Dividend (Post-Oct 1, 2024)

The 2024 amendment aligned the taxation of buybacks with the taxation of dividends. The law now treats the entire buyback consideration as a “Deemed Dividend.”

A. Taxation in the Hands of the Shareholder

Under the new Section 2(22)(f), the total amount received from a buyback is now taxed as “Income from Other Sources”:

* Tax Rate: Shareholders are taxed at their applicable income tax slab rates. For high-net-worth individuals in the 30% bracket, the effective tax rate (including surcharge and cess) can reach up to 35.88%.

* No Deductions: No expenses or interest costs can be claimed as a deduction against this deemed dividend income.

B. Treatment of Cost of Acquisition (Capital Loss)

Because the entire proceeds are taxed as dividends, the “sale” aspect of the transaction is handled separately to prevent double taxation:

* Deemed Sale Consideration: For capital gains purposes, the sale price is considered Nil.

* Capital Loss: The original cost of acquiring those shares is recorded as a Capital Loss.

* Set-off Rules: This loss can be used to offset other Capital Gains (Short-term or Long-term) in the same year or carried forward for up to 8 years.

3. Compliance and TDS Requirements

With the shift in liability, companies now have new compliance obligations:

* TDS for Residents: Companies must deduct Tax Deducted at Source (TDS) at a rate of 10% under Section 194 if the total payment to a resident individual exceeds ₹5,000 (though some thresholds may vary by specific filing).

* TDS for Non-Residents: For foreign investors, TDS is typically 20% (plus surcharge/cess) or the rate specified in the relevant Double Taxation Avoidance Agreement (DTAA), whichever is more beneficial.

4. Strategic Implications for Investors

This shift has turned buybacks from a “tax-free” windfall into a potentially high-tax event:

* Lower Net Returns: For investors in high tax brackets, the move from 0% tax (previously exempt) to 30%+ tax significantly reduces the net cash in hand.

* The “Loss” Paradox: Investors are left with a capital loss that is only useful if they have other capital gains to offset. If an investor has no other gains, the “benefit” of the original cost basis is effectively locked away or wasted.

* Non-Resident Advantage: Some non-resident shareholders may actually benefit if their country’s tax treaty allows for lower dividend tax rates (e.g., 5% or 10%) compared to the previous 23% indirect burden.

The new taxation framework essentially treats a buyback as a distribution of profits rather than a capital exit. While this simplifies the law by treating dividends and buybacks equally, it increases the tax burden on most domestic retail and HNI investors.

In conclusion, share buybacks are a sophisticated tool for capital management. When used wisely, they reward loyal investors and optimize the capital structure; however, they must be balanced against the company’s need for future growth and R&D investment.

Positional Trading: Ride Long-Term Trends for Bigger Profits

Tired of the daily market grind? Positional trading lets you step back, spot major trends, and hold for weeks or months to capture big moves. Unlike frantic day trading, it balances patience with potential rewards—perfect for busy investors. In this guide, we’ll break down how it works, strategies, and tips to get started.

What Is Positional Trading?

Positional trading is a medium- to long-term strategy where you hold positions for weeks, months, or longer. It targets substantial price swings driven by overall market direction, ignoring short-term noise.

Traders blend technical analysis (charts for entry/exit) with fundamental analysis (company health, macro trends). This approach suits those without time for constant monitoring, offering lower transaction costs from fewer trades.

Key Edge: Focus on trends like economic recoveries or sector booms, not intraday volatility.

Time Horizon and Objectives

• Duration: Few weeks to months (or more).
• Goal: Profit from major uptrends or downtrends.
• Contrast with Others: Day traders close daily; swing traders hold days to weeks. Positional traders wait for the market to hit targets.

It’s ideal for balancing active trading with long-term investing.

Types of Positional Trading

Choose based on your risk appetite and market view:

Futures Note: These are standardized contracts to buy/sell assets at a future date/price. Unlike customizable forwards, they’re exchange-traded—use for positional plays on Nifty or commodities.

How to Select Stocks for Positional Trading

Pick winners with this step-by-step approach:

1. Scan Sectors: Target those with recent strong performance.
2. Screen Stocks: Use tools to filter by your goals (e.g., growth, value).
3. Check History: Look for consistent upward/downward trends.
4. Verify Liquidity: Ensure high daily volume for easy entry/exit.

Combine quantitative (numbers) and qualitative (story) factors.

Technical + Fundamental Analysis: The Winning Combo

Top traders use both for conviction.

