sábado, 15 de octubre de 2011

An Overview on Demat Account Charges in India

DEMAT account is more or less an essential requirement for all the investors who invest in equities, bonds and debentures. Despite various efforts by the regulators to make electronic transactions as cheap as possible for the ordinary investors, the charges for DEMAT accounts continue to remain on the higher side. Depending upon the individual profile, requirements and suitability, different investors open DP accounts with banks, online broking houses or local brokers. In this article, I have given an overview on the prevailing DEMAT charges in India.
DEMAT Account charges can be broadly divided into the following three main categories.

Account Opening and Documentation Charges

It is a one-time charge that has to be paid at the time of opening of DEMAT Account. Most of the Banks and Stock Trading Brokers do not charge any fees towards account opening but some of them may charge you a nominal fee for stamp paper on which you have to execute the agreements with the brokers.

Folio Maintenance Charges or Annual Maintenance Charges (AMC)

The charges vary from Rs. 200 to Rs.750 per year, which are generally required to be paid at the commencement of the year. However, some of the banks and brokers may charge you every month or quarter.

Transaction Charges

Transaction Charge is the charge for Debit of Shares (when you sell) from your DP account. Please note that as per the regulator SEBI (Securities and Exchange Board of India), no broker or bank can levy transaction charges for Credit of Shares (when you buy), that means, it is free. Therefore, don't be misled by the agents who say that they offer 'Free Credit of Shares'. The transaction charges are in the range of 0.02% to 0.04% of the transaction value subject to a minimum charge of Rs.12 to Rs.25 per transaction. Some of the brokers like Reliance Money, India Bulls and Geojit charge Flat Fees of the order of Rs.10 to Rs.12 per transaction.

In addition to the above three main charges, there are charges for Dematerialization or Rematerialization of Shares, Pledge Services, and off-market transfers. However, for most of the ordinary investors, these charges are rarely applicable.

Few Important Points Worth Noting:

In addition to the basic charges as explained above, you have to pay service tax and education cess, the rate of which at present is 10.3% Many banks waive off annual maintenance charges for the first year. You may have to pay extra charges for physical account statements; however, if you opt for E-Statements, you do not have to pay any charges. If you have a Trading and DP account with the same broker, you may save substantial amount on AMC and transactions charges. Many online brokers offer you low charges initially but they may revise it subsequently. Therefore, while choosing the broker or bank for opening new DEMAT account, you should consider all the factors such as service, convenience, and your frequency and volume of transactions instead of taking the decision based only on the charges.

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