Primary objective of demat account is to keep financial instruments i.e. shares, ETF or Mutual funds in safe custody in electronic form. It is also very much possible people have multiple demat accounts, as in earlier days, only full-service brewers were active but now discount brokers are dominating in the stock broking industry providing better trading platforms.
Also Read: How to Choose the Best Trading Platform in India: Points to Check
Hence, many investors don’t bother to close or use their existing demat account, instead, they open another one with a new broker. Such investors have the holdings of shares in older demat accounts and now bought the securities in the new demat account with two brokers. And now looking to merge or transfer the shares from one demat account to another one.
Can we Transfer Shares from One Demat Account to Another?
There are only 2 major depositories in India- one is CDSL ( Central Depository Services Ltd) and other one is NSDL ( National Securities Depositaries Ltd). Only these two entities have the authority to open Demat account in India. Your depository participant (DP) must be a registered member of both these depositaries and either any of them to open a demat account on their client's behalf to keep securities held.
If you have opened two demat accounts with different brokers with the same depositories or two demat accounts with different brokers with different depositaries you can transfer the shares from one demat to another demat account through manually (offline)or online method.
It takes some time to carry out and complete the share transfer process and that totally depends on which mode of share transfer you follow. And if it is necessary or you really need to transfer the shares into a new demat, then only get involved in such a procedure.
Why You Need to Transfer the Shares from One Demat to Another Demat Account?
Multiple reasons i.e. shifting of broker, convenience, low broking charges can be the primary cause of shifting shares from one demat account to another however now a day’s many clients also keep shifting their shares to access margin benefits in intraday trading.
Another reason could be low annual demat charges or trust issue with current broker however pricing doesn’t play a crucial role for shifting shares from one dp to another.
How Much Time Does it Take to Transfer Shares from One Demat Account to Another?
Well it depends on the way client choose to transfer their shares. Mainly there are 2 ways to transfer- manual and online. Through manual mode share transfer is time taking process and it may take 7-10 days to complete entire process. On the other hand electronically or in online mode transfer process is quite simple and less time consuming. Entire process will take hardly 4-5 days with proper verification of documents. Of course pricing structure is quite different in both ways.
Procedure to Transfer Shares from One Demat to Another
As we have already told you you can transfer your demat account through two modes – offline or manual transfer and online transfer procedure. And below you can find step-wise guidance for manual as well as online share transfer to another demat account.
Manual Transfer Method
Manually share transfer from one Demat Account to Another:
Step 1: for any kind of manual transfer you need a DIS (Delivery Instruction Slip). It is a document that needs to be properly filled with all the required details.
Step 2: You have to mention the Beneficiary Broker IDon the DIS from both of your brokers (existing and new brokers). The ID is a 16-digit unique code allotted to the brokers.
Step 3: Now you have to fill in the International Securities Identification Number (ISIN) which is a unique identification number allocated to each security that helps identify the individual shares into the demat account. You have to mention the ISIN with the number of shares you want to transfer.
Step 4: Here you have to choose between the Intra-depository Transfer and Inter-depository Transfer procedure to complete your share transfer process.
Step 5:If you want to do an Intra-depository transfer, you have to choose off-market, while in another case you need to opt for the inter-depository transfer option.
Note: Depository transfer can be categories in 2 parts- Intra depository and Inter depository. When shares transferred from one demat to another demat account but demat account registered with same depository that is Intra depository transfer. When shares transfer from one demat to another and both account registered with different depository it is called as Inter depository transfer.
Step 6: Before handed over your DIS to your broker please make sure that it will be dully signed by you and there is no signature difference. Here you might be asked to pay some charges for transferring your shares from one demat account to another demat account.
Share Transfer from one Demat to Another Charges
Depending on the depositories and your DP rules and regulations the charges for transferring the shares from one demat account to a different account might differ. Transferring charges and expenses will be also different as per the mode of the share transfer mode you opt for.
Also Read: How to Convert Physical Shares Into Demat: Stepwise Procedure
The charges for transferring the shares from one demat to another demat account online are lower compared to the offline process. The charges for the transfer of shares from one demat account to another demat also depend on the market value of the total shares you want to transfer with additional charges like taxes (18% GST) imposed by the government on such transactions.
Online Share Transfer Procedure To Other Demat Accounts:
Nowadays everything is digitalized, hence share transfer to other demat accounts is also possible and more convenient through online mode. CDSL and NSDL both provide online share transfer facilities to transfer the shares online.For CDSL you can use electronic access to securities information and execution of secured transactions (EASIEST)and for NSDL you have to use the Speed-e facility.
Steps to Transfer Shares from One Demat to Another Online:
Step 1: Open the CDSL or NSDL website and register for the EASIEST or Speed-e facility as per the demat account you have with the depository.
Step 2: Now fill in the required details like shares ISIN and quantity and existing DP ID etc.
Step 3: Cross check all the details filled and send it to your broker or DP
Step 4: Broker will further send this application to your depository where all the details will be verified and after this you will get your login id with password.
Step 5: With these credentials login your account and transfer your shares seamlessly.
Is Share Transfer Taxable?
As per income tax provisions merely transfer of shares from one DP to another is not chargeable if both accounts belong to same person. Other than that if any person transfers any shares as a gift to other person and value stands more than Rs 50000 it would be chargeable under income tax act. In addition to this if recipient hold these shares for more than 1 year and then sell, profit will be charged as long term capital gain tax and it would attract tax rate of 10%. If recipient hold these shares for less then 1 year, any profit outcome will be deemed as short term capital gain and attract tax liability @ 15% .
Things to Keep in Mind While Transferring Shares from One Demat to Another:
So it is very clear that transfer of shares from one account to another is not as complicated as you think. For any transfer of shares you need to follow some basic rules and regulations. Apart from this there are several other points that should be remain at the back of your mind-
- Before you start the share transfer procedure from one demat to another demat account, read all the instructions, rules, regulations and charges carefully so that you can understand the entire procedure and carry out the same without facing any trouble.
- Choose the right broker to transfer the demat account from your existing broker. Compare the benefits of a demat account with a new broker and other additional features you will enjoy.
- Get the information on charges, duties and taxes you have to pay while transferring your shares from your existing demat account from any other demat account.
- If you want to close the existing demat account after the share transfer, then this process is free and you have to return the unused DIS back to the broker.
- Verify each and every detail required in the document while transferring the shares from one demat account to another demat account to avoid any trouble or rejection.
- Keep the records of all the share transfer deeds, share certificates and any other related documents with previous DP ID and demat account details.
- And before moving to the new demat account ask about the annual demat charges, limits and various rules, regulations and obligations towards using the demat account with the new DP.
Summing-up
Transferring the shares from one demat account to another account is not necessary unless you are not interested use multiple demat accounts. If you have to pay annual maintenance charges you want to deal in the stock market only with a single broker or you want to consolidate all your stock holdings in one demat account you should transfer your shares to one demat account.
You can choose the manual (offline) or online procedure to transfer the share transfer from one demat account to another as per your convenience and affordability. But make sure to choose the right discount broker or full-service broker to open the new demat account and transfer the shares. And also confirm about the transfer charges and demat account annual maintenance charges.
You can choose Moneysukh to open the trading account and demat account with the best features at the lowest charges. Here you can enjoy the additional benefits of a demat account with the lowest brokerage charges in the industry with the most advanced trading facility through the best online trading platforms. Along with demat, all the trading and investing services are available at the lowest prices.
Also Read:Key Points to Consider While Opening a Trading Account Online
