Short answer: To buy shares directly on the NSE or BSE you need a PAN, a completed KYC, a demat account and a trading account with a SEBI-registered stockbroker, linked to your bank account. Direct investing gives you control and no fund-management fee, but you carry all the research, diversification and behavioural risk yourself. Build an emergency fund first, invest only money you won’t need for five years or more, avoid borrowing to invest, and stay away from F&O trading until you understand it fully.
Last updated: 13 October 2026.
We first published this in 2022. This 2026 version updates the tax rates, settlement cycle and investor-protection points, and adds a worked example.
Before you start: are you ready?
- Emergency fund in place: 6 months of expenses in a savings account, FD or liquid fund. Use the emergency fund calculator.
- High-cost debt cleared: paying off a 36% credit card balance is a guaranteed return no share can match. See how to progressively reduce credit card dues.
- Insurance sorted: health cover and term life cover if others depend on you.
- Time horizon of 5+ years for any money put into equities.
How to open the accounts
- Choose a SEBI-registered stockbroker. Banks, full-service brokers and discount brokers all offer demat and trading accounts. Compare account opening and maintenance charges, brokerage, and the quality of the app.
- Complete KYC with PAN, Aadhaar-based e-KYC or other address proof, a bank account, and in-person or video verification.
- Set your nomination (or formally opt out) for the demat account.
- Link your bank account for funding and payouts. Money goes from your bank to the broker and is reflected in your trading balance.
- Read the investor charter your broker must provide; it lists your rights and the broker’s obligations.
The SEBI investor website has free modules on how markets work, warnings on fake trading apps and “stock tips” groups, and an investor awareness test.
How a trade works
You place an order on the broker’s app; it is executed on the NSE or BSE. Indian equities now settle on a T+1 basis for most stocks, so shares bought today are credited to your demat account by the next working day. When you sell, the money reaches your trading account and can be withdrawn to your bank.
Direct stocks vs mutual funds and ETFs
| Direct stocks | Equity mutual funds / ETFs | |
|---|---|---|
| Control | You choose every stock | Fund manager or index decides |
| Diversification | You must build it (15–20 stocks across sectors) | Built in, even with ₹500 |
| Costs | Brokerage, DP charges, STT | Expense ratio; ETFs also have brokerage |
| Time needed | Research and monitoring | Low |
| Behavioural risk | High: easy to over-trade | Lower, especially with SIPs |
Many investors combine both: a core of index funds or ETFs and a smaller satellite of direct stocks. Read are ETFs a good investment for you and 12 common SIP investor mistakes.
Tax on listed shares (2026)
| Holding period | Type of gain | Tax rate |
|---|---|---|
| Up to 12 months | Short-term capital gain | 20% |
| More than 12 months | Long-term capital gain | 12.5% on gains above ₹1.25 lakh a year |
| Dividends | Income | Taxed at your slab rate |
These rates (plus surcharge and cess where applicable) have applied since July 2024 and were not changed by Budget 2026. Securities transaction tax (STT) is charged on equity trades; the 2026 Budget raised STT on futures and options from 1 April 2026 but left delivery trades unchanged. From 1 April 2026 the Income-tax Act, 2025 applies, and share buybacks are taxed as capital gains in the shareholder’s hands. Which ITR form you can use depends on your gains; see the Income Tax Department’s guide to applicable returns.
Worked example: You buy shares for ₹1,00,000. If you sell after 14 months for ₹1,60,000, the ₹60,000 long-term gain is within the ₹1.25 lakh exemption, so no tax is due if you have no other long-term equity gains that year. If you sell after 8 months for ₹1,30,000, the ₹30,000 short-term gain is taxed at 20%, that is ₹6,000, plus 4% cess = ₹6,240. Brokerage and STT reduce your gain.
A simple checklist before buying a stock
- Business: Can you explain in two lines how the company makes money?
- Profits and cash flow: Has it earned profits and generated cash over several years, not just one good year?
- Debt: Is borrowing manageable relative to profits?
- Valuation: Is the price reasonable compared with earnings and peers, or are you paying for hype?
- Governance: Any frequent auditor changes, promoter share pledging or related-party red flags?
- Your exit rule: What would make you sell? Write it down before you buy.
If you cannot answer these, an index fund may suit you better for that part of your money. Long-term thinking matters more than picking the next winner; see the advantages of long-term thinking with money.
Rules that protect beginners
- Diversify. No single stock should be large enough to derail your goals if it falls 50%.
- Read the annual report, not just tips. Understand how the company earns money, its debt and its management.
- Invest in instalments rather than all at once, to reduce timing risk.
- Ignore “guaranteed return” groups. SEBI-registered advisers cannot guarantee returns; unregistered tipsters are a common route to fraud.
- Avoid F&O as a beginner. A SEBI study found that about 93% of individual traders in equity F&O lost money between FY22 and FY24, with aggregate losses above ₹1.8 lakh crore.
- Keep records of contract notes and the annual tax P&L from your broker.
Should you borrow to invest?
Generally, no. A personal loan at 12–18% needs your shares to beat that cost after tax just to break even, and markets can fall 20–30% in a year. If you already hold shares or mutual funds and need short-term money, a loan against shares or loan against mutual funds can be cheaper than selling or taking an unsecured loan, but a sharp market fall can trigger a margin call. Compare rates on LAS and LAMF rates across lenders.
Need cash without selling your investments? Compare loans against shares and mutual funds from regulated lenders.
If something goes wrong
Raise a complaint with your broker or depository participant first. If unresolved, file on SEBI’s SCORES complaint portal, which tracks the complaint and escalates it to the regulated entity. For disputes, the stock exchanges’ online dispute resolution route is also available.
Frequently asked questions
What is the minimum amount needed to invest in shares?
There is no official minimum; you can buy a single share. Brokerage and demat charges make very small, frequent trades costly.
Can I invest without a demat account?
Not in listed shares. You need a demat account to hold them and a trading account to buy and sell.
How is long-term capital gain on shares taxed in 2026?
Gains on listed shares held over 12 months are taxed at 12.5% on the amount above ₹1.25 lakh in a year, plus applicable surcharge and cess.
Is it safe to follow stock tips on WhatsApp or Telegram?
No. Many such groups are pump-and-dump or investment frauds. Check if the adviser is SEBI-registered and never pay to a personal account.
Do I pay tax if I haven’t sold my shares?
No capital gains tax is due until you sell. Dividends you receive are taxable in the year you get them, at your slab rate.
Should I start with F&O to grow money faster?
SEBI’s own data shows most individual F&O traders lose money. Learn cash-market investing first.
Sources
- SEBI: Investor website
- SEBI: Study on F&O traders' losses FY22–FY24 (press release, 23 Sept 2024)
- SEBI: SCORES complaint redressal system
- Income Tax Department: Which ITR form applies
Disclosure: FundsTiger (Gatimaan Finance Advisors Pvt. Ltd.) is a loan marketplace and lending service provider for RBI-regulated lenders. Aparampaar Finance Pvt. Ltd. (Omozing), one of those lenders, is a related party of FundsTiger. This article is general information, not financial advice. Read your loan agreement and KFS before you decide.