As an investor, you may open multiple accounts in the name of your spouse, children, parents or other loved ones. These accounts may be with multiple investment companies or the same company. But did you know that there are several benefits if you use a consolidated demat account for share market investments. Read on to know more.
Too many accounts – Are you even using them?
There are several reasons why you may end up with multiple demat accounts. When you thought of investments, you ended up opening an account with different companies. You may have your reasons for opening new accounts under the name of your family members. But a single account is used for trading online because of low brokerage or other benefits from one company.
You must be aware that demat accounts usually come with annual maintenance charges. That means you incur costs for keeping each account active. Why keep so many accounts active when there are more benefits attached to a consolidated account. Another need for consolidating shares is when you have received the shares through inheritance or through nomination from a family member who passed away.
Steps to consolidate multiple demat accounts
1. For off-market transfer of demat account, you need to fill in the Delivery Instruction Slip (DIS) and get it collected at the depository participant.
2. A unique ISIN number is allotted to the consolidated demat accounts. This ISIN has to be signed by all account owners as per the documentation required.
3. The shares in all the demat accounts are transferred to the single account. Once the rest of the accounts show a zero balance, an account closure form can be used to close the accounts.
Visit www.cdslindia.com or https://nsdl.co.in/services/offmarket.php for more information related to the role of a depository in the transfer of shares.
Important points related to consolidating accounts:
· You need consent and signatures of all account owners to consolidate the demat accounts.
· Securities with lock-in period or securities pledged against loans cannot be transferred until they are set free from the documents that bound them.
· Additionally, it is necessary to indicate “offmarket transaction” in your Delivery Instruction Slip. This helps the depository to monitor the fraudulent transfer of shares from multiple accounts. Also, the depository screens all share transfers for consolidation that hold a value of more than Rs. 5 lakh and verifies them.
· Demat account holders usually have to assign a nominee for transfer of shares in case of an unfortunate event such as death or if they found shares in their family that were held by single/joint account holders who no longer exist. If a nominee is not assigned by the account holders, a legal heir can claim the transfer to shares if the share value is less than Rs. 1 lakh. For share values more than Rs. 1 lakh, the legal heir will have to get the necessary formalities done through relevant authorities.
Benefits of consolidating multiple accounts
Benefit #1 – Save Costs
While there can be low brokerage and transaction costs offered by investment broking companies, the transaction costs might differ while buying shares. Again, it is better to keep an account with a company that offers a good demat account service instead of paying varying transaction and maintenance charges for multiple accounts with different companies.
Benefit #2 – Manage Easily
Managing multiple accounts can be a hassle. Instead of maintaining a consolidated account means that you need not worry about managing your shares from multiple places.
Benefit #3 – Transfer shares easily
If you are worried about the paperwork for transfer of shares from your accounts to a single demat account whether within the same brokerage firm or through competitor firm, the process is quite easy and hassle-free these days.
Benefit #4 – File taxes easily
Managing multiple accounts will require filing taxes separately for each of these accounts. You can save time and money when you operate a single account.
Benefit #5 – Enjoy tax exemptions
When you transfer shares, you earn capital gains and tax benefits. For transfer of shares, several tax exemptions are applicable based on the value of the shares and the scenario in which the shares are transferred.
There may be some charges for transfer of shares to a single account. But you still save by putting an end to recurring costs that add up every year. Think about it.
For more information and assistance related to transfer of shares, click here to get in touch with our customer support team. You can also leave comments with your queries related to consolidating your demat accounts.