Contents
Definition
T+1 settlement means that a trade executed on day T settles on the next working trading day (T+1): the buyer's account is debited cash and credited shares; the seller's account is credited cash and debited shares on T+1 by 1:30 PM (payout time per SEBI/NSCCL). India completed its phased migration to T+1 for all equity scrips by January 27, 2023, under SEBI Circular SEBI/HO/MRD2/DCAP/P/CIR/2023/004. This made India one of the world's first major markets to mandate T+1 for all listed equities (the US moved to T+1 in May 2024). SEBI has since proposed T+0 optional settlement for select scrips, piloted in March 2024. Source: SEBI Circular dated January 6, 2023.
How It Works Mechanically
India's equity settlement is handled by two clearing corporations: NSCCL (NSE Clearing) and ICCL (BSE's Indian Clearing Corporation). Both operate on a multilateral net settlement basis:
- Trade day (T): Buyer places order → matched on exchange → trade confirmation generated. Shares are locked in the seller's demat account by the depository (NSDL/CDSL) and earmarked for delivery.
- Settlement day (T+1, by 10:00 AM): Clearing members submit funds obligations. NSCCL nets buy and sell positions across all members for each scrip, arriving at a net securities and funds obligation per member.
- Pay-in (T+1, 10:30 AM): Securities pay-in: selling brokers' depository accounts are debited. Funds pay-in: buyers' bank accounts (via clearing banks) are debited.
- Payout (T+1, 1:30 PM): Securities payout: buyers' demat accounts are credited. Funds payout: sellers' bank accounts are credited.
For delivery failure (seller cannot deliver shares): NSCCL runs a close-out auction the next trading day; the defaulting party bears the close-out price difference plus a penalty.
Under T+0 pilot (selective scrips): settlement occurs same-day by 4:30 PM for trades executed before 1:30 PM. This is optional and running in parallel with T+1.
Cost Components
Settlement itself carries no separate charge for retail investors — it is embedded in the exchange's transaction charges. Relevant costs:
- STT on delivery: 0.1% on buy + 0.1% on sell (charged at trade execution, settled through broker on T+1).
- Depository charges (NSDL/CDSL): ~₹5.5–₹15.93 per ISIN per debit transaction (charged quarterly or per delivery, varies by DP/broker).
- If buying with BTST (Buy Today Sell Tomorrow): selling T+0 stock before T+1 receipt is technically a short delivery risk — SEBI allows it but broker margin requirements apply.
Risk / Protection Rules
- Earmarking: At trade time, the seller's shares are immediately earmarked (blocked) by the depository, eliminating the risk of a seller re-selling the same shares between T and T+1.
- Close-out auction: NSCCL's auction mechanism ensures buyers receive shares even if a seller defaults, at a price determined by the auction (capped at 20% above last traded price).
- Settlement Guarantee Fund (SGF): NSCCL maintains a SGF exceeding ₹7,000 crore (as of 2024) to cover member defaults, protecting the counterparty's settlement.
- Short selling: Naked short selling in delivery segment is prohibited. All short positions must be covered by T+1 payout time. Intra-day short selling must be covered by end of trading day.
Worked Example
Investor C buys 100 shares of Wipro on NSE on Monday, January 15 (T). Settlement timeline: Tuesday January 16 (T+1) by 1:30 PM — 100 Wipro shares appear in C's demat account and ₹1,74,500 + STT + charges are debited from her broker-linked bank account. If Wipro pays a dividend with ex-date January 16, Investor C is eligible (she owned shares by payout time on T+1 = January 16). Contrast with old T+2: she would have received shares on January 17, missing the ex-date.
Caveats / Common Mistakes
- BTST risk: Selling on T+1 before your own T+0 purchase has settled is a delivery risk if your selling price triggers a margin shortfall. Brokers may allow BTST but restrict delivery if the counterparty's T+1 delivery fails.
- Ex-date eligibility: you must hold shares at the start of ex-date — not at settlement date. Under T+1, buy one trading day before ex-date to be eligible for dividend/bonus/rights.
- T+0 pilot is opt-in; verify your broker supports T+0 for the specific scrip before relying on same-day settlement cash.
See Also
Primary Source
MintByte (ARN-314872 / APMI APRN-01658) provides this glossary for educational purposes only. Nothing here constitutes investment advice, a recommendation to buy or sell any security, or a guarantee of returns. Equity and derivatives trading involves risk of loss. Consult a SEBI-registered adviser before making investment decisions.