Fundamental Analysis

Assess long-term viability:

• Revenue/profit growth
• Debt-to-equity ratio
• Competitive moat
• Management quality

Technical Analysis

Time your trades:

• Moving averages (50/200-day) for trends
• MACD/RSI for momentum
• Support/resistance for targets/stop-loss
• Volume for breakouts

Example: A fundamentally solid stock like Reliance breaking 200-day MA on high volume? Buy signal. Weak fundamentals + support break? Short it.

Risk Management Essentials

Long holds mean more exposure—protect yourself:

• Stop-Loss: Set 5-10% below entry to cap losses.
• Diversification: Spread across 5-10 stocks/sectors.
• Risk-Reward Ratio: Aim for 1:2+ (risk ₹1 to make ₹2+).

Patience pays; avoid overtrading.

Positional vs. Swing/Day Trading

Positional wins for hands-off trend chasers.

Tips for Beginners

• Start small to build confidence.
• Skip penny stocks—stick to mid/large-caps for liquidity.
• Log every trade for review.
• Stay unemotional; ignore short-term dips.
• Read news for macro insights (e.g., earnings, policy changes).
• Practice on paper trading accounts first, especially for futures.

Positional trading rewards discipline over haste. Master trends, manage risks, and watch your portfolio grow steadily

Understanding ESG ETFs: Responsible Investing Made Simple

With rapid changes in all aspects of life, the way investors invest has also evolved. Today, people prioritize not just returns but the real-world impact of their money. Environmental, Social, and Governance (ESG) investing has surged in popularity as individuals and institutions seek responsible options. One accessible way to dive in is through ESG Exchange Traded Funds (ETFs). In this post, we’ll break down what ESG ETFs are, how they work, and whether they fit your portfolio.

What Does ESG Stand For?

ESG represents Environmental, Social, and Governance—three pillars for evaluating a company’s ethics and sustainability.

• Environmental: Covers carbon emissions, waste management, and resource use.
• Social: Examines employee treatment, customer relations, and community impact.
• Governance: Assesses leadership, board diversity, and operational transparency.

Companies excelling in ESG tend to thrive long-term, benefiting both the planet and society.

What is an ESG ETF?

An ESG ETF is an exchange-traded fund that pools money into companies meeting strict ESG standards. Rather than selecting individual stocks, it offers instant exposure to a diversified basket of compliant securities. Traded on stock exchanges like regular shares, these funds let you invest with purpose—generating returns while supporting positive environmental and social change.

How Do ESG ETFs Work?

ESG ETFs mirror specialized ESG indexes, holding companies in proportions that match the benchmark. This passive approach ensures the ETF’s performance closely tracks the index’s returns.

The ETF’s value fluctuates with its underlying companies’ stock prices. You can buy or sell shares during market hours via a brokerage account, just like any stock.

Types of ESG ETFs

ESG ETFs come in various flavors to match different goals:

Key Benefits of ESG ETFs

Investing in ESG ETFs offers compelling upsides:

• Aligns your portfolio with personal values, supporting environmental and social good.
• Provides diversification across many companies, spreading risk.
• Positions you for long-term trends, like global policies pushing ESG standards.
• Delivers low-cost, passive exposure similar to traditional ETFs.

Risks to Watch Out For

No investment is risk-free, and ESG ETFs have their challenges:

• Narrow focus on high-ESG scorers can limit diversification and growth potential.
• Equity-based, so they’re vulnerable to market downturns.
• Risks include company-specific issues, “greenwashing” (false ESG claims), and shifting regulations.

Top ESG ETFs in India

India’s market features solid options:

• Nippon India Nifty 100 ESG Sector Leaders ETF
• Mirae Asset Nifty 100 ESG Sector Leaders ETF

Always check the latest NAV, expense ratios, and holdings.

ESG ETFs vs. Traditional ETFs

Here’s a quick comparison:

How to Invest in ESG ETFs

Getting started is straightforward:

1. Open a demat and trading account with a SEBI-registered broker.
2. Research ETFs on NSE/BSE—review expense ratios, holdings, and tracking error.
3. Place a buy order via your platform, specifying quantity and price.
4. Monitor performance in your demat account and rebalance as needed.

Who Should Invest?

ESG ETFs suit value-driven investors seeking long-term wealth with moderate risk and passive strategies. They’re ideal if sustainability matters to you. Skip them if you chase short-term gains or want unrestricted sector exposure.

Do ESG ETFs Mean Lower Returns?

The myth persists that ESG restrictions sacrifice returns. In reality, performance varies by market cycles and sectors—many ESG ETFs match or outperform traditional ones over time, especially as sustainable trends accelerate.

