Stock renting—officially called the Stock Lending and Borrowing Mechanism (SLBM)—allows investors to lend eligible shares they already own to traders for a fixed period and earn a lending fee. It can provide additional income alongside potential price appreciation and dividends, subject to applicable exchange and regulatory rules.
📌 For Lenders (Owners):
1. You do not sell your shares; you temporarily lend them.
2. You earn a rental fee from the borrower.
3. You may continue to benefit from long-term price movements and applicable corporate benefits, such as dividends, according to the mechanism’s rules.
4. At the end of the lending period, the shares are returned to your demat account.
5. The lending fee depends on demand for that stock, quantity, tenure, and prevailing market conditions.
📌 For Borrowers (Traders):
They may use borrowed shares to:
1. Execute short-selling strategies in the cash market.
2. Meet delivery obligations and avoid short-delivery penalties.
3. Support hedging, arbitrage, or other trading strategies.
📌 Taxation -
The Central Board of Direct Taxes (CBDT) classifies SLBM lending fees as "Income from Other Sources". This income gets clubbed with your total salary or professional revenue and is taxed according to your highest individual income tax slab rate.
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