India will be the second largest country in the world after China, where T+1 system will be implemented for settlement of shares. Presently, T+2 system is applicable for settlement of shares. T stands for trading day. This means that when an investor sells a share, he can withdraw the proceeds from his demat account after two days.
Now from February 25, 2022, this period of two days will be reduced to one day. However, initially this system will be implemented only in 100 small companies according to the market cap. Then more companies will be included in it in a phased manner. According to a report, it will take a year for the T+1 system to be implemented in large cap stocks.
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Nitin Kamat, founder of brokerage firm Zerodha, said that the most frequently asked question from customers on Zerodha’s customer care is why they are not able to withdraw their money after two days of selling the shares. ? “Hopefully, with the implementation of the T+1 system, there will be some reduction in this question,” Kamat said in a blog post.
But why is the T+0 system not being implemented in India? That is, why can investors withdraw money on the same day after selling the shares? Whereas after the arrival of UPI revolution, more than 4 billion transactions are being done daily in the banking system and all the transactions are settled on the same day?
On this question Nitin Kamat said that we have to understand that only one asset is transacted in a bank transaction and that is money. Whereas in the transaction of stock market two things are transacted – stock and money.
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Kamat said, “Stocks also now exist in digital form and they can be transferred instantly from one place to another. But they cannot be transferred immediately because of intraday trading. Most of the trading in the stock market is done by intraday traders. Those who buy and sell the stock without giving or taking delivery of the stock, so if you buy a share from an intraday trader on the exchange, he may have the option to transfer it to your demat account immediately. Don’t have any shares.”
Kamat said that usually intraday traders clear their positions before the end of the day’s trading. He said that in the end the responsibility of delivering the stock rests with the one who has the stock.
“All the buy and sell positions are cleared only at the end of the trading day. The brokers then transfer the stock and money to the clearing corporation to settle the transaction,” Kamat said. Due to this, it is very difficult to immediately transfer or implement T+0 system.
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