Common ESG Indexes in India

Popular benchmarks include:

• Nifty 100 ESG Index
• Nifty 100 ESG Sector Leaders Index
• Nifty 100 Enhanced ESG Index
• S&P BSE 100 ESG Index
• S&P BSE 500 ESG Index

Final Thoughts

ESG ETFs blend profitability with purpose, making responsible investing effortless. They support sustainable companies without sidelining returns—but weigh the risks against your goals.

Unlocking Global Markets: A Complete Guide to International ETFs

In today’s interconnected world, why limit your investments to India? International ETFs offer a simple, efficient way to tap into global opportunities, diversify your portfolio, and chase growth beyond borders. Whether you’re eyeing U.S. tech giants or emerging markets, these funds make it accessible. Let’s dive into what they are, how they work, and why they’re worth considering.

What Are International ETFs?

An exchange-traded fund (ETF) pools money from investors to buy a basket of securities like stocks, bonds, commodities, or indices. Traded like stocks on exchanges, ETFs let you buy and sell shares easily throughout the day.

International ETFs take this a step further by focusing on global assets. They provide exposure to specific countries, regions, or sectors outside India, investing in equities, bonds, or other instruments worldwide. This helps you ride international market waves without picking individual stocks.

How Do International ETFs Work?

ETFs aim to mirror the performance of a benchmark index by holding the same securities in similar proportions. Most are passively managed, keeping costs low.

An international ETF tracks a foreign index—for instance, one covering U.S. stocks, European bonds, or Asian tech. If the index rises 5%, the ETF should closely match that return (minus small fees).

Example: The Mirae Asset NYSE FANG+ ETF tracks top U.S. tech stocks like those in the NYSE FANG+ index. As these companies grow, so does your investment.

Types of International ETFs

International ETFs come in various flavors to match your goals. Here’s a quick overview:

Why Invest in International ETFs?

These funds pack powerful benefits:

• Broader Exposure: Access global giants and trends without leaving India.
• Diversification: Spread risk across countries, reducing reliance on Indian markets.
• Growth Opportunities: Capitalize on booming economies abroad.
• Convenience: Buy a diversified global basket with one trade.

Key Risks to Watch

No investment is risk-free. International ETFs come with unique challenges:

• Country-Specific Risks: Economic downturns or policy changes in target countries can drag performance.
• Currency Fluctuations: Forex rates can erode gains when converting back to INR.
• Regulatory Risks: Trade barriers, taxes, or local laws may impact holdings.
• Geopolitical Events: Wars, elections, or instability can shake markets.

Always assess your risk tolerance before jumping in.

How to Invest in International ETFs from India

Getting started is straightforward:

1. Open a demat account with a SEBI-registered broker.
2. Search for available international ETFs on their platform.
3. Place a buy order with your desired quantity and price.
4. Monitor holdings as they’re credited to your account.

Popular options in India include:

Taxation on International ETFs

• Capital Gains: Short-term (under 24 months) taxed at your slab rate; long-term (over 24 months) at 12.5% with indexation (post-2024 rules).
• Dividends: Added to income and taxed per slab.
• DTAA Benefits: Claim credits for foreign taxes withheld under India’s Double Taxation Avoidance Agreements.

Consult a tax advisor for your situation.

International ETFs vs. Indian ETFs

Both build diversification, but international ones shine for global reach. Indian ETFs stick to domestic markets, missing overseas growth. Use them together for a balanced portfolio.

Who Should Invest?

Ideal for:

• Investors seeking global diversification.
• Those targeting specific countries or sectors abroad.
• Risk-tolerant folks comfortable with currency and geopolitical volatility.

Start small if you’re new.

International ETFs democratize global investing, turning worldwide opportunities into everyday trades. With diversification and growth potential, they’re a smart addition for long-term portfolios—just balance the risks.

സ്റ്റോക്ക് മാർക്കറ്റിൽ നിക്ഷേപം തുടങ്ങുമ്പോൾ പലരും ശ്രദ്ധിക്കുന്നത് ബ്രോക്കറേജ് ചാർജ് മാത്രമാണ്.

എന്നാൽ യഥാർത്ഥ ലാഭം കുറയുന്നത് മറഞ്ഞിരിക്കുന്ന ചാർജുകൾ മൂലമാണ്.

Demat & Trading Account Charges എന്തൊക്കെ?

1️⃣ Brokerage Charges

“Zero Brokerage” എന്ന് പരസ്യം ചെയ്യുന്ന ബ്രോക്കർമാർ പോലും:

• Intraday Trading
• F&O Trading
• Currency & Commodity

       ഇവയിൽ ബ്രോക്കറേജ് ഈടാക്കും.

