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If your stock broker’s trading fee or annual maintenance charges (AMC) charges are too high, or you are otherwise unhappy with the services, you might consider transferring your stocks from the existing demat account to another. You can do this in three ways:
1. You can close your existing demat and transfer
2. You can manually transfer your shares
3. You can transfer online through the depository.
To understand the transfer process let’s understand what a Demat account is and how it evolved.
What is a Demat account?
A demat account, also known as a dematerialised account, is similar to a bank account. The only difference is that it stores your shares and securities in electronic format, not your money. Before demat came into existence sometime in the latter half of the 1990s, retail investors had to submit an application to banks along with a cheque in order to participate in an IPO. If the shares were allotted to the investor, he would receive physical share certificates by post.
A stock broker would need to be contacted if the investor wanted to sell the allotted shares. The broker would pick up the share certificates and issue a cheque to the investor upon selling yhe shares in the stock market. This was a long and cumbersome process that was also fraught with other issues such as misplacement of share certificates, stamping procedures and postal delays. By contrast the demat accounts used today permit investors to buy and sell shares on the cellphone or computer from anywhere in the world, with just a few clicks or push of the keypad.
Difference between trading and demat account
A demat account is used to store the share certificate in an electronic form, while the trading account is connected with the exchange and your bank account to create a seamless trading experience.
For intraday trading, your shares enter your trading account and are traded within the same day. In such a case, you would not get delivery of the share. But if you take delivery, the money will get debited from your bank account linked to your trading account the same day, and you will get the delivery of stock in your demat account in T+1 day (trading+1).
Reasons for switching demat account
Charges like Securities Transaction Tax (STT), Transactional charges, GST and Sebi charges are uniform across all platforms. But there are a few charges that the retail investor should keep in mind while selecting a broker. These include AMC levied by the platform for maintaining your demat account, and brokerage fee.
If you buy shares for the long term, you will be paying an equity delivery charge. This charge is an important factor for the long-term investor. But if want to buy and sell the stock on the same day, you should look for a broker with the lowest intraday charges.
How to switch demat account
There are three ways you can transfer your shares from one demat account to another, as explained above. Let’s see how they work:
Closure-cum-transfer
If you want to close your account with your existing broker, then you can opt for the closure-cum-transfer process. If your shares or mutual fund (MF) units are in the lock-in period, then this is the only option to transfer shares or MF units.
To make this transfer you’ll have to obtain a closure-cum-transfer form from the broker you want to close your account with, fill it and send it to them along with the Client Master Report (CMR) of the account of the stock broker to whom you want to transfer your shares. This process may take a few days.
Manual share transfer
You’ll have to take a form from your existing broker, and will need the following details to complete the procedure: delivery instruction slip (DIS) of the account from which you want to transfer your shares, the beneficiary Owner ID (BO ID) of the account you want to transfer your shares into, and the International Securities Identification Number (ISIN) of the stock.
If you are transferring shares within the same depository–Central Depository Services Limited (CDSL) or National Securities Depository Limited (NSDL)–then it’s an off-market transfer. This process also takes 3-5 days.
Online share transfer
You can transfer shares directly from the Depository body’s website. You’ll have to register on CDSL or NSDL for this process. The name of the procedure is ‘Easiest’ – Electronic access to securities information and execution of secured transactions.
You’ll have to register and verify your identity by the same email that you’ve provided to your broker. Once you log into the portal, just select the shares and provide the BO ID of the target account into which you want to transfer shares. This is the quickest process–the transaction will get settled in one day.
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