Demat account is a digital repository of the shares and other securities held by an individual. It works as a statement of your multiple investments into you hold in shares and other government and non-government securities at a singular place. There are several misconceptions when it comes to charges taken to open a Demat account. Here are is how you can know if the trading account is free or you incur some charges.
Demat Account Opening Charges…
Today most of the brokers are offering zero account opening charges. The zero charges are usually applied to the opening of the Demat account only. Opening a free Demat account is more feasible as compared as it comes with a savings account in the same bank.
Also, there are other service providers where brokers provide full-service offering Demat account opening all for free or at a very low cost. The discount brokers do charge a fixed fee for opening a trading account, it is the DP who will charge you separately for legal stamp paper charges in case of Power of Attorney Execution. Power of Attorney Execution makes it easier for you to trade and saves a lot of time, but it will charge you something so make the best decision.
Annual Maintenance Charges
Even if you don’t have to pay any charges for opening a Demat account, the DP will still charge you an annual maintenance charge. These charges can be from Rs. 300 per annum to Rs. 800 per annum. Some brokers offer you special offering and waive off the first year Annual Maintenance Charges and you only have to pay them from the second year.
Banks have lower AMC if the trading account is mapped to the same bank but charges are higher if the trading account is not mapped to the same bank. Banks have differential rates when it comes to AMC.
SEBI has agreed to Basic Demat Account wherein the annual maintenance charges are waived off. The basic share market account is for the investors with custody value below Rs 200,000. If the custody is less than Rs 50,000, DPs normally waive off the AMC or the AMC you have to pay will be very nominal. Hence it becomes very beneficial for small investors.
Transaction Fees and Custodial Fees
You have to pay the custodial fee that is imposed by 2 depositories that is NSDL and CDSL on the per ISIN basis. In most cases, the custody fees are paid directly by the company to the depository and the charges are not applicable. Also, there is this transaction fee that is imposed on you every time your stock trading account is debited or credited. Some DPs only charge you when the account is debited.
The transactional fee and AMC are debited to your Demat account regularly. But the DP also puts some additional cost on you depending on the nature of your service demands. For instance, there are no charges if you are using an online DP facility, but if you use a DIS facility you might be imposed on some small administrative charges on you.
Also, if your debit instruction should fail, or you get rejected for technical issues, your DP can impose you a small penal charge on the customer. Apart from that, the DP will also charge you when you dematerialize your physical shares or rematerialize your shares and securities.