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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Charges on Demat Account Opening

Demat account opening is as simple as opening a savings account in a bank. A demat account is actually a dematerialized account that holds dematerialized stocks, just like your saving bank account holds your savings. An account has to be opened with a depository participant (DP). All the banks and brokers that offer depository services are DPs, but all the DPs are not banks or brokers.

There is a certain amount that is supposed to be maintained in the bank savings account in order to continue availing the bank's services. But in the case of demat account, there are mainly four charges that are levied on it. The four charges are Account opening fee, annual maintenance fee, transaction fee and custodian fee. All these charges are different for every DP.

Account opening fee: This is supposed to be paid only during opening the demat account. Charging opening fee from the customer is not compulsory and hence the DP may or may not charge it. However, some stock trading brokers and banks may levy a nominal charge for the stamp papers that would be required by you for executing the contract with your DP.

Annual maintenance fee: Annual maintenance charges are also referred to as folio maintenance fee, which is generally charged in advance.

Brokerage/Transaction fee: Brokerage or transaction fee is levied for the debiting and/or crediting of shares from and to the account every month. Some of the DPs levy a fixed amount as fee for every transaction, while other few calculate their fee on the basis of the total value of the transaction. Other than that, some of the DPs offer frequent trader accounts where the active traders are charged with lower fees as compares to the charges levied by them on the non-frequent traders. The charges also vary on the basis of the type of transaction being carried out, ie selling or buying. In other cases, few DPs levy the fess only on debiting of shares, while some others might levy the fee for both. The charges are also levied if the instruction given by you for buying or selling is rejected or fails.

Custodian fee: This is charged on a monthly basis and is calculated on the basis of the number of shares your demat account holds. The fee is charged somewhere between INR0.5 to INR1 per share per month. DPs do not levy custodian fee for ISIN on which one-time charges have been paid by the companies to the DP.

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