How-to zerodha rights entitlement rights issue renunciation RE trading off-market transfer corporate actions

How to renounce a rights entitlement on Zerodha

From WebNotes, a public knowledge base. Last updated 21 June 2026. Reading time ~11 min.

Key facts

What renouncing means	Selling or transferring your rights entitlement (RE) instead of subscribing to the rights shares yourself
On-market route	Sell the RE on Kite like any equity delivery trade; the RE has its own ISIN and symbol
Off-market route	Transfer the RE to a named renouncee with a delivery instruction slip quoting the RE ISIN
Trading window	RE trading opens with the rights issue and closes about four days before the issue closes
Cost on Kite	Normal equity-delivery brokerage, STT and exchange charges on the RE sale; no separate corporate-action fee
If you do nothing	The RE lapses and becomes worthless after the issue closing date

Procedure

Confirm the RE is credited to your dematAfter the rights record date, the rights entitlement (RE) credits to your Zerodha demat as a separate instrument with its own ISIN and symbol. Check console.zerodha.com, then Holdings, to confirm the RE quantity, which equals your eligible shares multiplied by the rights ratio.
Note the RE trading window datesFind the RE trading start and end dates and the RE symbol in the company or RTA email and the Letter of Offer. On-market trading in REs closes at least four working days before the rights issue closes, so act early.
Decide on-market sale or off-market transferSell the RE on the exchange through Kite for a market price, or transfer it off-market to a specific person you have agreed a price with. On-market suits selling to the market; off-market suits gifting or a private deal with a known renouncee.
On-market: sell the RE on KiteIn Kite, search the RE symbol, place a CNC sell order for your RE quantity, and execute it like an equity delivery sale. There is no intraday in REs, so the full quantity must be delivered from your demat.
Off-market: transfer the RE by DISSubmit a delivery instruction slip to your depository participant quoting the RE ISIN, the renouncee’s demat details, and the RE quantity. The renouncee must accept the credit. Off-market renunciation must be done a day or two before the on-market window closes.
Confirm the renunciation settledFor an on-market sale, the sale proceeds credit to your trading account on settlement and the RE leaves your demat. For an off-market transfer, confirm the RE has moved out of your Holdings and into the renouncee’s demat.
Account for the taxProceeds from selling an RE you received as entitlement are capital gains with nil cost of acquisition, so the whole sale price is the gain, usually short-term given the short window. Keep the contract note or DIS record for your return.

To renounce a rights entitlement is to sell or transfer the right to subscribe to a rights issue instead of subscribing yourself. When a listed company makes a rights issue, every eligible shareholder receives a rights entitlement (RE), a tradeable instrument credited to the demat account as a separate ISIN and symbol, representing the right to buy new shares at the issue price. If you do not want to put more money into the company, you do not have to let that right go to waste: you can sell the RE on the exchange through Kite or transfer it off-market to a named buyer, and capture its value. This guide is for a Zerodha client who holds REs and wants to renounce rather than subscribe.

Renunciation is one of three choices an RE holder has. You can apply, by paying the issue price and receiving the new shares; you can renounce, by selling or transferring the RE; or you can do nothing, in which case the RE lapses and becomes worthless after the issue closes. The worst outcome is the third: a holder who neither applies nor renounces absorbs the dilution of the rights issue and captures none of the RE’s value. This guide covers the renounce path, on-market and off-market, and the tax that follows.

Conflict-of-interest disclosure. This guide is published by the WebNotes Editorial Team for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this guide does not carry it and earns no referral commission from the procedure described here.

How a rights entitlement works

A rights entitlement is the tradeable form of your right to subscribe. When the company fixes the rights record date, it identifies the eligible shareholders. Within a few working days the RTA credits the RE to each eligible demat account as a distinct instrument, with its own ISIN and its own trading symbol, separate from the underlying share. The RE quantity equals your eligible holding multiplied by the rights ratio: hold 400 shares in a 1:4 issue and you receive 100 REs.

Zerodha’s own description is a useful mental model: an RE is like a coupon code attached to a stock, and like a coupon code it carries an expiry. It has value only because it lets the holder buy a new share at the discounted issue price; that value lasts until the issue closes, after which an unused RE is extinguished.

