Dematerialized or Demat accounts are the modern and electronic versions of the earlier paper-based accounts. The process of converting physical shares into electronic forms is Demat accounts. With dematerializing share certificates, investors or traders can track and hold their investments conveniently.
Investors evaluate several factors when searching for a stockbroker to open a Demat account. The cost and charges accompanying opening a Demat account have a vital role in the decision. There is nothing better than the prospect of a free Demat account with no annual charges.
While some stockbrokers offer free Demat accounts with no annual charges, they make it up through the means of levying heavy AMC charges.
This article discusses all the charges involved in maintaining a Demat account.
Account opening charges:
Account opening charges are a nominal fee expected by the depository participant (DP) at the time of opening the Demat account. Depending on the type of DP, the charges will vary. Banks charge between 700-900 INR as account opening charges. Some DPs even provide low opening charges.
Some DPs levy custodian charges or safety charges as a one-time fee or as a monthly or annual fee for the safekeeping of your shares. Every International Security Identification Number (ISIN) recorded to your account as low as INR 1.00 may get charged. While some DPs expect a safety charge, some provide a free Demat account with no annual charges. Clarify with your DP if they charge a safety or custodian fee.
Transaction charges are claimed on the movement of securities in and out of your Demat account. You need to be aware of transaction charges, as they vary for different DPs. Some depository participants charge a fee for only shares debited, while some charge for shares credited. It can be drawn up to about INR 1.5 per transaction.
The terms and conditions of all the costs, your Demat account service provider will explain in detail.
Account maintenance charges:
Demat account maintenance charges range from INR 300-900. depending on your DP, they applied maintenance charges quarterly or annually. Some DPs don’t charge the annual maintenance fee for the first year. Opening a savings-Demat-trading account with a bank will reduce the maintenance charges and help you save some money.
Points to remember:
- You can open multiple Demat accounts, but it makes no sense. The minor charges for opening, maintaining, and transacting can skyrocket if you operate multiple accounts.
- To efficiently manage your portfolio, you can open two accounts. You can link one to your trading account, and the other could hold your long-term investments.
- You are expected to pay the annual maintenance charges even if your Demat account remains inactive.
- CDSL or NSDL manages our Demat accounts. Hence, we don’t have to worry about the safety and security of the share certificates.
- A pleasant experience with a depository participant includes seamless customer service and streamlined paperwork for opening, closing, and transferring shares.
- If your Demat account is inactive, it will get frozen by the DP.
Demat account is the prime requirement for entering the stock market world, and its features help you make reliable decisions. You can open a Demat account in a few simple steps, and with the guidance of your DP, your Demat account will be linked to your personal bank account.
While some offer free Demat account opening, some stockbrokers provide the facility of opening a free Demat account with no annual charges, therefore you can enjoy the benefit of a lifetime free Demat account.