How using Multiple Demat Accounts can help to Save More Tax

Yes, it is possible to use Multiple Demat Accounts to save more Income Tax. Let us explain how it works.

As per Tax experts, If you want to enjoy the benefits of both trading and investing, you need two separate Demat accounts: one for trading and one for investing.

Income Tax Circular:

Circular Number 4/2007 dated 15-6-2007 has clarified tests for distinction between shares held as stock-in-trade and shares held as investment. In the Circular, CBDT has emphasised that it is possible for a tax payer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads i.e., capital gains as well as business income.

However there are Disadvantages of having different DEMAT Account as well. Additional changes like annual maintenance cost, keeping Track of all the accounts and increase in overall trading expenses are some of them.

Taxpayers should do a cost-benefit analysis before making any decision.