Step-by-step procedure

The procedure infobox near the top of this guide lists the sequence. The H3 sections below expand the on-market and off-market routes, which is where the two paths diverge.

1. Confirm the RE is credited to your demat

After the rights record date, log in to Console , open Holdings, and confirm the RE has credited as a separate line with its own symbol. The RE typically credits within 2 to 4 working days of the record date. If it has not appeared within about five working days, raise a Zerodha support ticket, since a depository or address mismatch at the RTA can delay or misdirect the credit.

2. Note the RE trading window dates

The window to renounce on-market is short and time-bound. Trading in REs starts when the rights issue opens and closes at least four working days before the issue closes. That early cut-off exists to give a buyer of the RE enough time to then apply for the rights shares before the issue closing date. Read the company or RTA email and the Letter of Offer for the exact RE start date, RE end date, RE symbol, and RE ISIN, because these vary with every issue.

3. Decide on-market sale or off-market transfer

On-market renunciation sells the RE to whoever is bidding on the exchange at the prevailing RE price. Off-market renunciation transfers the RE to a specific person you have agreed a price with, outside the exchange. Use on-market when you simply want to sell to the market and take the going price. Use off-market when you are gifting the RE or have a private arrangement with a known renouncee, for example a family member who will then apply for the rights shares.

4. On-market: sell the RE on Kite

To sell on the exchange:

In Kite, search for the RE symbol from the Letter of Offer.
Place a CNC (delivery) sell order for the RE quantity you want to renounce.
Execute it the way you would any equity delivery sale.

There is no intraday in REs, so you can sell only what is delivered from your demat; you cannot short an RE. The RE price on the exchange tracks the difference between the underlying share’s market price and the rights issue price, less a discount for execution and timing risk. A rights issue priced at Rs 100 against a market price of Rs 150 will see the RE trade around Rs 50, less that discount. Normal equity-delivery brokerage, STT and exchange charges apply to the RE sale; Zerodha does not levy a separate corporate-action fee for selling REs on the secondary market.

5. Off-market: transfer the RE by DIS

To renounce off-market to a named person:

Submit a delivery instruction slip to your depository participant quoting the RE ISIN, the renouncee’s demat details, and the RE quantity.
The renouncee, the person receiving the RE, issues a receipt instruction to their own DP so the credit is accepted.

In the terminology of renunciation, the person selling or giving up the RE is the renouncer and the person receiving it is the renouncee. An off-market renunciation must be completed a day or two before the on-market trading window closes, so the renouncee still has time to apply for the rights shares. An off-market transfer for no consideration, a gift, carries its own gift-tax position for the recipient.

6. Confirm the renunciation settled

For an on-market sale, the sale proceeds credit to your Zerodha trading account on settlement and the RE leaves your demat. For an off-market transfer, check that the RE quantity has moved out of your Holdings in Console and into the renouncee’s demat. Keep the contract note for an on-market sale, or the DIS acknowledgement for an off-market transfer, as the record for your tax return.

On-market versus off-market renunciation

Dimension	On-market (Kite)	Off-market (DIS)
Counterparty	The market, via the exchange	A specific named renouncee
Mechanism	CNC sell order on the RE symbol	Delivery instruction slip quoting the RE ISIN
Price	Prevailing RE market price	Privately agreed, or nil for a gift
Charges on Kite	Equity-delivery brokerage, STT, exchange charges	DP off-market transfer charge per the tariff
Timing cut-off	RE window closes about four days before issue close	A day or two before the on-market window closes
Typical use	Selling to the market at the going price	Gifting or a private deal with a known buyer

What happens to the renouncee

A buyer or renouncee who receives the RE, whether by buying it on Kite or accepting an off-market transfer, becomes eligible to apply for the rights shares even if they never held the underlying share. To apply, the renouncee uses the RE through ASBA, either on the RTA’s rights-issue web portal or through bank net banking, selecting the renouncee option (not the shareholder option) and entering their DP or BO ID before paying by net banking or UPI. If the renouncee buys the RE and then does nothing, the RE lapses and any premium they paid to acquire it is lost. This is the mirror of the renouncer’s own lapse risk, and it is the reason the RE trading window closes well before the issue does.

