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Introduction to dabba trading

The growing popularity of the stock market has benefited the economy and the public at large, but it has also made room for some illegal activities.

One such activity is dabba trading. Read further to know what it means and how it works.

What is dabba trading?

The process of trading illegally outside the boundaries of stock exchanges is called dabba trading or box/bucket trading.

Boxes are called “dabbas” in Hindi, and that is where the term dabba trading originated.

The brokers here are called the dabbawalas. Investors and traders transact with these brokers instead of using the stock exchange platform.

How does dabba trading work in India?

The concept of dabba trading is comparable to buying movie tickets in black.

The dabba trading brokers act as middlemen between traders. They look for buyers and sellers interested in the same security in the dabba market. They connect the two and facilitate the trade in exchange for a commission, calculated as a percentage of the trade value.

Example: Trader A wants to buy 100 shares of ABC Ltd at ₹100. He wants to buy them in the dabba market and places the order with a dabbawala. The broker then looks for a seller willing to sell 100 units of ABC Ltd at ₹100.

Upon completion of the transaction, the broker charges a commission on the trade value.

Another form of dealing in the dabba market is through betting. Traders speculate price movements of securities and bet with the brokers. If the prices move according to their speculations, the traders profit, or else the brokers profit.

The transactions in dabba trading are mostly cash-based.

Benefits of dabba trading

  • No stock market regulations: As these transactions materialise outside the stock market’s purview, the rules of the stock exchanges do not apply here. 
  • Tax saving: While the money earned through stock markets is taxable, the money in the dabba market is unaccounted for and tax-free. 
  • Trading costs are saved: Trading costs on the stock exchange like payment of various fees like stamp duty, brokerages, depository charges, etc. are saved in dabba trading.
  • Quick execution: Since this is an unregulated market with fewer traders, the execution of trades happens faster.
  • Better prices of securities: The prices in the dabba market are manipulated to favour the traders.

No, dabba trading is illegal and is a punishable offence in the Indian court of law.

The Indian Penal Code (IPC) of 1870 covers the dabba trading in Sections 120-B, 406 and 420.

According to the Securities Contracts Regulation Act (SCRA) of 1956, dabba trading is a criminal offence under Section 23(1). The punishment includes imprisonment for up to 10 years or a fine of up to ₹25 crores or both.

Risks involved

Apart from the legal consequences when caught, the dabba market involves other risks like the below:

  • Difficulty in resolving disputes: It is hard to find resolutions in case of disputes, between the traders or with the broker as there are no regulations. 
  • No transparency: Since dabba trading does not involve any statutory requirement of disclosing the financial details, there is no transparency between the traders and brokers.
  • No legal protection – Since dabba trading is illegal and does not involve any governing body, there is no protection for losses that the traders may incur.

Economic impact

According to the Income Tax Act of 1961, income, including profits from investments are taxable.

Income tax, paid by the citizens of the country, is one of the primary sources of income for the government to conduct its day-to-day activities. Since dabba trading is not within the scope, the traders evade tax payments.

Tax evasion is an unlawful practice that affects the income of the government. Traders may also follow other unlawful practices to launder money earned through dabba trading, leading to security threats, economic instability, etc.

Recent news

The laws and regulations around stopping the dabba trading in India are getting stricter by the day.

A group of 6 people were recently caught by the police for trading in the dabba market.

This group has earned a turnover of ₹4,672 crores by trading in the illegal market, leading to a revenue loss of ₹1.95 crores to the government.


With laws becoming more stringent, it is exceedingly important for traders to reevaluate their reasons for entering the dabba market.

Now that we know the meaning of dabba trading, it is clear that this seems lucrative and offers opportunities for saving costs, but the risks involved are high.


Is dabba trading profitable?

Yes, dabba trading is profitable. But, considering the risks involved, it may not be worth taking the chance. The penalty of ₹25 crores and imprisonment can impact all your profits and your further stock market transactions.

How is dabba trading done?

It is done through dabbawalas who act as brokers in the dabba market. Orders placed through these brokers are settled every week in cash.

What is the other name of dabba trading?

Dabba trading is also called box trading, bucket trading or bucket shop trading. It basically refers to illegal trades happening outside the stock market.

What is considered illegal trading?

Apart from dabba trading, insider trading is another form of illegal trading.  It is where traders use non-public, confidential information of companies to manipulate stock market trades.

Where can I complain about dabba trading?

As a responsible citizen, it is our duty to report any illegal trading activity we may come across. All stock exchanges on their portals have published phone numbers, email IDs and complaint forms to which one can report dabba trades.

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