Dear Investors,
We recently introduced for our users the ability to Rent stocks via the SLBM (Stock Lending and Borrowing Mechanism) for our users. We are happy to witness participation from thousands of investors on Dhan who now found a new way to earn passive income from their long-term investments made on Dhan.
With time coming up soon for the ITR (Income Tax Returns) filings and later the advance tax season, we thought to share this post for the benefit of our users and everyone to help them understand the tax implications of Stock Renting via SLBM.
Since SLBM is relatively new for a large section of investors, there is limited clarity available on how the income and expenses from such transactions are treated for taxation purposes. To help you navigate this better, here’s a detailed breakdown of how taxation works for both lenders and borrowers.
For Renters:
When you rent your stocks through SLBM, the income you earn in the form of renting fees is classified as “Income from Other Sources.” This income is added to your overall taxable income and is taxed according to your applicable income tax slab.
If a dividend is declared during the lending period, you remain eligible to receive it as the beneficial owner. This amount is typically reflected in your Dhan trading ledger within 2–3 working days after the record date. This dividend income is classified as “Income from Other Sources” and is taxed according to your applicable income tax slab.
For Borrowers:
When you borrow stocks through SLBM, the fee paid for borrowing is subject to 18% GST under the Reverse Charge Mechanism (RCM). Under this mechanism, the responsibility of paying GST lies with the borrower directly, rather than the service provider. This means you are required to account for and pay the applicable GST on the borrowing fee.
Further, if a dividend is declared during the borrowing period, the company deducts TDS before crediting the dividend. This deducted TDS can be claimed while filing your ITR, subject to applicable rules.
To summarise, renters earn income that is taxed as per their slab rate without any GST liability, while borrowers incur borrowing costs that attract GST under RCM. Dividends in both cases remain taxable, with TDS applicable wherever relevant, however borrower is eligible for filing a return for the same.
It is important to note that the exact tax treatment may vary depending on your individual profile, nature of income (trading or investing), and overall tax position. Hence, it is always advisable to consult a tax advisor or professional for guidance specific to your situation.
SLBM taxation is one of those things that’s worth understanding before you start lending — partly because the treatment is different from what most traders are used to, and partly because it changes how you think about which holdings to put up for rent. Stock lending on Dhan has been growing steadily over the past year, much of it shaped by what traders here have asked for. Here are a few related SLBM launches in case any are useful as you go deeper:
- Earn More by Renting Stocks via SLBM — the main launch post for SLBM on Dhan. Useful as a starting point if you haven’t yet — walks through how you can rent out long-term holdings to borrowers and earn a daily fee, without giving up ownership or your corporate-action benefits.
- Zero Brokerage on Renting & Borrowing via SLBM — no brokerage charges on either lending or borrowing stocks via SLBM on Dhan. Particularly useful when paired with the tax math from this post, since lower friction makes the after-tax yield meaningfully cleaner.
- SLBM Lending Insights on ScanX — live SLBM lending data layered into ScanX while you screen. Helpful for spotting which stocks are in demand right now, so you can lend based on real signal rather than guesswork.
- SLBM Market Insights – March 2026 — the previous month’s SLBM trend report covering rental rates, most-lent stocks, and yield opportunities. Useful as a reference point for what kinds of returns are realistic before you factor in tax.
- SLBM Market Insights – April 2026 — the most recent SLBM trend report, with the latest view on rental yields and where lending demand is concentrating. Worth a look if you’re planning your next lending cycle.
Quick question for everyone here — has the tax treatment changed how you think about which stocks to put up on SLBM? Would love to hear what you’ve learned from your own lending.
Thank you,
Tanvi Vartak
