What Are the Demat Account and Trading Account Charges?
Demat accounts and trading accounts are both required to start trading, though they serve different purposes. Most brokerage services provide Demat and trading accounts together, but most people need to learn their functions. However, one must also learn about charges on account initiation, services, maintenance, and transactions applicable to these accounts. Knowing these charges is necessary to determine the risk-reward ratio.
The section below discusses the various Demat and trading account charges. Keep reading to learn about their differences and stay updated on the charges you may have to pay the stockbroker.
What are Demat accounts and Trading accounts?
Before proceeding through the charges levied on Demat and the trading account, let’s learn how they operate and their distinct role for an investor.
A Demat (Dematerialised) account acts as a repository for your purchased securities and does not facilitate any transaction, nor can it store capital.
The National Securities Depository Limited (NSDL) and Central Depositories Services Limited (CDSL) maintain the Demat account of investors. They store the securities of investors virtually through requests generated by investors via Depository Participants or brokers. However, you will need a trading account to execute transactions or trade securities.
Trading accounts are regulated by Securities and Exchange Board of India (SEBI) and provided by registered stockbrokers to investors. It acts as an intermediary between your primary bank account and the Demat account, allowing you to buy and sell shares or other securities. You must input your bank details and PAN while applying for a trading account.
While purchasing securities, the trading account deducts funds from your connected bank account and credits your Demat account with the corresponding securities. The opposite thing happens when selling securities.
Why do brokers charge money on Demat accounts?
As an investor, you will have to approach a stockbroker to trade on your behalf. Stockbrokers are registered as Depository Participants (DP) to trade on your behalf.
The DP purchases your desired securities and transfers them to your Demat account. Furthermore, they are responsible for your account’s safety, maintenance, and management, which requires effort and time. In addition, DPs have to pay membership fees and transaction charges to NSDL or CDSL.
Therefore, you will need to pay nominal fees to avail of such services and other facilities that DPs provide.
Types of charges levied on Demat and Trading account
Account opening charges
Account opening charges are subject to change as per the DP’s terms and conditions. Some reputed brokers offer free Demat accounts to investors, whereas some levy nominal fees for the same.
Furthermore, charges may depend on the type of account offered to the investor. For example, brokers or banks that offer savings, Demat and trading accounts in a bundle to investors often exempt account opening charges.
Account maintenance charges
Investors must pay Annual Maintenance Charge (AMC) to the DP to maintain their Demat accounts. However, these charges vary as per the number of transactions and the equity holding value.
The table below provides the AMC charges levied by NSDL and CDSL based on equity holdings.
The AMC charges on the Demat account, as per NSDL specifications for individual investors are as follows:
|For Debt Securities||Charges|
|Regular Services Demat Account||Basic Services Demat Account|
|Up to ₹1 lakh||₹600 collected quarterly||No Charges|
|Between ₹1 lakh – ₹2 lakh||₹100|
|For Other Than Debt Securities|
|Up to ₹50,000||No Charges|
|Between ₹50,000 to ₹2 lakh||₹100|
|For values above ₹2 lakh||Charged as per regular Demat account|
The AMC charges on the Demat account, as per CDSL specifications for individual investors are as follows:
|Regular Service Demat Account||₹360 collected annually from 2nd year onwards. In case of no transaction during the financial year, ₹100 is chargeable.|
|Non-Trading||₹500 collected annually|
|Basic Service Demat Account|
|Up to ₹50,000||No Charges|
|Between ₹50,000 to ₹2 lakh||₹100|
|For values above ₹2 lakh||Charges as per regular Demat account|
Dematerialisation and Rematerialisation charges
DPs levy charges for dematerialisation and rematerialisation services to investors. Dematerialisation is when physical certificates are converted to digital certificates and stored electronically. Rematerialisation, on the other hand, is the process of turning digital certificates into physical ones.
