With more investors exploring different brokers, platforms, and investment strategies, it’s become increasingly common to maintain multiple Demat accounts. While there’s nothing illegal about it, many investors overlook the tax and compliance aspects that come with holding more than one account. Let’s understand the rules, benefits, and potential tax implications of managing multiple Demat accounts in India.
Is It Legal to Have Multiple Demat Accounts?
Yes, the law allows you to open multiple Demat accounts under your name. You can hold one or more accounts with different Depository Participants (DPs) such as Zerodha, Groww, ICICI Direct, or HDFC Securities — as long as they are linked to your unique PAN number. However, you cannot open more than one Demat account with the same DP.
Having multiple accounts can be useful for separating trading and investing activities, using different brokers for various segments, or testing new platforms. But since all accounts are linked to your PAN, your holdings and transactions are easily traceable by tax authorities.
Reporting Your Capital Gains
Regardless of the number of Demat accounts you hold, your capital gains tax is calculated on your overall transactions, not on a per-account basis. Here’s how it works:
- Short-Term Capital Gains (STCG): If you sell equity shares or equity-oriented mutual funds within 12 months, the gains are taxed at 15% under Section 111A.
- Long-Term Capital Gains (LTCG): If you sell after 12 months, gains exceeding ₹1 lakh in a financial year are taxed at 10% under Section 112A, without indexation benefits.
When you file your Income Tax Return (ITR), you must consolidate gains and losses from all Demat accounts. Skipping any account or broker while reporting could be considered tax evasion, as your PAN links all your transactions.
TDS and Brokerage Statements
Most brokers provide detailed capital gains reports, but if you use multiple platforms, you’ll need to combine them manually or use tax software. Ensure that TDS (Tax Deducted at Source), if applicable, matches your consolidated records. Always cross-check broker-provided statements with the Annual Information Statement (AIS) available on the Income Tax portal — it now includes all your stock, mutual fund, and bond transactions.
Set-Off and Carry-Forward of Losses
If you incur a capital loss in one Demat account, you can offset it against gains from another account, provided they belong to the same financial year.
- Short-term losses can be set off against both short-term and long-term gains.
- Long-term losses can only be set off against long-term gains.
If your losses are not fully adjusted, you can carry them forward for up to eight assessment years, but only if you file your ITR before the due date.
Gifts and Transfers Between Accounts
Transferring shares between your own Demat accounts is not taxable, as there’s no change in ownership. However, if you gift or transfer securities to another person’s Demat account, it may attract taxation under the Income Tax Act if the value exceeds ₹50,000 (unless it’s to a close relative as defined by law).
Compliance and Audit Trail
The Income Tax Department has access to your consolidated financial data through PAN-based tracking. Hence, all your trading and investment activities are visible, even across brokers. Failing to disclose gains or interest income from one of your accounts can invite scrutiny or a notice for under-reporting.
Final Thoughts
Holding multiple Demat accounts can make sense for organizational convenience or platform flexibility. However, it also adds responsibility — you must maintain accurate records, consolidate reports, and file taxes diligently. As long as you stay compliant, having multiple Demat accounts won’t create tax problems. But ignoring proper reporting could cost you much more than any trading gain.
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