 Trading account charges പരിശോധിക്കുക നിർബന്ധമാണ്.

2️⃣ Exchange Transaction Charges

NSE / BSE ഈടാക്കുന്ന ചാർജുകളാണ് ഇത്.

• എല്ലാ buy & sell ട്രേഡിലും ബാധകം
• Segment അനുസരിച്ച് charge വ്യത്യാസപ്പെടും

3️⃣ SEBI Turnover Charges

SEBI നിർബന്ധമാക്കിയ:

• ചെറിയ amount
• എല്ലാ ട്രേഡിലും ബാധകമായ charge

4️⃣ STT – Securities Transaction Tax

• Equity buy / sell
• Intraday & Derivatives

ഇവയിൽ STT charge ഉണ്ടാകും.

❌ STT refund ചെയ്യാൻ സാധിക്കില്ല.

5️⃣ GST on Trading Charges

18% GST ബാധകമാണ്:

• Brokerage
• Exchange charges
• SEBI turnover Charges

❌ STT-ൽ GST ബാധകമല്ല.

6️⃣ DP Charges (Demat Debit Charge)

Demat account-ൽ നിന്ന് ഷെയർ വിൽക്കുമ്പോൾ മാത്രം ഈടാക്കുന്ന charge.

• CDSL / NSDL വഴി
• On a per-transaction wise

7️⃣ AMC – Annual Maintenance Charge

Demat account maintain ചെയ്യാൻ:

• Yearly / Quarterly charge

✔️ First year free ആണോ?

✔️ Lifetime free ആണോ?

👉 Account തുറക്കുന്നതിന് മുമ്പ് പരിശോധിക്കുക.

8️⃣ Pledge & Re-Pledge Charges

Margin Trading / F&O ചെയ്യുന്നവർക്ക്:

• Shares pledge ചെയ്യുമ്പോൾ
• Re-pledge ചെയ്യുമ്പോൾ

Extra charges ബാധകമാണ്.

9️⃣ Call & Trade Charges

Phone വഴി order place ചെയ്താൽ:

• Additional trading charges ഉണ്ടാകും

🔟 Penalty & Interest Charges

• Margin shortfall penalty
• Delayed payment interest
• Auction penalty

⚠️ ഈ ചാർജുകൾ വളരെ കൂടുതലായിരിക്കും.

Demat & Trading Charges കുറയ്ക്കാനുള്ള മാർഗങ്ങൾ

✔️ Contract Note സ്ഥിരമായി പരിശോധിക്കുക

✔️Financial Ledger/statement സ്ഥിരമായി പരിശോധിക്കുക

✔️ Margin മതിയായ രീതിയിൽ maintain ചെയ്യുക

✔️ Over-trading ഒഴിവാക്കുക

✔️ Unnecessary pledging ഒഴിവാക്കുക

Final Words

സ്റ്റോക്ക് മാർക്കറ്റിൽ ലാഭം ഉണ്ടാകുന്നത് ശരിയായ നിക്ഷേപം കൊണ്ടും ചാർജുകൾ നിയന്ത്രിക്കുന്നതുകൊണ്ടും ആണ്.

“Charges കുറച്ചാൽ, Returns കൂടുതലാകും.”

📌 Frequently Asked Questions (FAQ)

Demat & Trading Account Charges

❓1. Demat account തുറക്കാൻ charge ഉണ്ടോ?

ചില ബ്രോക്കർമാർ free demat account opening നൽകും.

എന്നാൽ പിന്നീട് AMC (Annual Maintenance Charge) ഉണ്ടാകാം.

❓2. Zero brokerage എന്നത് എല്ലായിടത്തും ബാധകമാണോ?

ഇല്ല. സാധാരണയായി equity delivery-ക്ക് മാത്രമാണ് zero brokerage.

Intraday, F&O, currency trading-ൽ brokerage ഉണ്ടാകും.

❓3. DP charge എന്താണ്?

Demat account-ൽ നിന്ന് ഷെയർ വിൽക്കുമ്പോൾ മാത്രം ഈടാക്കുന്ന charge ആണ് DP charge.

Buy ചെയ്യുമ്പോൾ DP charge ഇല്ല.

❓4. STT refund ചെയ്യാൻ പറ്റുമോ?

ഇല്ല. STT (Securities Transaction Tax) refund ചെയ്യാൻ കഴിയില്ല.

ഇത് സർക്കാർ നിർബന്ധമാക്കിയ tax ആണ്.

❓5. GST ഏതിന്മേൽ ആണ് ഈടാക്കുന്നത്?