The Demat and Remat charges for NSDL are listed below:
|Category (Demat & Remat)||Charges (Both Regular and Basic Service Demat Account)|
|Demat||₹5 per certificate for a maximum of 4 certificates, ₹20 after that, up to a maximum of ₹5,000. In addition, a mailing charge worth ₹100 is applicable per request.|
|Remat||₹25 per certificate per request|
|Or, ₹25 for every hundred securities or part thereof, up to a maximum of ₹5 lakh, whichever is higher: additional mailing or postal charge of ₹100.|
The Demat and Remat charges for CDSL are as follows
|Categories||For Demat||For Remat|
|Regular Service Demat Account||₹5 per certificate with an additional ₹50 per request for postal or mailing.||₹100 postal or mailing charges.|
|Non-Trading||₹10 per certificate with an additional ₹75 per request for postal or mailing.|
|Basic Service Demat Account||₹10 per certificate with an additional ₹100 per request for postal or mailing.|
Brokers or DPs levy nominal charges based on the number of transactions executed. DP levy these charges on per transaction basis or at a flat monthly rate.
Transaction charges as per NSDL instructions are as follows:
|Individual Account||Non-Individual Account|
|Regular Service Demat Account||₹30 per instruction, ₹20 for Fed-e-Trade customers.||0.025% of the share, subject to a minimum of ₹50 and a maximum of ₹600 per transaction.|
|Basic Service Demat Account||₹100 per instruction|
The specified transaction charges for CDSL are as follows:
|Regular Service Demat Account||₹15 On-market transactions through autopay and ₹20 without autopay.|
|Basic Service Demat Account||₹30 On-market transactions through autopay and ₹40 without autopay.|
|Non-Trading Account||A minimum of ₹50 or 0.05% of the purchase, whichever is higher.|
DP provides pledging services, which allow investors to utilise their purchased shares as collateral to get a loan for trading purposes. These charges only apply to investors willing to borrow capital from brokers. However, this is one of the prominent services worth mentioning if you are willing to do the same. For NSDL, the pledging charges for regular and essential service Demat accounts are ₹75 per transaction. In the case of CDSL, ₹25 is levied per transaction for Regular Service Demat Accounts, whereas ₹100 or 0.01% of the debt is charged, whichever is higher, for Basic Service Demat & Non-trading accounts.
Other Applicable Charges
Several other charges are applicable for the services provided by DP, like account freezing/unfreezing, account modification, book reissue, reconversion and redemption of mutual funds charges, etc., some of which are as below.
|Account Modification||₹10 per instruction||₹50 per instruction|
|Book Reissue||₹100 per booklet for 5 slips₹150 per booklet for 10 slips₹250 per booklet for 100 slips||₹50 for 10 slips|
|Reconversion of Mutual Funds||₹100 per instruction||₹25 per instruction|
Ways to reduce Demat charges
The following are some tips you can follow to reduce Demat charges:
- If you are a passive trader, you may opt for Basic Services Demat Account (BSDA), which attracts lower AMC than Regular Service Demat Account. BSDA account holders with security holdings of less than ₹50,000 do not have to pay for AMC.
- You may look for reputed DPs offering Demat account opening at lower service costs.
- Lastly, you can opt for a discounted brokerage plan, which allows you to pay for the transaction at a fixed rate at the end of the month rather than having to pay for each transaction. If you are an active trader and make multiple transactions consistently, this service can help you save a lot of money.
Brokers who are also DP act as intermediaries for either of the two depositories of India, NSDL or CDSL. They are responsible for providing Demat and trading accounts to the investors so they can trade and hold their securities, for which they charge nominal fees.
As an investor knowing the charges applicable to a Demat account can help you sort out unnecessary services. The above sections have detailed the charges levied by NSDL and CDSL so that you can choose your DP accordingly.
Frequently Asked Questions (FAQs)
Are Demat and a trading account compulsory for trading?
Yes, Demat and trading accounts are compulsory for trading securities. However, a Demat account is optional if you are willing to only invest in options and futures.
Is it mandatory to dematerialise my physical certificates?
Yes, SEBI has made it mandatory to dematerialise physical certificates.
What happens if I do not pay the AMC charges on the Demat account?
If you do not pay the AMC charges, you will receive intimations from the DP for a specific period. After which, your Demat account will be considered dormant.
Can I avoid paying Demat Charges?
Practically, you cannot avoid paying Demat charges unless you follow BTST (Buy Today, Sell Tomorrow) trading strategy or invest in futures.