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Is it Possible to Sell a Stock for a Profit and then Buy it Back

21 Nov 2023

Upon your entry into the stock market, there can be no doubt that you do so with the intention of making good money. However, “good money” comes with costs and risks when you are dealing with markets that may be volatile. You may, at any point, think of selling a stock you won at a profit, and this profit may be substantial compared to what you spent in buying it. Still, there are those times (and more often than not) when you sell your stock at a good profit, only to see it move upwards. If you think you should buy it back, as you predict it will rise even further, you may not be able to as soon as you would like. 

You can always sell stocks if you think you will make profits, and this happens because you had earlier purchased at a lower rate than their current value. While there is no rule stopping you from buying shares online after you have sold them before, there are certain regulations about the reason for sale. When you buy stocks online after you have sold them previously, you must be cognizant of particular aspects of the transaction. 

  • Selling at a Loss

Stock selling can be confusing if you do not know exactly when you should sell any stock. You may see values rising, but is this the right time to sell? What if stock values go up even further? Such questions plague the minds of many investors. Nonetheless, if you sell your stock at a loss, you typically don’t pay any tax as you don’t make any gains. The losses from investment assets are capital losses. Gains/profits are called capital gains (on which you have to pay taxes). Losses can be offset against any capital gains or the income shown on your Income Tax Return. This saves tax. In case you sell your stock at a loss, you cannot buy back stocks instantly as this is called a wash sale tactic, used just for the purpose of avoiding tax. There is a period to wait before you can buy the stock back. If you buy stocks online just after selling them at a loss (your motive being to avoid tax), you won’t be able to avail capital losses. Technically, you have to wait before you buy the stocks you sold for losses back. The wash rule claims that, in case you sell any investment at a loss, and then you re-buy it within a month (30 days), the loss that you made initially cannot be accounted for the purpose of taxation. In case you want to purchase the stocks sold again, you have to wait for this period to lapse to claim a tax benefit.

  • Sell a Stock for a Profit

In case you sell stocks to make a profit, you gain from stock sold. That means you know when to sell a stock. If you make profits from the sale of equities, you are obligated to pay taxes on the gains you have made from your equity sale. So you have to pay capital gains tax on the profit. If you are wondering when to sell a stock for profit, then this obviously sounds like the right thing to do. It is, and in many cases, traders do sell a stock to make substantially higher profits when values increase. 

  • You can Sell a Stock for Profit

When you invest in stocks online, you should do so at a broker that gives you advice on how to trade and when to sell your stocks for maximum profit. At Motilal Oswal, not only can you open a free online Demat account, but avail of trading information that helps you to see your investments being profitable. It is always possible to sell a stock for profit purposes, as the Income Tax Department has you paying taxes on the profit you make. This is, as mentioned earlier, a capital gains tax. You can buy the same stock back at any time, and this has no bearing on the sale you have made for profit. Rules only dictate that you pay taxes on any profit you make from assets.  To profit in stocks, means that you make rich rewards. Any gains that you make are taxed in India, and profit translates to paying taxes. However, when you invest in equity, you stand to make substantial returns over the long run, and your taxes may be minimal in comparison to the returns from stocks that you make. 

Now as to the question of whether you can sell for a profit and buy the same stock back, you can do this. As mentioned, when you earn a profit from your sale, you have to pay a capital gains tax. Once you have sold stocks for profit and paid taxes due to gains you have made, it would not be sensible to buy back the stock again. To what end would you do this? You may think you have collected less profits and feel the same stock will rise even further. You can definitely buy identical stocks back, but this happens only if you have surplus funds to invest.

Final Words

When should you sell a stock for profit? The answer lies in when you can make maximum profit from a stock and whether you are a short-term investor or a long-haul investor. Theoretically speaking, the only way to make gains on the stock market involves traders making one of two decisions (or both): selling stocks at the right moment, and purchasing them at the correct time. These are the ways to make certain that you make profits. Buying a stock may be an easier decision to execute than selling it is. Decisions may be hasty and this is primarily due to greed on investors’ parts, and this has to be avoided. As you know, in the world of trading, feelings cannot enter the picture.

You can find more information at Motilal Oswal, your one-stop financial shop. 


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