A Demat account is a digital repository of shares and securities that allows holding multiple investments in electronic form. As per SEBI regulations, it is mandatory to open a Demat account to invest in the stock market. But just like a bank account, opening a Demat account also has its charges. This includes opening fees, annual maintenance fees, brokerage fees, transaction charges, etc.
Knowing these charges will help you plan your finances better. This post breaks down all the different charges and fees of a Demat account. Read on!
Here’s a list of different charges and fees associated with a Demat account:
Financial institutions used to charge anywhere from Rs. 700 to Rs. 900 for opening new Demat accounts. These days they charge a nominal fee, while some do not charge any opening charges. Some offer 3-in-1 accounts (Demat account, trading account and bank account), making it easy and convenient for first-time investors.
Depository Participants (DPs) typically charge around Rs. 300-Rs. 900 as annual maintenance charges (AMC) for their services. Account holders have to pay them in advance every year. Some DPs charge quarterly fees or lifetime fees of around Rs. 2,000. A few DPs offer nil Demat AMC for new account holders for the first year but full AMC from the second year.
DPs (including banks, stockbrokers and trading platforms) charge a nominal amount (around Re 0.5-1) every month as safety or custodian fees for every security. The DP pays this directly to one of two depositories- NSDL and CDSL. Some companies may waive this charge.
Unlike some Demat account charges that some DPs may waive, transaction or brokerage charges are always applicable. This charge is levied every time a security enters or leaves your account and depends on the type of security and transaction. Some DPs charge flat Demat brokerage charges for all transactions in a month, while others charge an amount based on the number of transactions.
This fee is applicable for converting physical shares or share certificates to a digital form. Different financial institutions have different Demat charges, though it is usually nominal.
This can include administrative charges for DIS (Delivery Instruction Slip) and fees for the online DP facility. In addition, you may have to pay stamp duty, GST, and other small fees.
Here are some tips you can follow to reduce charges on your Demat account:
A Demat account is an essential tool for any investor in the stock market. You can use it to hold, trade and monitor all sorts of securities easily and cost-effectively. Before opening one, you should check all applicable Demat account charges to optimise your trading experience.
Yes, it is legal for anyone to open multiple Demat accounts in their name. However, an investor can open only a single Demat account with a Depository Participant (DP) or a broker. In other words, you can only open one more Demat account with another broker.
The stock exchange matches a ‘sell’ request from an investor with a ‘buy’ order from another investor. Once this order is matched, the stock exchange forwards them to a clearance house, settling the trade. Now, the shares that you have bought are credited to your Demat account while being debited from the seller’s Demat account.
Depository Participants charge a flat fee for converting physically held mutual fund units into dematerialised form. They also charge a small flat fee for the redemption of mutual fund units and reconversion of fund units into physical form.
The basic plan involves a flat pricing plan where the brokerage remains the same regardless of trading volumes. In the case of volume-linked pricing, the charges decrease as trading volume goes up beyond a certain limit. Some brokers also offer pre-paid pricing where traders pay the brokerage upfront at discounted rates.
To trade using a Demat account, first, you have to link your trading account and bank account with it. You can add funds to the trading account from your bank account and place an order to buy shares. Once the order matches, you will get the shares in your Demat account within two business days from the transaction date.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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