If you’re an investor, chances are you have a demat account. But what are demat account charges, and how can you avoid them?
A demat account is simply an account that holds your securities in electronic form. It’s similar to a bank account, but instead of holding cash, it holds investments like stocks, bonds, and mutual funds.
There are two main types of demat account charges online: transaction charges and annual maintenance charges (AMC). Transaction charges are levied every time you buy or sell a security, while AMC is an annual fee charged by the depository participant (DP) for maintaining your account.
Fortunately, there are ways to avoid paying these fees. By understanding the charges and choosing the right account, you can keep more of your hard-earned money in your pocket.
Demat account charges: an overview.
Demat account charges are fees charged by a broker or depository participant for providing Dematerialization services. These services allow investors to hold their securities in an electronic form and trade them on the stock exchanges.
There are two types of charges associated with a Demat account – account maintenance charges and transaction charges. Account maintenance charges are levied monthly or annually by the DP, while transaction charges are levied whenever you buy or sell shares.
The Securities and Exchange Board of India (SEBI) has capped the maximum amount that a DP can charge for maintaining a Demat account at Rs. 400 per annum. However, DPS are free to charge lower amounts than this. Similarly, SEBI has also capped the maximum transaction fee that a DP can charge at Rs 25 per scrip for intraday trades, and 0.003% of the total value of trade for delivery-based trades (i.e., trades where shares are bought with the intention of holding them for more than one day). Again, DPS can choose to charge lower rates than these caps.
Types of demat account charges
The two types of demat account charges are:
Account Maintenance Charges: These include an annual custody fee, which is charged by the depository participant for holding your securities in an electronic format on your behalf; and an annual service fee, which covers the costs incurred by the DP in providing you with various value-added services like online trading platforms, SMS alerts, etc. The SEBI-mandated limit on AMC is Rs 400 per annum plus taxes (if any).
Transaction Charges: A DP may levy transaction charges whenever you buy or sell shares using your Demat account. For instance, they may charge you a flat fee per transaction or a percentage of the total value of the trade as a commission. The SEBI-mandated limit on transaction charges is 0.003% of the total value of TradingView for delivery-based trades and Rs 25 per scrip for intra-day trades (plus taxes, if any).