18% GST ബാധകമാണ്:

• Brokerage
• Exchange transaction charges

❌ STT-ൽ GST ബാധകമല്ല.

❓6. Demat AMC yearly ആണോ monthly ആണോ?

ബ്രോക്കർ അനുസരിച്ച്:

• Yearly
• Quarterly

എന്നിവ ആയിരിക്കും.

Account opening സമയത്ത് ഇത് പരിശോധിക്കുക.

❓7. Shares sell ചെയ്തിട്ടും full amount കിട്ടാത്തത് എന്തുകൊണ്ട്?

കാരണം:

• DP charge
• STT
• Exchange charges
• GST

ഇവ എല്ലാം sell value-യിൽ നിന്ന് കുറയ്ക്കപ്പെടുന്നു.

❓8. Pledge charge എപ്പോൾ ബാധകമാകും?

• Shares pledge ചെയ്യുമ്പോൾ
• Re-pledge ചെയ്യുമ്പോൾ

Margin trading അല്ലെങ്കിൽ F&O ചെയ്യുന്നവർക്ക് ഈ charge ഉണ്ടാകും.

❓9. Penalty charges എപ്പോഴാണ് വരുന്നത്?

• Margin shortfall ഉണ്ടായാൽ
• Payment delay ചെയ്താൽ
• Auction സംഭവിച്ചാൽ

ഈ സാഹചര്യങ്ങളിൽ penalty & interest charges ഉണ്ടാകും.

❓10. Trading charges എങ്ങനെ പരിശോധിക്കാം?

• Daily Contract Note
• Broker app / back-office
• Monthly statement

ഇവ വഴി എല്ലാ charges-ഉം പരിശോധിക്കാം.

❓11. Demat charges കുറയ്ക്കാൻ പറ്റുമോ?

അതെ.

✔️ Over-trading ഒഴിവാക്കുക

✔️ Margin maintain ചെയ്യുക

✔️ Unnecessary pledging ഒഴിവാക്കുക

✔️ Contract note പരിശോധിക്കുക

❓12. Long-term investors-ക്ക് charges കുറവാണോ?

അതെ.

Long-term investors-ക്ക്:

• Brokerage കുറവ്
• Trading frequency കുറവ്

അതിനാൽ total charges കുറവായിരിക്കും.

When investors enter the stock market, most of them focus only on brokerage charges. However, the real cost of trading lies in the hidden charges that silently reduce your profits.

What Are Demat & Trading Account Charges?

Demat and trading charges are fees levied by:

• Stock exchanges (NSE/BSE)
• Government & regulators (SEBI)
• Depositories (CDSL/NSDL)
• Brokers

These charges apply on buying, selling, and maintaining investments.

1. Brokerage Charges

Brokerage is the fee charged by brokers for executing trades.

Even brokers advertising zero brokerage usually charge for:

• Intraday trading
• Futures & Options (F&O)
• Currency & commodity trading

👉 Always check the broker’s tariff sheet before trading.

2. Exchange Transaction Charges

These charges are levied by NSE or BSE on every trade.

• Applicable on both buy and sell
• Varies by trading segment

Though small per trade, they add up for frequent traders.

3. SEBI Turnover Charges

SEBI charges a nominal fee on total turnover.

• Mandatory
• Applied to every trade.

This charge is small but unavoidable.

4. Securities Transaction Tax (STT)

STT is a government tax charged on:

• Equity buy/sell
• Intraday trades
• Derivatives

❌ STT is non-refundable and one of the biggest costs for active traders.

5. GST on Trading Charges

18% GST is applicable on:

• Brokerage
• Exchange transaction charges

❌ GST is not charged on STT.

6. DP (Depository Participant) Charges

DP charges are applied only when you sell shares from your Demat account.

• Charged per ISIN per day
• Levied via CDSL or NSDL

Long-term investors often miss this charge.

7. Annual Maintenance Charges (AMC)

AMC is charged for maintaining your Demat account.

• Charged yearly or quarterly

       Some brokers offer conditional or lifetime free AMC (Always confirm AMC details at account opening.)

8. Pledge & Re-Pledge Charges

If you pledge shares for margin or trade in F&O:

• Pledge charges apply
• Re-pledge is mandatory as per SEBI

Each action attracts additional charges.

9. Call & Trade Charges

If you place orders through:

• Dealer
• Phone call

Extra charges apply, even with discount brokers.

10. Penalty & Interest Charges

These charges apply due to:

• Margin shortfall
• Delayed payments
• Auction of shares

⚠️ These penalties can be expensive if ignored.

