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Demat Account charges and know how to reduce them

  • 06 May 2024
  • By: BlinkX Research Team
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    • Demat accounts offer convenience in investments and trading, but they come with some charges. Opening a Demat account requires a Depository Participant (DP), typically a brokerage firm or bank. DPs may require nominal opening charges or offer a free Demat account for a year, charging the next year. It is financially prudent to be aware of these charges and consider the potential financial implications. Let’s understand if there are any charges for Demat account in India in detail.

    What are Demat Account charges?

    A Demat account charge or fee is the amount of charge applicable when you open and use your Demat account for online trading. When you set up a Demat Account, it is important to think about the charges associated with your Demat Account.  Demat account charges can be categorised into two categories: operational charges (AMC Tax, AMC, and many additional) Demat transaction charges, which are charges incurred by brokers for the execution of transactions for customers, stamp-duty charges & taxes applied to your trade.

    Demat Account fees levied by a Depository Participant (DP) for the upkeep and management of a Demat account. The DP charges of each DP vary. The DP acts as a go-between for the investor and the depository and keeps the investor's securities in electronic form. Depending on the DP's policy, Demat Account charges are typically deducted from the investor's account monthly, quarterly, or annually.

    Table of Content
    1. What are Demat Account charges?
    2. Different Types of Demat Account Charges
    3.  How to Reduce Demat Account Charges?
    4. Things that can affect your Demat Charges

    Different Types of Demat Account Charges

    There are several types of Demat Account charges that investors need to understand. Demat Account charges vary depending on the nature of the services and fees charged by the depository participant. Listed below are the Demat account charges.

    • Demat Account Opening Charges
    • Annual Maintenance Charges (AMC) 
    • Transaction Fees
    • Custodian Fees
    • Dematerialisation Fees
    • Demat Account Safety Charges

    Below is a brief explanation of each Demat account charge.

    • Demat Account Opening Charges:

      This is a one-time fee assessed by the DP when a new Demat account is opened. Depending on the DP, the fee can range from zero to a few hundred rupees. Moreover, it is completely free when you set up a 3-in-1 account with the bank. This includes a savings account, a trading account, and a Demat account.
      However, most broking firms offer seamless account opening via their online trading platforms and do not charge account opening fees. Yet, stamp duty, GST, and other statutory levies by SEBI will be charged if applicable.
      To choose the best DP, always compare their Demat Account opening charges.

    • Annual Maintenance Charges (AMC):

      The DP charges a yearly fee to maintain the Demat account. The AMC varies according to the DP and the type of account (individual or corporate). Individual accounts have an AMC of Rs. 250/-  to Rs.1,000/- per year, while corporate accounts can have an annual maintenance charge of Rs. 5,000 per year. Demat accounts don't have any rules about Demat account minimum balance or holdings.
      Starting from 1st June 2019, SEBI has removed annual maintenance charges for debt securities up to Rs. 50,000 for the Basic Services Demat Account - BSDA. Alternatively, if the holding is between 50,000 and 2 lakhs, a maximum of Rs. 100 will be charged + tax.

    • Transaction Fees:

      The DP charges for each transaction made on the Demat account, such as buying or selling securities. Transaction charges are determined by transaction value and differ between DPs. The fees are typically a percentage of the transaction value or a flat fee per transaction.
      A transaction occurs every time securities enter or exit your Demat account. DPs may charge transaction fees monthly. Also, transaction charges can vary depending on whether you are buying or selling. There are some DPs that only charge transaction fees when you sell securities.

    • Custodian Fee:

      A fee charged by the depository for storing securities in electronic form. The custodian fee is usually a small percentage of the securities' value and is charged quarterly or yearly.

    • Dematerialisation Fees:

      The DP charges this fee for converting physical securities to electronic format. Charges are typically fixed per certificate and vary between DPs.

    • Demat Account Safety Charges:

      Before Demat accounts were introduced, traders used paper-based security certificates. It was their responsibility to keep these physical papers safe. Depository participants now hold securities on behalf of traders with Demat accounts. To ensure the safety of these securities, DPs charge a small Demat account safety fee.
      The charge depends on how many securities the trader holds. A monthly safety fee is usually charged by DPs. There is a fee associated with each International Securities Identification Number (ISIN) that ranges from 0.5-1 rupees. Also, you can explore the lowest Demat account charges

    Demat Account charges and know how to reduce them

     

     How to Reduce Demat Account Charges?

