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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:
- Equity
- Debentures
- 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.
Table of Contents
What Is 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.
Types of Demat Account Charges
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.
Transaction Changes
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.
● Rematerlisation is the process of converting the share in the Demat account into the physical form.
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.
Conclusion
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.