How to Reduce Demat & Trading Charges

✔️ Avoid over-trading

✔️ Maintain sufficient margins

✔️ Use limit orders

✔️ Avoid unnecessary pledging

✔️ Review contract notes regularly

✔️ Review financial ledgers/statements regularly

Why Understanding Charges Is Important

Many investors earn profits in the market but lose money through avoidable charges.

fit is not only about returns — it’s also about controlling cost

Final Thoughts

Understanding Demat and trading charges helps you:

• Protect your profits
• Trade smarter
• Avoid unpleasant surprises

A smart investor tracks both returns and cost

📌 Frequently Asked Questions (FAQ)

Hidden Charges in Demat & Trading Accounts

❓1. What are the hidden charges in a Demat account?

Hidden charges include DP charges, AMC, GST, exchange transaction charges, SEBI turnover charges, and STT. These are often deducted automatically and may not be clearly noticed by investors.

❓2. Is Demat account opening completely free?

Some brokers offer free Demat account opening, but Annual Maintenance Charges (AMC) may still apply after the first year or based on account activity.

❓3. What is a DP (Depository Participant) charge?

DP charge is a fee deducted only when you sell shares from your Demat account.

There is no DP charge when buying shares.

❓4. Does zero brokerage mean no trading charges?

No. Zero brokerage usually applies only to equity delivery.

Charges still apply for intraday, F&O, currency, and commodity trading.

❓5. On which charges is GST applicable?

18% GST is applicable on:

• Brokerage
• Exchange transaction charges
• SEBI turnover charges

❌ GST is not applicable on STT.

❓6. What is STT and can it be refunded?

STT (Securities Transaction Tax) is a government tax charged on securities transactions.

It is mandatory and non-refundable.

❓7. Why do I receive less money after selling shares?

Because the following charges are deducted before payout:

• DP charges
• STT
• Exchange transaction charges
• GST

❓8. What are pledge and re-pledge charges?

These charges apply when you:

• Pledge shares for margin
• Re-pledge shares as per SEBI rules

Mostly applicable to margin trading and F&O.

❓9. When are penalty or interest charges levied?

Penalties or interest may be charged for:

• Margin shortfall
• Delayed payments
• Auction of shares

These charges can be high if margins are not maintained.

❓10. How can I check all my trading charges?

You can check your charges through:

• Daily contract notes, financial ledgers or statements
• Broker’s trading app or back-office
• Monthly account statements

❓11. Can Demat and trading charges be reduced?

Yes. Charges can be reduced by:

✔️ Avoiding over-trading

✔️ Maintaining sufficient margins

✔️ Avoiding unnecessary pledging

✔️ Reviewing contract notes regularly

❓12. Are Demat charges lower for long-term investors?

Yes. Long-term investors usually have:

• Fewer trades
• Lower brokerage impact

Hence, overall charges are lower.

❓13. Are DP charges charged per share or per transaction?

DP charges are generally charged per ISIN per day, not per share.

❓14. Is AMC mandatory for all Demat accounts?

Most brokers charge AMC, but some offer:

• Conditional free AMC
• Lifetime free AMC

Always check broker terms.

Here are the step-by-step instructions to transfer securities from your Pentad Securities account using CDSL Easiest, presented in a pointwise format:

Registration and Upgrade

• If you haven’t registered for CDSL Easiest, visit web.cdslindia.com/myeasitoken/home/login and click on the “Click here” button next to “To Register for Easiest!”.​
• Enter your 8-digit DP ID followed by your 8-digit demat client ID (BO ID) and continue.​
• Enter the OTP received on your registered mobile or email and proceed.​
• If you already have a Myeasi account, upgrade to Myeasiest for easier transfers.​

Adding Beneficiary and Trusted Account

• Add the receiver’s (transferee’s) demat account as a beneficiary on CDSL. This is mandatory for off-market transfers.​
• After adding the beneficiary, add that account as a Trusted Account on CDSL Easiest. This process takes up to 24 hours to be approved.​

Initiating Transfer

• Log in to CDSL Easiest using your credentials.​
• Select the option to transfer securities and choose the beneficiary account as the destination.​
• Enter the details of the securities you want to transfer, including ISIN and quantity.​
• Verify the transfer request and submit. The transfer will be processed after CDSL’s approval.​

Additional Notes

• Ensure your account is not dormant or frozen; inactive ISINs cannot be transferred.​
• For off-market transfers, fields like Exchange ID and Settlement ID are not required.​
• If transferring to an NSDL account, use the “Account of choice transfer” option instead of adding as a trusted account.​

These steps will help you securely transfer securities from your Pentad Securities demat account to other CDSL demat accounts using CDSL Easiest.

