Zerodha’s Nithin Kamath on that one investing habit that changed his wealth creation journey
Zerodha founder and CEO Nithin Kamath has revealed how maintaining a secondary demat account acted as a behavioural hack, helping him avoid impulse trading and achieve better long-term returns. His insight underscores the importance of separating investments and trading for smarter portfolio management and tax planning.
- Sep 10, 2025,
- Updated Sep 10, 2025 7:36 PM IST
Zerodha founder and CEO Nithin Kamath has shared a personal investing lesson that shaped his approach to wealth creation. In a recent post on his official X handle, Kamath revealed that his best investment returns came not from active trading, but from stocks held for years in an offline secondary demat account.
Kamath explained that before launching Zerodha, he actively traded using one account while maintaining a separate offline demat account for long-term holdings. The added friction of selling — which required filling physical delivery slips and sending them to a broker — kept him from giving in to the temptation of frequent trading. “Unsurprisingly, the best returns were on stocks that I held the longest in my secondary demat,” he wrote.
According to Kamath, such segregation also has tax benefits. When both short- and long-term holdings are in the same account, FIFO (First In, First Out) taxation rules apply. By separating investments, investors can manage their portfolios more strategically and reduce unintended tax liabilities.
The reflection coincides with Zerodha’s rollout of secondary demat accounts on its Kite platform, a feature long in the works. “We wanted to offer a secondary demat for a long time, but there were some challenges. You can now open a new demat and use it to segregate long-term and short-term holdings and smartly manage the tax impact,” Kamath said, calling it a useful behavioral hack against impulse selling.
How to open a Secondary Demat Account in Zerodha
Opening a secondary demat account in Zerodha is simple, free, and can be done completely online if your Aadhaar is linked to your mobile number. A secondary demat account is an additional account alongside your primary one, useful for separating long-term investments from short-term trades and improving tax planning.
Advantages of a secondary demat account
Efficient tax handling: Under the Income Tax Department’s FIFO (First In First Out) rule, shares are sold in the order they were bought. By transferring long-term holdings to a secondary demat, you ensure that short-term trades are not mixed with long-term ones. FIFO is applied separately to each demat, making tax filing clearer.
For example, if you buy 100 shares at Rs 100 in January (long-term) and another 100 shares at Rs 150 in June (short-term), then sell 100 in July at Rs 180:
Without a secondary demat, FIFO sells your January batch, creating a taxable short-term gain of ₹8,000.
With a secondary demat, you can transfer the January shares out, so only the June batch is sold, reducing taxable gains to Rs 3,000 while keeping your long-term investment intact.
Portfolio organisation: Shares in the secondary account appear only on Console, not Kite, helping you clearly separate long-term and short-term strategies.
Prevents impulsive selling: Since transfers between accounts take 24 hours, you cannot instantly liquidate long-term holdings, giving you time to reassess before selling.
How to open a secondary demat account
On Kite app: Go to your profile → Manage account → Demat → Secondary → Continue. Add nominee details, complete IPV (In-Person Verification) by capturing your photo, sign digitally with Aadhaar OTP, and submit.
On Kite web: Log in → Console → Account → Demat → Secondary. Follow the same steps as above.
The secondary account is usually activated within 72 working hours, and confirmation is sent via email.
Charges of a Secondary Demat Account
Each demat account attracts ₹300 + 18% GST annually as AMC, charged separately for primary and secondary accounts. BSDA benefits are not applicable. Off-market share transfers between accounts cost ₹13 + GST (₹15.34) per transaction, regardless of share quantity or value.
This insight aligns with Kamath’s broader philosophy of disciplined investing over speculation. He has often emphasized that patience and consistency outweigh short-term market timing. The move also highlights Zerodha’s commitment to simplifying investing habits for its users, while reinforcing its reputation for innovation built not on advertising, but on customer trust and referrals.
Zerodha founder and CEO Nithin Kamath has shared a personal investing lesson that shaped his approach to wealth creation. In a recent post on his official X handle, Kamath revealed that his best investment returns came not from active trading, but from stocks held for years in an offline secondary demat account.
Kamath explained that before launching Zerodha, he actively traded using one account while maintaining a separate offline demat account for long-term holdings. The added friction of selling — which required filling physical delivery slips and sending them to a broker — kept him from giving in to the temptation of frequent trading. “Unsurprisingly, the best returns were on stocks that I held the longest in my secondary demat,” he wrote.
According to Kamath, such segregation also has tax benefits. When both short- and long-term holdings are in the same account, FIFO (First In, First Out) taxation rules apply. By separating investments, investors can manage their portfolios more strategically and reduce unintended tax liabilities.
The reflection coincides with Zerodha’s rollout of secondary demat accounts on its Kite platform, a feature long in the works. “We wanted to offer a secondary demat for a long time, but there were some challenges. You can now open a new demat and use it to segregate long-term and short-term holdings and smartly manage the tax impact,” Kamath said, calling it a useful behavioral hack against impulse selling.
How to open a Secondary Demat Account in Zerodha
Opening a secondary demat account in Zerodha is simple, free, and can be done completely online if your Aadhaar is linked to your mobile number. A secondary demat account is an additional account alongside your primary one, useful for separating long-term investments from short-term trades and improving tax planning.
Advantages of a secondary demat account
Efficient tax handling: Under the Income Tax Department’s FIFO (First In First Out) rule, shares are sold in the order they were bought. By transferring long-term holdings to a secondary demat, you ensure that short-term trades are not mixed with long-term ones. FIFO is applied separately to each demat, making tax filing clearer.
For example, if you buy 100 shares at Rs 100 in January (long-term) and another 100 shares at Rs 150 in June (short-term), then sell 100 in July at Rs 180:
Without a secondary demat, FIFO sells your January batch, creating a taxable short-term gain of ₹8,000.
With a secondary demat, you can transfer the January shares out, so only the June batch is sold, reducing taxable gains to Rs 3,000 while keeping your long-term investment intact.
Portfolio organisation: Shares in the secondary account appear only on Console, not Kite, helping you clearly separate long-term and short-term strategies.
Prevents impulsive selling: Since transfers between accounts take 24 hours, you cannot instantly liquidate long-term holdings, giving you time to reassess before selling.
How to open a secondary demat account
On Kite app: Go to your profile → Manage account → Demat → Secondary → Continue. Add nominee details, complete IPV (In-Person Verification) by capturing your photo, sign digitally with Aadhaar OTP, and submit.
On Kite web: Log in → Console → Account → Demat → Secondary. Follow the same steps as above.
The secondary account is usually activated within 72 working hours, and confirmation is sent via email.
Charges of a Secondary Demat Account
Each demat account attracts ₹300 + 18% GST annually as AMC, charged separately for primary and secondary accounts. BSDA benefits are not applicable. Off-market share transfers between accounts cost ₹13 + GST (₹15.34) per transaction, regardless of share quantity or value.
This insight aligns with Kamath’s broader philosophy of disciplined investing over speculation. He has often emphasized that patience and consistency outweigh short-term market timing. The move also highlights Zerodha’s commitment to simplifying investing habits for its users, while reinforcing its reputation for innovation built not on advertising, but on customer trust and referrals.