Will i get LTCG in swing trading, if min amount are held in account?

Taxation
1

i recently learned zerodha uses FIFO(first in first out) when selling stocks. If this is true, then it is bad for swing trading since we have no advantage of ltcg.

Let me give example.

  1. buy 100 (Group A, total: 100)

  2. buy 100 (Group B, total: 200)

  3. sell 100 (Group A, total: 100)

  4. buy 100 (Group C, total: 200)

  5. sell 100 (Group B, total: 100)

  6. buy 100 (Group D, total: 200)

In the end i have 200 shares with Group C, Group D. In this case i won’t be getting any LTCG since my initial Group A was not held for more than 1 year (considering enough time has passed). Although i always had 100 shares in my account.

If LIFO (last in first out) was used, then i would have sold 100 shares from Group B, and 100 shares from Group C. This would have given me LTCG on Group A.

Does this make sense ? or am i missing some thing?

2

Hi @goutham_vel

FIFO is mandated to be used to report profit and loss (P&L) while filing income tax returns as per the income tax department (WEB).

One jugaad you can probably use is to buy long term shares in your family accounts and keep the short term trades in your account. :smiley:

I would recommend you to consult with your CA to save taxes.

3 Likes
3

Hello @goutham_vel

According to the provisions of the Income Tax Act, the First-In-First-Out (FIFO) method is applied for the computation of capital gains.
This means that when securities or other capital assets are sold, the assets that were acquired first are assumed to be sold first for the purpose of calculating the gain or loss arising from the transaction.

The FIFO method ensures a systematic and consistent approach in determining the holding period and cost of acquisition, which are essential factors in the calculation of short-term or long-term capital gains.

Hope, this helps!