The stock market has gained popularity over the past years. Historically, it has generated more returns than any other investor, driving more investors to invest in equities to reap benefits. Investing or trading in the stock market has gained popularity over the years, including in India.
Most people have started learning about and trading in the share market after looking at its historical returns and compounding benefits in the long run. However, with many people investing in the Indian stock market, illegal activities have also increased significantly, and dabba trading, or bucket trading, is one such activity.
The Dabba trading system is a parallel system that allows investors to buy and sell stocks outside the stock exchanges. Let us understand dabba trading in detail. When you invest at DABBA TRADING, you strategically allocate resources to grow your wealth over time.
What is Dabba Trading?
Dabba trading is a proxy market. Investors must open a Demat account with online dabba brokers to buy and sell stocks on the stock exchange. However, in bucket trading, all translations happen outside of the market guidelines. It is risky, but this online dabba trading is very profitable since there are no governing rules and regulations. All trades in the dabba system are settled mainly in cash. The operators in the system take orders personally. And book transactions outside the stock market.
Since it is illegal, there is no income tax on profit gained from the trading. Traders do not pay the Commodity Transaction Tax (CTT) or the Securities Transaction Tax (STT) on their transactions. SEBI has taken several steps to curb the online dabba trading system and to encourage more investors to invest in the mainstream.
How does dabba trading work?
The dabba trading system is also called box trading in India. It is also called bucket trading in the US market. The broker routes the investors to invest outside the stock market. The orders are placed through operators, and all transactions are settled in cash weekly. The operator books the trade in its record after receiving the order from its client. The operator charges money from its clients to facilitate trades.
According to Clear Tax, no income tax is levied on profit in dabba trading. Additionally, traders tend to pay no commodity transaction tax (CTT) or securities transaction tax (STT) on their transactions. Of late, there has been a surge in such activity. Dabba traders have been fraudulently active in both the equity and commodity markets.
Transacting in the bucketing market carries higher risk. It involves counterparty risks and actions conducted by respective authorities since it is an illegal transaction. The Dabba system is a pseudo-market without a settlement guarantee, meaning you may lose all your investments.
In India, gold and silver are often traded in the parallel trading market. These commodities are traded along with copper and crude oil as well.
SEBI banned dabba trade as an illegal and prohibited activity under regulations 3 and 4 of SEBI Prohibition of Fraudulent and Unfair Trade Practices. It is also punishable under the Indian Penal Code and the Information Technology Act 2000.
Risks Involved In Dabba Trading
- Lack of regulation: Dabba trading system operates outside the region of SEBI regulations. This means there is no oversight on trades. And also pricing transparency, or dispute resolution mechanisms. As a result, investors are at a higher risk of fraud and manipulation. In almost all cases, transactions are settled in cash, which removes the money trail.
- Absence of investor protection: When you engage in dabba trade, you lose all legal protections provided by SEBI to safeguard your investments. In case of any disputes or malpractices by these unregulated individuals, seeking recourse through legal channels becomes extremely difficult.
- Risks beyond finance: Dabba trading also involves risks beyond your financial situation. It is often operated by people who will go to any extent to extort money from you if you cannot pay your losses. Involvement of goons or bad people or 3rd Party in such cases is very common.
- Legal consequences: Individuals engaging in such activities can face severe penalties, including fines and imprisonment. As a responsible investor, adhering to the law and trading only through authorized channels is crucial.
What Is Dabba Trading App?
The Dabba Trading App is a digital platform that facilitates this unofficial trading, allowing users to engage in dabba trade via the internet. Online dabba trading is popular among those who want to bypass official channels, often seeking to avoid regulatory scrutiny and associated fees. Users can easily access these services through online dabba brokers, who provide the necessary tools and support to trade informally.
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Commitment to Growth
The Dabba Trading App is dedicated to continuously enhancing its platform. This platform offers users more efficient and innovative ways to engage in dabba trading with smart investment choices.
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Streamlined Experience
The Dabba Trading App provides a seamless and user-friendly interface, making online dabba trading quick and easy.
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Customer Centric Support
The Dabba Trading App offers dedicated customer support, ensuring users receive personalized assistance and solutions promptly.
Conclusion
Earlier, dabba trading was done through networking. And the mode was offline. However, with technological advancement, various Dabba Trading Apps were developed. The Dabba Trading App helped facilitate transactions in various parts of the country.
Dabba trading may seem enticing because there are no transaction costs (GST, STT, brokerage, etc.). However, a significantly lesser margin is required, and income disclosures to the ITD are not required. Thus, its inherent risks far outweigh any potential benefits. By participating in this illicit practice, you expose yourself to SEBI’s radar, and the ITD can also step in if they doubt your tax evasion.