Tax treatment

The tax on renouncing turns on whether the RE was received as an entitlement or bought from the market.

Selling an RE received as entitlement

Proceeds from selling an RE you received as a shareholder entitlement are taxable as capital gains . The cost of acquisition of an RE received as entitlement is nil, because you paid nothing for the RE itself, so the entire sale price is the capital gain. Given the short RE trading window, the holding period is almost always under 12 months, so the gain is short-term. Report it in the capital-gains schedule of your return.

Selling an RE bought from the market

An RE bought from the secondary market has a cost of acquisition equal to the purchase price. The gain on sale is the sale price minus the purchase price, again typically short-term given the short window.

Off-market gift

An off-market transfer for no consideration is a gift. A gift to a relative as defined in the Income Tax Act 1961 is exempt in the recipient’s hands; a gift to a non-relative above Rs 50,000 in aggregate in a financial year is taxable in the recipient’s hands. For any sizeable renunciation, confirm the treatment with a chartered accountant before acting, since tax rules change each financial year and the gift and capital-gains points interact.

What can go wrong

Letting the RE lapse: if you neither apply nor renounce by the issue closing date, the RE expires worthless and drops out of your Holdings. There is no auto-sale and no cash payment for a lapsed RE.
Missing the RE window: on-market RE trading closes about four working days before the issue closes, not on the issue closing date. Sell well before the cut-off.
Assuming the RE has the same charges as a regular trade only: an on-market RE sale carries equity-delivery brokerage, STT and exchange charges, and an off-market transfer carries the DP off-market charge.
Forgetting the nil cost on entitlement REs: an RE received as entitlement has nil cost, so the whole sale price is taxed as capital gain. Budget for the tax before treating the proceeds as free money.
Off-market transfer left too late: a renouncee needs time to apply for the rights shares, so complete an off-market transfer a day or two before the on-market window closes, not at the last minute.

External references

References

SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018, rights issue provisions, RE credit, listing and renunciation.
SEBI Circular SEBI/HO/CFD/DIL1/CIR/P/2020/136, dematerialised rights entitlements and trading.
Income Tax Act 1961, Section 55 (cost of acquisition, nil for REs received as entitlement) and Section 56(2)(x) (gift in the recipient’s hands).
Zerodha support and Z-Connect documentation on rights entitlements, on-market and off-market renunciation, and RTA application.
NSE and BSE rights entitlement trading and settlement guidelines.

Frequently asked questions

What does it mean to renounce a rights entitlement?

Renouncing means selling or transferring your rights entitlement (RE) instead of subscribing to the rights shares yourself. You can sell the RE on the exchange through Kite, or transfer it off-market to a named person, and capture its value.

How do I sell a rights entitlement on Zerodha Kite?

In Kite, search the RE symbol from the Letter of Offer and place a CNC delivery sell order for your RE quantity. It settles like an equity delivery sale. There is no intraday in REs, so you can sell only what is in your demat.

What is the difference between on-market and off-market renunciation?

On-market renunciation sells the RE on the exchange through Kite at the prevailing price. Off-market renunciation transfers the RE to a specific renouncee through a delivery instruction slip quoting the RE ISIN, at a privately agreed price or as a gift.

Until when can I sell my rights entitlement?

The on-market RE trading window closes at least four working days before the rights issue closes, not on the issue closing date. The early cut-off gives the buyer time to apply for the rights shares, so sell well before it.

What is the tax on selling a rights entitlement?

An RE received as entitlement has a nil cost of acquisition, so the entire sale price is a capital gain, usually short-term given the short window. An RE bought from the market is taxed on the sale price minus the purchase price.

What happens if I do nothing with my rights entitlement?

The RE lapses and becomes worthless after the issue closing date, and it drops out of your demat. There is no auto-sale and no cash payment for a lapsed RE, so neither applying nor renouncing forfeits its value entirely.

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WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 21 June 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.