Today, no one trades in physical shares anymore. Demat Account is required for trading and investing because almost all trades must be settled in dematerialized form.
To open one, one must go to a depository participant and complete an account opening form. Depository participants collect Demat account charges in exchange for various services.
Here are the details of all the applicable Demat account fees & charges:
- Account Opening Charges
Brokers levy a one-time non-refundable fee for opening a Demat account with them.
The majority of online brokers provide a free Demat account. The account opening charges are included in the account opening charges if you open a 3-in-1 account.
- Account Maintenance Charges (AMC)
AMC is the yearly fee charged by the broker to maintain the Demat account. It can range between Rs 300 to Rs 1000 per annum depending on the value of holdings.
There are 2 major fee structures followed by stock broker for AMC:
- Fixed Yearly AMC – a fixed fee paid every year. Some brokers offer the first year’s AMC as a bonus.
- Zero AMC Demat Account (Lifetime free AMC) in which a customer doesn’t pay any AMC. Some brokers need a small refundable deposit, while others impose a one-time non-refundable cost.
- Debit Transaction Charges
Every time a customer withdraws shares from their Demat account, they must pay a debit transaction fee. Debit transactions refer to the withdrawal of securities from a Demat account.
Some brokers impose a fixed fee per transaction (e.g., $9.50), while others take a percentage of the transaction amount.
- Off-Market Debit Transactions Charges
An off-market transaction is a sale of securities between a seller and a buyer at a predetermined price and terms that do not involve a stock exchange or a clearing corporation. Off-market trade can be done for several reasons:
- Gifting shares to any family member.
- Transferring ownership of shares.
- Transactions in unlisted securities.
- Transferring shares between two Demat accounts.
- Shifting of securities between a sub-broker and a client.
Every off-market debit transaction cost is incurred by the customer.
- Pledge Creation Fees
In this procedure, investors put shares available in his Demat account as collateral against loans. The pledgee (to whom a pledge is issued) has the right to hold the shares until the pledgor pays the dues. This commitment is used to recover the dues in the case of insolvency.
The broker charges a pledge formation fee every time a customer puts shares on the pledge in his Demat account.
- Pledge Invocation Fees
In case, where the pledgor is unable to return the debt to the pledgee as agreed, the pledgee will submit an instruction slip to DP to initiate the invocation of the pledge. The shares are transferred from the pledgor to the pledgee when a pledge is invoked.
- Dematerialisation Charges
Dematerialization is the process of converting securities paper certificates into electronic form and storing them in a Demat account. To convert the shares, the brokers charge a fee.
- Rematerialisation Charges
The process of rematerialization is the inverse of dematerialization. With the rematerialization process, any securities in dematerialized form can be transformed back to physical certificates. The customer is charged a fee by the broker for rematerialization and transportation costs.
- Modification in Address, Email, Mobile, And Bank Updating Fees
Any changes to the Demat account’s address, email, phone number, or bank account should be reported to the DP along with the relevant papers. These modifications are communicated to various companies by the depository participant. With DP, this service is paid per modification request.
- Delivery Instruction Slip Charges
A Delivery Instruction Slip (DIS) is a document that authorizes the DP to deduct shares from BO’s account and transfer them to another account specified on the slip. This is a fee-based document.
- Consolidated Account Statement
CAS is extremely useful for investors because it displays a consolidated view of your Demat account statement for all of your securities. This explains how to track the performance of various securities as well as the company’s financial situation.
Opening a Demat entices several charges. It is imperative to understand the various Demat trading charges because they will affect your investment results.