1. Log in to web.cdslindia.com/myeasitoken/home/login and click on Setup under Transactions.

2. Click on Bulk Setup.

3. Click on Transaction and enter the execution date and enter the Beneficiary owner ID (BOID) of the person to whom the securities are to be transferred. Select NA from the drop-down in the Entity Identifier.

4. Click on Account ISINs, select the ISINs from the list of holdings, enter the quantity, and select the reason. You can refer to the following comminique from CDSL to select the correct reason code.

For Off-Market Sale/Purchase

• If transferring due to a sale, enter the sale amount under “Consideration Amount”.​
• Select the payment mode and enter the buyer’s bank details.​
• Pay stamp duty for the sale using your CDSL virtual account before the transfer.​
• Visit cdslindia.com/stampduty/cal_stampduty.aspx to check the required stamp duty amount.​

For Gift, Self-Transfer, or Family Transfer

• If transferring as a gift, to self, or to family (no money involved), enter “0” as the consideration amount.​
• Do not select any payment mode in this case.​

Bulk Setup and Authentication

• You can add up to 10 ISINs at a time for transfer.​
• After setting up 10 ISINs, click on “Transaction” and then “Bulk setup” to add another 10.​
• Repeat this process in multiples of 10 to add more transactions.​
• In your final batch, you’ll see a complete list of all transactions.​
• Select the transactions and authenticate them using your OTP and PIN to complete the setup.​

5. Click on Submit. If the receiver’s beneficiary is not added, the following error will be displayed: Active link between seller and buyer does not exist. To learn how to add a beneficiary

6. Click on Verify. Exchange ID, Counter Party Exchange ID, Market Type, Counter Party Market Type, Settlement ID and Counter Settlement ID need not be filled in for off-market transactions.

7. Click on Commit and then enter the OTP received on the registered mobile number and email.

8. Enter the 8-digit alphanumeric CDSL easiest PIN received on the registered email ID. Do not enter the 6-digit CDSL TPIN. First-time users must change the default PIN by visiting web.cdslindia.com/myeasitoken/home/login and, clicking on Miscellaneous, and then on Change PIN.

If the PIN was not received or forgotten, visit web.cdslindia.com/myeasitoken/home/login, click on Miscellaneous and then on Reset PIN.

This is now sent to the Depository Participant (DP) for confirmation. The request is approved on confirmation, and the transfer will be done.

Real Estate Investment Trusts, or REITs, offer a smart way for everyday investors to tap into real estate markets without buying properties outright. These funds pool money to own, operate, or finance income-generating real estate, delivering dividends from rents and appreciation.​

What Are REITs?

REITs function like mutual funds but focus on real estate, owning assets such as office buildings, apartments, malls, and hotels. By law, they distribute at least 90% of taxable income as dividends, avoiding corporate taxes while providing steady payouts to shareholders.​

Types of REITs

• Equity REITs own and manage properties, earning from rents.
• Mortgage REITs provide loans for real estate, profiting from interest.
• Hybrid REITs blend both for diversified income streams.​

Key Benefits

REITs shine in diversification, spreading risk across properties and locations without the hassle of direct ownership. They offer liquidity through stock exchange trading, professional management, and inflation hedging via rising rents.​

Risks to Consider

Market volatility, interest rate sensitivity, and limited reinvestment due to high dividend payouts can impact growth. Investors should assess fees and economic cycles before diving in.​

Getting Started

Buy REIT shares via brokerage accounts, just like stocks, starting with small amounts for broad exposure. Research listings on exchanges and align with long-term goals for optimal returns.

Mastering Inverse ETFs: Profit from Market Declines

Inverse ETFs provide a straightforward way for investors to bet against market movements, rising in value when the underlying index falls. These exchange-traded funds use derivatives to achieve daily inverse performance, making them popular for short-term hedging or speculation.​

What Are Inverse ETFs?

Inverse ETFs track the opposite daily return of a benchmark like the S&P 500 or Nifty 50, so a 1% index drop aims for a 1% ETF gain. Unlike regular ETFs holding stocks, they rely on futures, swaps, and options to replicate this inverse exposure without short-selling.​

How They Work

These funds rebalance daily to reset exposure, using derivatives to profit from declines—for example, a swap pays the ETF when the index falls. Compounding from daily resets means long-term holds can deviate significantly from the index’s overall performance due to volatility decay.​

Types Available

• Broad Market: Inverse to major indices like Nifty or S&P for overall market bets.
• Sector-Specific: Target declines in industries like banking or tech.
• Leveraged Inverse: Amplify returns, such as -2x or -3x the index’s move.​

Benefits and Risks

Inverse ETFs offer easy access, liquidity, and no margin requirements for downside protection. However, they’re unsuitable for long holds due to compounding losses in volatile or sideways markets, plus counterparty risks from derivatives.​

Risks Associated with Inverse ETFs

Knowing about the risks of inverse ETF investments is essential before you finalise your decision. Here is a closer look at the same. 

