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
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.