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What are the Demat Account Charges?

As we know, by now, the demat account is a repository of your shares and other securities. Just as you hold funds in your bank account, you hold shares in your demat account. You open the stock markets page of any newspaper and you will be deluged with advertisements of Free Demat Accounts. Are demat accounts actually free or is there a demat account charge?

Demat account opening charges…

Today most of the banks and many of the brokers have started offering zero account opening charges. Remember, this zero charge only applies to the opening of the demat account. For most banks, the free demat account opening is feasible because the person who opens the demat account with a banks is normally also having a savings account with the same bank. Therefore, the bank is anyways benefiting from the balance float of the individual. While most of the full-service brokers are either offering demat account opening free or at a very low cost, the discount brokers do charge you a fixed fee for opening a demat account. Normally, DPs will also charge you separately for the legal stamp paper charges in case of Power of Attorney execution. This is normally charged on actuals.

There is something called Annual Maintenance Charge (AMC)…

Even though the demat account opening charges are waived off, the DP will still charge you an annual maintenance charge (AMC). These charges typically vary from Rs.300 per annum to Rs.800 per annum. Many brokers, as part of their special offering to customers, absorb the AMC charges for the first year and only bill you from the second year onwards. Banks typically have differential rates of AMC. Banks tend to charge you lower AMC if the trading account is mapped to the same bank but charge higher if the trading account is not mapped to the same bank. Is there a way to get AMC charges waived?

SEBI recently permitted the idea of a Basic Demat Account, wherein the annual maintenance charge (AMC) is waived off. The Basic Demat Account is for investor accounts with custody value of less than Rs.200,000. Normally, DPs waive off the AMC if the custody value is less than Rs.50,000 but charge a nominal AMC if the custody value is above Rs.50,000. This is suitable for very small investors only.

Transaction fees and custodial fees…

There is a custody fee that is imposed by the 2 depositories, viz. NSDL and CDSL on a per ISIN basis. However, since in most of the cases the custody fee is directly paid by the company to the depository, this charge is normally not applicable. Then there is a per transaction fee which is imposed each time your demat account is debited or credited. Normally, when you buy shares the demat account is credited and when you sell shares the demat account is debited. The DPs used to charge the customers for credits and debits to the demat account, but nowadays most of the DPs are only charging for the debits to the account.

There are also some additional charges that get debited to you…

The transaction fee and the AMC are debited to your demat account on a regular basis. But the DP also puts some additional costs on you depending on the nature of services demanded. For example, there is no charge if you use the online DP facility but if you use the Debit Instruction Slip (DIS) facility then some DPs do impose a small administrative charge on you. Additionally, there are occasions when your debit instruction could fail or could get rejected for technical reasons. In such cases, the DP imposes a small penal charge on the customer. Apart from all these, the DP will also charge you when you dematerialize your physical shares or rematerialize your demat shares back to physical form.

To understand Demat charges, you need to get a holistic picture of all the above costs. You get all these details when you try to understand how to open demat account and the benefits of demat account.

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