• Higher Risks

These ETFs may lead to considerable losses if the market moves in the opposite direction of your expectations. Using leverage in these funds may amplify not only your gains, but also losses. Also, these ETFs may witness tracking errors and may not always replicate the underlying index performance accurately. Factors like liquidity hurdles, rebalancing costs, fees, and market disruptions come into play in this case.

• Short-Term Focus

Inverse ETFs are tailored for short-term trading and reset exposure to the index daily. Holding them for longer durations may lead to losing their desired correlation with the index in question. 

Practical Tips

Use them for tactical trades during expected downturns, monitor daily, and pair with long positions for hedging. Note restrictions in markets like India where SEBI bans them.

Every investor has unique financial goals and needs. While some aim for long-term capital growth, others seek regular income from their investments. Mutual fund houses provide multiple facilities to cater to these varying requirements. One such tool is the Systematic Withdrawal Plan (SWP).

In this blog, we explore what an SWP is, its features, benefits, and how it can help investors achieve financial discipline.

What is a Systematic Withdrawal Plan (SWP)?

A Systematic Withdrawal Plan (SWP) is a facility offered by mutual funds that allows investors to withdraw a fixed amount from their investment at regular intervals.

Key points about SWP:

• It allows regular redemption of units from a mutual fund scheme.
• Investors can choose the frequency of withdrawals – monthly, quarterly, or annually.
• You can withdraw a fixed amount or choose to withdraw only the capital appreciation, keeping the principal intact.
• At the set date, units from your portfolio are redeemed, and the money is transferred to your account.

SWP is ideal for investors who require regular income from their investments without having to redeem the entire investment at once.

Benefits of a Systematic Withdrawal Plan (SWP)

1. Tax Efficiency

SWPs are generally more tax-efficient than dividends:

• Under the dividend option, mutual funds deduct Dividend Distribution Tax (DDT) at 10% at the source.
• With an SWP, no tax is deducted at source, but capital gains tax applies based on the type of mutual fund and holding period:

2. Rupee Cost Averaging

SWPs automatically benefit from rupee cost averaging during volatile markets:

• If units are redeemed all at once, the timing of withdrawal impacts returns.
• With an SWP, units are redeemed regularly, sometimes at higher NAVs and sometimes at lower NAVs.
• This averages out the redemption price, reducing the risk of withdrawing all funds during a market slump.

Example:

• Rajeev invested ₹5 lakh in April 2019 and withdrew ₹2.5 lakh after 5 months.
• Rajesh invested the same amount but opted for an SWP of ₹50,000 per month.

This example illustrates that Rajesh benefits from rupee cost averaging, while Rajeev’s lump-sum withdrawal is more exposed to market timing.

3. Ideal During a Bull Run

During market upswings, the gains from your mutual fund units can exceed the SWP amount.

• This allows the investment to last longer and lets you pocket the profits from bullish phases without liquidating the entire principal.

4. Promotes Investment Discipline

• Just as a Systematic Investment Plan (SIP) helps in disciplined investing, an SWP ensures you don’t withdraw large amounts impulsively during market corrections.
• It provides a steady income stream, minimizing panic-driven decisions.

How to Start an SWP in Mutual Funds

1. Select a Mutual Fund Scheme
   Choose a scheme that aligns with your investment horizon and risk appetite.
2. Decide on the SWP Amount and Frequency
   Decide whether you want a fixed withdrawal or to withdraw only capital gains, and choose the frequency (monthly, quarterly, or annually).
3. Fill the SWP Form
   Submit the SWP form with your details to the fund house or through your online investment platform.
4. Monitor Your Investment
   While SWPs reduce the need for constant monitoring, periodically reviewing your investment ensures your withdrawals continue to meet your financial needs.

Conclusion

A Systematic Withdrawal Plan (SWP) is an effective tool for investors who want to generate regular income from their mutual fund investments while maintaining investment discipline.

Key advantages:

• Tax-efficient withdrawals
• Rupee cost averaging benefits
• Longevity of investment during market upswings
• Helps maintain financial discipline

Whether you are a retiree seeking monthly income or an investor looking to gradually liquidate your mutual fund holdings, an SWP can be an essential part of your financial plan.