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How to view the long-term and short-term holdings separately?

To categorise securities separately as long-term (securities held for more than 1 year) and short-term (securities held for less than 1 year), the tags feature on Console can be used. Once the securities are tagged, they can be viewed using filters on Console. See How to add tags on Zerodha’s Console?

Even though the holdings can be viewed separately, they cannot be sold separately. Purchase and sale of securities are accounted for based on the First-In-First-Out (FIFO) method as per the Income-tax guidelines (WEB). The shares purchased first are considered to be sold first from the demat account.

Securities in a demat are not differentiated in terms of when they were bought. When filing income tax returns, it is the investor's responsibility to indicate whether the sale of the asset resulted in a short or long-term capital gain or loss. But as was already mentioned, the IT department requests that clients follow FIFO, and Zerodha’s P&L statements also do the same.

When figuring out the purchase price and capital gains or losses, what was purchased first will be counted as what was sold first.

Example Scenario

  1. Mr A is holding 10 quantities of Infosys for two years. He buys 15 more quantities to sell after a week as he expects an upside. Now he holds 25 quantities of Infosys, i.e., 10 quantities previously held + 15 quantities recently bought.
  2. He sells 15 quantities after a week. Based on the FIFO method, the first 10 quantities that were held for more than two years will result in Long Term Capital Gain (LTCG) if the selling price is higher than the buying price. The P&L for the remaining 5 quantities sold will be considered based on the buying price of the stock bought recently to determine short term capital gains.

Did you know? Zerodha gets requests asking if the order in which buying price is considered when a stock is sold can be changed or if custom short and long term holdings for the same stock can be made. As was said above, it isn't possible as Zerodha needs to follow the income tax guidelines (WEB).