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Nithin Kamath said that when short-term and long-term holdings stay in the same demat, FIFO rules may count long-term stocks as short-term, raising tax liabilities
Nithin Kamath said that by transferring long-term stocks to a secondary demat account, FIFO applies separately to each account. (News18 Hindi)
Many investment experts believe that success in the stock market depends not only on picking the right stocks but also on investor behaviour and tax planning. Zerodha co-founder and CEO Nithin Kamath has now shared a key strategy that he says could change the way portfolios are managed.
Kamath shared that maintaining a secondary demat account not only instils investment discipline but also offers significant tax-saving benefits.
“When I was trading actively (before Zerodha), I had an offline demat account where I held all my investments and an online account for all my trades. This was a way to avoid the temptation of “trading” my investments,” Kamath said on X. His idea was to open a separate account to create friction between investing and trading, helping investors avoid impulsive and emotional decisions.
When I was trading actively (before Zerodha), I had an offline demat account where I held all my investments and an online account for all my trades. This was a way to avoid the temptation of “trading” my investments 😬If I had to sell any of my investments, there was effort…
— Nithin Kamath (@Nithin0dha) September 10, 2025
Control Over Impulsive Selling
Kamath elaborated that the process of selling long-term investments was intentionally cumbersome. He had to fill out a physical delivery instruction slip and send it to the broker, which acted as a “behavioural hack”, preventing impulsive selling based on short-term emotions. His best returns, he noted, came from stocks held in the secondary demat for the longest periods.
Smart Strategy For Tax Saving
Kamath added that this strategy is not only about building discipline but also about saving on taxes. In India, when both short-term and long-term holdings are kept in the same demat account, the FIFO (First In, First Out) rule applies. As a result, long-term holdings can sometimes be counted as short-term for tax purposes, he said. By transferring long-term stocks to a secondary demat account, FIFO applies separately to each account. This ensures short-term trades don’t interfere with long-term investments, he added.
Zerodha Introduces Secondary Demat Option
To assist investors, Zerodha has introduced a secondary demat account feature. Kamath stated, “You can now open a new demat and use it to segregate your long-term and short-term holdings and smartly manage the tax impact on your holdings.”
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
September 11, 2025, 16:37 IST
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