The Central Board of Direct Taxes (CBDT) in a 2007 circular noted that a taxpayer can keep separate status of a trader as well as the investor.
The countdown for filing returns has started. By filing an ITR, an individual can save more taxes on his/her income. But did you know that you could save more by having multiple Demat accounts? Yes, that is possible and here we explain how it works.
Speaking with CNBC-Awaaz, tax expert Mukesh Patel said, “Even today, many people have this wrong impression that I can only have one Demat account after my name. As per the laws, you can keep more than one Demat account.”
However, while doing so, a person is required to stay cautious about certain restrictions.
“You just need to take care of one thing: you can’t keep more than one account with your depository participant (DP) or broker. If you wish to keep more than one Demat account with two different DPs or brokers, and there should be no doubt about this,” Patel noted.
What’s the benefit from it?
“You need to do a cost-benefit analysis of whether the benefit you wish to take is worth it in comparison with an extra amount of money you have to spend,” Patel said.
Further. he went on to highlight that the Central Board of Direct Taxes (CBDT) in a circular in 2007 had noted that a taxpayer can keep separate status of a trader as well as the investor.
“If I wish to take benefits of both trader and investor, then I need to have two separate Demat accounts for this — one for trading purposes and the other for investment,” Patel said.
“Secondly, if I don’t wish to be a trader and wish to continue as an investor… there is Section 45 (2A), under which it has been stated that you’ll have to follow the FIFO (First in, first out) method,” he added.
Besides that, Patel also urged people to open more Demat accounts in the names of other members of their families as that, too, helps in saving taxes.
However, people must understand that there are certain disadvantages of opening more than one Demat account as it invites additional changes like annual maintenance among others. As a result, this increases your overall trading expenses. Moreover, keeping track of multiple Demat accounts can be a bit tricky at times.
Source: https://www.cnbctv18.com/personal-finance/multiple-demat-accounts-can-help-save-more-on-income-tax-returns-expert-explains-19410295.htm
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