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How is the buy average affected when shares from holdings are sold and bought back on the same day?

The buy average calculation is unaffected by intraday trades of shares that are part of the holdings since these trades are considered as separate transactions. This is because the shares do not physically move in or out of the demat account.

Example Scenario

  1. 50 shares of Reliance were purchased at ₹500 in 2021 and are currently held in the demat account.
  2. The current trading price of Reliance is approximately ₹2500.
  3. If these shares are sold at ₹2500 and bought back on the same day for ₹2400, the intraday trade will not impact the buy average.
  4. The buy average will still remain at ₹500.

The buy average is calculated by considering the tax implications of trades. According to IT Rules, any transaction that does not result in delivery in or out of demat is classified as intraday and is considered speculative, and such transactions must be categorized separately. It is important to keep intraday trades separate from delivery transactions, which are evaluated for capital gains.

However, this is not applicable for T2T stocks since the buy average will be the latest buy price. To learn more, see What are Trade to Trade or T2T stocks?