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Rent Stocks
Stock renting and Borrowing
Here’s a detailed breakdown of how taxation works for both lenders and borrowers.
For Renters:
When you rent your stocks through SLBM, the income you earn in the form of renting fees is classified as “Income from Other Sources.” This income is added to your overall taxable income and is taxed according to your applicable income tax slab.
If a dividend is declared during the lending period, you remain eligible to receive it as the beneficial owner. This amount is typically reflected in your Dhan trading ledger within 2–3 working days after the record date. This dividend income is classified as “Income from Other Sources” and is taxed according to your applicable income tax slab.
For Borrowers:
When you borrow stocks through SLBM, the fee paid for borrowing is subject to 18% GST under the Reverse Charge Mechanism (RCM). Under this mechanism, the responsibility of paying GST lies with the borrower directly, rather than the service provider. This means you are required to account for and pay the applicable GST on the borrowing fee.
Further, if a dividend is declared during the borrowing period, the company deducts TDS before crediting the dividend. This deducted TDS can be claimed while filing your ITR, subject to applicable rules.
For more details you can refer to our post on Tax implications of SLBM on : https://madefortrade.in/t/slbm-taxation-explained-guide-for-stock-renting-and-borrowing/63808
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