What Is T+1 Settlement?

You invest in shares and stocks with the aim of generating returns. You reach your target value, and you decide to complete the trade transaction under the consideration. But do you know when you will get the proceeds credited? 

This is why knowing the settlement cycle is important. Which was previously T+2 days has now changed. It is now the T+1 settlement cycle that you should be aware of. 

So, if you are new to trading and looking for better trading knowledge, then read this guide. Know what T+1 settlement is and why it is important that you know this as an investor in India. So, let us get started.

What Is T+1 Settlement?

T+1 settlement means trade day plus one working day. It is the time taken to complete a stock market transaction. And this time starts after a trade is executed. Under this system, the transfer of shares and money happens. All this is completed on the next working day after the trade date.

In simple terms, if you buy or sell shares today, the settlement is completed tomorrow. Shares are credited to the buyer’s demat account. At the same time, the funds are credited to the seller’s trading account on T+1.

How T+1 Settlement Works

The T+1 settlement process follows a clear sequence. This starts from trade execution to final settlement. Understanding these steps is quite important for the investors. This helps them to know exactly when shares and funds are transferred. And for this process, having a trading and demat account is quite important. So, here is how it actually happens. 

Step 1: Trade Execution (T Day)

The buy or sell order is placed. It is then executed on the stock exchange. Now, this can happen on any of the stock exchanges like NSE, BSE, and others. Once matched, the trade is confirmed. Then it is sent for clearing.

Step 2: Trade Clearing and Verification

The exchange verifies trade details. The key details that are checked here include the price, quantity, and settlement obligations. This process begins on the same trading day.

Step 3: Settlement Completion (T+1 Day)

This happens on the next working day. Now, the buyer will get the shares in his demat account. At the same time, the funds for the trade are credited to the seller’s trading account. This is when the entire transaction is completed. The deal is now closed in the system.

Understanding Working Day in T+1 Settlement Cycle

When understanding the T+1 settlement cycle, it is important to know what a working day is. So, it is the day when financial institutions are working. It includes banks, the stock market, and even the clearing institutions. Only these days are counted for settlement cycles like T+1.

In India, these days are Monday to Friday. Weekends and holidays are not considered in this. So, if there is a holiday, then the settlement day moves one day ahead, which is the next working day. This is why settlements may sometimes take longer.

Example of T+1 Settlement

To understand the T+1 settlement cycle, let us check an example. This will make it easier to understand in real trading situations. Let us look at a simple buy and sell scenario.

Say, you buy shares on Monday. Now, Monday becomes the trade day or T-day. The settlement takes place on Tuesday. This is what we call the T+1. The shares are credited to your demat account on Tuesday.

Now, you sell shares on Monday. Then the sale amount is credited to your trading account on Tuesday. This will now complete the settlement on T+1. 

But say Tuesday was a holiday. So, it was not a working day. Then the new settlement day will be Wednesday. This will be the day when the trade cycle will be complete.

Why Traders Must Know T+1 Settlement

Knowing the T+1 settlement helps traders manage trades. Those offer them better clarity and control. It affects timing, fund usage, and overall trading discipline. Some of the main reasons why you should know about the settlement cycle are as follows:

• Clarity on when sale proceeds are credited

• Better planning for next-day trades

• Lower chances of settlement-related penalties

• Faster reuse of available capital

• Smoother execution of short-term strategies

This knowledge helps traders stay aligned with the settlement cycle and avoid avoidable trading errors.

Conclusion

T+1 settlement has made the Indian stock market faster and more efficient by completing trades within one working day. It gives traders quicker access to funds and shares, which improves planning and reduces confusion around settlements. For active traders and long-term investors alike, understanding this cycle helps manage cash flow and avoid avoidable errors. Platforms like Rupeezy focus on simplifying such core market concepts so traders can make informed decisions and trade with better confidence.

FAQs

What do you mean by the T+1 in the stock market?

T+1 is the trade settlement cycle. It means a trade is settled one working day after the transaction date.

Is T+1 settlement applicable to all stocks?

Yes. Most of the trades that happen in the stock market in India follow the T+1 settlement cycle.

Are weekends counted in T+1 settlement?

No, weekends and market holidays are not considered working days.

When do I receive money after selling shares under T+1?

The sale amount from the shares is credited to your account on the next working day. 

Does T+1 settlement affect intraday trading?

No, intraday trades are squared off on the same day. These are the only trades that are not impacted by settlement timing.