Investing is a magnificent way of wealth generation. It is a viral method that provides the right kind of financial security. The Demat account is at the center of investing in the share market. It is mandatory to have if one wishes to invest in various assets or carry out online trading. It acts as a repository of the shares and other securities of the investors.
So, investors need to open a Demat account for themselves. But, opening one without taking a proper look at the charges it carries is not advisable. There are a good number of financial institutions which provide Demat accounts without any immediate charges. Most of them do charge you for the variety of services they offer.
To get a Demat account, one would generally need to contact a financial institution. Such institutions are the depository participants authorized by India’s Securities and Exchange Board (SEBI). At the same time, before you go through the Demat account opening process, look at the following charges.
Demat Account Opening Fees
As discussed earlier, most depository participants (DPs) do not charge for Demat account opening. But, there may be a few DPs who may wish to take a fee for this too. Confirm this before you start the Demat account opening process. Renowned institutions like Kotak Securities refrain from charging their customers for opening a Demat account, which may be the ideal selection for many.
Annual Maintenance Charges of the Demat Account
The Depository participants levy this charge you annually for the services they provide round the all or. In some cases, depending on your depository participant, you may need to make an advance payment in this regard. The DPS regularly works to keep your Demat account up and running, meeting all your needs. It is why most DPs generally do not waive off the maintenance charges. Sometimes, you may find it as portfolio maintenance charges. Some institutions may provide the facility of paying the charges—quarterly or semi-annually (or semi-annually basis.
Yet there may be a few who may offer you the option of paying a particular amount as a lifetime fee. This single payment would relieve you of the recurring annual payment. Some institutions, though, provide their customer’s Demat accounts with zero maintenance charges for the first year or so. The billing would generally start when you enter the second year or as offered by the institution.
Custodian Fee or Safety Charges Levied by the DPS
Many depository participants (DPs) levy a custodian fee for maintaining the Demat account properly to keep it safe. Some DPs skip the charge or merge or add it to the annual maintenance charges. Those who charge, though, ask for recurring monthly payments in this regard. The number of charges may vary. They depend on the volume of securities one holds in the Demat account. As deemed necessary by the concerned financial institution, a few other such factors may also decide the charges.
Transaction Charges in a Demat Account
The transaction charge is a monthly charge. The depository participants charge you for the credit and debit of the various securities in the Demat account that you get through online trading or even otherwise. Some of them charge you a flat fee for each while purchasing or selling the assets. Some others may charge it on a percentage basis based on the value of a particular transaction.
The transaction fee charges usually vary from one financial institution to the other. The kind of transactions one carries also determine the extent of the charges. There may be investors carrying out online trading in stocks. Others may deal in mutual funds, exchange-traded funds, or government bonds. As a Demat account holds multiple kinds of assets, the transaction charges for all these must naturally differ.
The conversion of the physical form of certificates of the securities into the electronic or digital form is the process of dematerialization. If an investor has securities in physical format, he may need to convert them into the form. Upon doing this only, can one get details of all these securities in a Demat account? The DPS will charge a small fee for this. Institutions like Kotak Securities charge a minimal amount.
Postal or Courier Charges
Some institutions may levy additional delivery charges if you wish for your Demat account’s physical document or transaction statements.
Some Extra Charges
Apart from all the significant changes we saw earlier, some minor ones also exist. They include failed instruction changes, mailing charges for particular statements, service tax, etc.
In conclusion, it is crucial to learn about all the charges before getting a Demat account. One should compare different Demat accounts offered by various institutions and choose wisely.