    To reduce the Demat Account charges you need to have a strategic approach and awareness about the fee structure associated with maintaining such accounts. Here are some useful strategies to minimise the Demat account charges:

    • Opt for a Basic Services Demat Account (BSDA) if your holdings are below a certain threshold.
    • Consolidate your holdings into a single Demat account to reduce account maintenance charges.
    • Choose a Demat account with lower transaction fees and annual maintenance charges.
    • Be aware of account closure charges and choose an account with lower or no closure fees.
    • Keep an eye on your account activity and avoid unnecessary transactions to minimise charges. 
    • Negotiate with your Demat service provider for reduced fees, especially if you are a high-value trader.
    • Use online and electronic statements to save on physical statement charges.
    • Opt for a discount brokerage that offers competitive Demat Account charges.
    • Stay informed about any regulatory changes that may impact Demat charges in your region.

    You can also save on Demat account charges by using an online brokerage calculator, you can pre-plan and save lots of money on your trade. For starters, you can open an account with BlinkX and download the BlinkX app to trade in the stock market. 

    Things that can affect your Demat Charges

    In India, DPs impose the Demat Account charges and these charges are influenced by several factors: 

    • Account Type

      Individual Demat account charges differ from corporate account charges. Corporate accounts typically incur higher fees as a result of the greater volume of securities held and the additional compliance requirements.

    • Transaction Volume

      On the Demat account number of transactions increases with the transaction fees. Transaction fees for regular traders could be greater than those for infrequent traders.

    • Transaction Value

      Transaction charges are typically a percentage of the transaction value due to this investors who trade high-value securities may face higher transaction costs than those who trade low-value securities.

    • Policy of the DP

      The DP charges imposed by Depository Participants may differ depending on their policies. Some DPs may charge less for certain types of accounts or transactions, while others may charge more. As you are aware of what DP charges are, you must compare different DP policies to know that you are not missing out on something.

    • Market Conditions

      Market conditions play an important role in the Charges during a bull market, for example, transaction fees may be higher due to increased trading activity. You can click here to learn about poa in a Demat account.

    Conclusion

    Demat fees are an unavoidable part of investing in stocks in India. However, investors can reduce these fees by selecting a DP with competitive fees, trading less frequently, and investing in low-value securities. It is also critical to carefully read the DP's policies and terms and conditions before opening a Demat account. 

    There are no criteria such as the minimum amount required to open a Demat account in India. To know more details about Demat Account charges, you can go to the BlinkX website and know more about Demat account charges. You can also download the online trading app on your mobile to easily access your trade in just a few taps.

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    FAQs on Demat Account Charges

    What is brokerage on a Demat account?

    Brokerage on a Demat account refers to the charges you need to pay on behalf of your trade, the maintenance of the Demat account or the opening charges of the Demat Account.

    Are there any hidden charges in a Demat Account?

    No, there are no hidden charges on your Demat account. You can check all Demat account-related charges on BlinkX.

    What is the minimum balance you need to keep for a Demat Account?

    Your Demat account does not require a minimum balance. You can keep any number of shares, just like a zero-balance account, or you can keep your Demat account empty.

    What happens if you don't pay your AMC for a Demat account?

    Multiple reminders will be sent to your registered email ID or mobile number if you fail to pay your AMC. Failing to pay your AMC might freeze your Demat account.

    Will the Demat account charges change over time?

    Depending on SEBI's rules and regulations and the government's passing of a new policy, the following charges for demat accounts will not change, and each broker has different trading charges.

    Who regulates demat accounts and DPs?

    The Securities Board of India (SEBI) regulates the working of demat accounts and functions related to the stock market in India.


     

    What's the purpose of transaction charges ?

    A transaction charge is levied by DPs or the stock broker as the constant fees applicable as the brokerage charges for the transaction of financial securities. It is a fixed or percentage-based amount decided by the stockbroker.

    What are some additional charges in the demat account?

    The following describes Demat account brokerage charges. Some of the additional charges that you can encounter are SMS alerts, Physical statements, and POA (Power of Authority Charges).

    How can I find out the specific charges for a demat account?

    To check the charges of blinkX you can go to the blinkX trading charges section on the blinkX website and check out different brokerage charges related to demat & trading account.

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