A Demat account has been a boon for trading. Traditionally, trading was a tedious process, with traders having to be physically present at the stock exchange. Brokers made it easy by being present instead of traders. The Internet has made trading convenient by providing trade portals for brokers. With advancements in technology and smartphones readily available to everyone, trading has gained popularity. The Demat account plays a significant role as it has made trading in the stock market accessible to everyone.
A Demat account stores various types of securities in the Demat form. The securities that can be stored are:
- Sovereign Gold Bonds
- Exchange Traded Funds (ETFs)
- Government Bonds
- Mutual Funds
- Tax-free Bonds
- Certificates of Deposits
They can be stored through the process of dematerialisation.
It is the conversion of physical shares to digital format. Dematerialisation of securities is done by depositories with the help of depository participants (DP). A form must be filled out and submitted along with the securities that must be dematerialised. It’s a seamless process and has multiple benefits attached to it. It has reduced the multiple charges associated with trading and has made the whole trading process safer. Shares are not lost during trading, and due to its secure storage facility, storage is not a problem either. The settlement period has also been reduced from 14 days to two days, making trading a more liquid and viable investment option.
The Demat account, being the best trading option, has certain charges associated with it. Although there are multiple charges involved, the most popular question that arises is, ‘What are AMC charges for Demat accounts?’ Let us understand the various charges that are involved with a Demat account.
Account Opening Charges
DP collects a certain fee when you open a Demat account with them. This amount isn’t standard and completely depends on the DP. Previously, there were heavy opening charges when the Demat account was introduced, but now, with its wide-scale adoption, the charges have been drastically reduced. Share India and a few other brokers have zero opening fees, meaning one can open a Demat account free of cost. When opening a Demat account, it’s advisable to utilise a brokerage charges calculator to understand not only the account opening fees but also the ongoing charges associated with your trading activity, helping you make cost-effective decisions in partnership with brokers like Share India.
Custodian Charges (Security Charges)
The Demat account has reduced the burden of worry about the safe storage of your securities. All these securities are safe in electronic form and have various protocols surrounding them to boost their safety. For this purpose, DP can charge security fees based on the securities in your Demat account. This can be as low as ₹1 and is generally charged annually unless specified.
These charges are levied every time a transaction involving the Demat account occurs. Transaction charges can be levied monthly as well, like custodian charges, but as multiple traders use their Demat accounts as investment vehicles, they tend to make very few trades and cannot even trade for months on end. For this very purpose, depository participants tend to levy a fee for every transaction from the Demat account.
With regards to brokerage, Share India has free or no cost on equity delivery. They charge ₹10 for intraday trading or 0.03%, whichever is lower. For futures and options, they charge ₹10 for each trade. The transactional charges levied by Share India are 15 for the receipt, purchase, delivery, or sale of securities. Use our brokerage calculator to estimate the brokerage fees you will incur when trading stocks.
Annual Maintenance Charges
These charges are levied annually and must be paid by the account holder. Most of the above charges can be waived off, but DP ensures the collection of AMC charges. AMC means annual maintenance charges for demat accounts. The account maintenance charges in demat could range from ₹300 to ₹900. Share India charges ₹300 as AMC charges. Share India doesn’t levy any annual maintenance charges in the first year or the first 356 days, and ₹300 must be paid per annum from the second year of opening a Demat account with Share India.
Dematerialising and Remateralisation Charges
These services are provided by the DP with the help of the depository.
● Dematerialisation is when the securities are converted from their physical form to be stored in the Demat account.
Physical shares can not be traded, and it is best to be stored in electronic format. Share India imposes ₹50 per dematerialisation request form (DRF) plus ₹5 per certificate for dematerialisation purposes only. For rematerialisation services, the charges are ₹25, exclusive of courier charges, which must be paid additionally.
There are multiple charges that are associated with a Demat account with AMC for Demat accounts recurring annually. It is good to be aware of all the charges related to a Demat account. Knowing and comparing charges with other brokers can help you decide which broker to go with for everything to do with trading. Also, to protect your Demat account against fraud, it’s crucial to stay vigilant and follow the best security practices. Regularly review your Demat account statements, use strong and unique passwords, enable two-factor authentication, be cautious of unsolicited communication or phishing attempts, and only share your account details with trusted sources.
Frequently Asked Questions (FAQs)
A trader must pay AMC to keep accessing the account. If you fail to make the payment, the broker will try to get in touch with you through various communication platforms to inform you about the AMC. Failure to pay them on time could lead to your Demat account being marked as dormant. No trades can be made from a dormant account until it is reactivated.
A Demat account will not expire. It will continue to exist as long as it is not closed by the owner. If you didn’t access it for a long time, AMC would keep piling up, and you’d have to clear your dues before closing the account.
There is an ITR required just to hold a Demat account. It must be declared if one earns a profit through it and comes under a specific tax slab. If they are not under any tax slab, they don’t need to file any ITR. Any dividend gains or capital gains that cross your tax bracket must be declared, and an ITR is required for the same.
Some of the charges related to Demat accounts are the opening account charges, annual maintenance charges (AMC), transaction charges, GST, and other taxes.
Yes, other than AMC charges, you have to pay transaction charges. These charges are applicable when you share your stocks in the stock market. The charges are based on percentage value or a fixed amount per transaction.
No, all the charges, including AMC charges for your Demat account of Share India, are listed on the website or application. You can review all the Demat account-related charges, such as AMC charges, taxes, and other charges, on the Share India website and open a Demat account with Share India.
No, you can keep your Demat account empty. But remember, as you keep your Demat account idle for a longer period of time, it’s possible that your Demat account will turn into a dormant account.