How are shares settled in a BTST transaction?
The Indian capital markets follow a T+2 settlement cycle. This means that if you buy a stock on Monday, it gets delivered to your demat account on Wednesday. However, you can sell your stock even before you receive it in your demat account.
In a BTST (Buy Today Sell Tomorrow) transaction, shares are allowed to be sold before they are delivered to your demat account. Learn more.
BTST transactions will be settled by first crediting shares to your account on the day it is received from the Clearing Corporation and on the same day, it'll be earmarked for delivery against the sale of stock you would have already carried out.
For example - Assume you've bought 100 shares of Reliance on Monday and sold these on Tuesday. As per the settlement cycle for the purchase, we would be transferring the shares you bought to your demat account on Wednesday. On the same day, we will earmark the 100 shares of Reliance against the sale you've made on Tuesday. These shares will be debited to your account towards the settlement on Thursday (T+2 day of the sale made on Tuesday).
By transferring the shares to your account, subsequently earmarking and then debiting for sale settlement, you will be ensured of getting credit for all corporate actions like dividends, bonus directly in your name. Similarly, if any TDS was deducted for dividends, the same would be filed against your PAN and would reflect in your 26AS instead of it being passed on from the Broker's PAN.
Note: Since the shares get credited to your demat account and then debited for BTST transactions, there will be DP charges that will be applicable like normal delivery transactions.