Everything About Demat Account Fees and Charges

Author : nancyahuja2414
Publish Date : 2021-03-26 07:53:07
Everything About Demat Account Fees and Charges

Demat account is a commonly used term in the stock market. Investors know its importance in the stock market as it is the account that has changed the entire process of investing and trading. Here is everything you should know about the charges applicable on Demat accounts. Before that, the following are some of the benefits of a Demat account: 

  • You can hold stocks and other financial securities in a Demat account 

  • It keeps securities safe and secure from any damage, forgery, fake deliveries, delays, etc.

  • Fast and easy way to receive dividends, interest, or refunds

  • Speedy share transfer for any buy/sell

  • You can access your Demat account on any smart device from anywhere

  • It offers the facility of Dematerialisation and rematerialization of shares

Demat Account Charges

There are mainly four types of fees levied on Demat account:

  • Demat Account Opening Charges 

Depository Participants (DPs), offer the facility of Demat account. Demat account opening charges are very nominal. And most DPs offer Demat account facilities without any Demat account opening charge. You can compare the quality of services from different DPs before opening a Demat account.

  • Annual Maintenance Charges (AMC)

As mentioned above, a Demat account offers several benefits. For the maintenance of your Demat account, DPs charge a nominal fee as Account Maintenance Charges (AMC) annually. It varies from broker to broker. 

Some DPs waive off the first-year annual maintenance charges for Basic Services Demat Account. 

  • Custodian Fees

When there was an outcry system in the stock market, traders had to keep shares in paper form and they were responsible for any damage to their shares. Now, when the stock market works electronically, the responsibility of the safety of traders’ certificates has been transferred to the DPs. Therefore, they charge a minimal custodian fee. The fee depends upon the number and type of financial securities held in the Demat Account.

  • Transaction Fees 

When you buy/sell any financial security, it is credited/debited to/from your Demat account. For these transactions, stockbrokers levy the transaction fees. The way to levy this charge may differ from broker to broker. Some DPs charge transaction fees on the basis of the number of transactions you made in a month and some charge a flat monthly fee.

For an active trader, these charges are quite nominal in exchange for convenient facilities provided by the stockbrokers.

Ways to reduce Demat and Trading Charges

  1. One way to reduce your Demat account charges is to open a Demat and trading account through a stockbroker which does not charge any account opening fee. However, you should check the services offered along with the Demat account

  2. The second way is signing up with a stockbroker offering discount brokerage plans at a flat fee per order regardless of the value of the transaction in the order. There are several stockbrokers offering savings on brokerage. You should examine the various subscription packs they offer which can help further reduce the brokerage charges. 

The Bottom Line 

This is how depository participants and stockbrokers play an important role in stock trading and charge minimal rates for their services offered through the Demat and trading account. Without their services, making safe electronic transactions for share trading is not possible. However, brokerage plans are special considerations of day traders. Check the brokerage rate levied by the stockbroker before opening the account. Also, examine if the stockbroker provides any annual subscription plan that will help reduce the brokerage. 

Category : business

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