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.

Demat account

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 account

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.

NSDL

The AMC charges on the Demat account, as per NSDL specifications for individual investors are as follows:

CDSL

The AMC charges on the Demat account, as per CDSL specifications for individual investors are as follows:

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.

NSDL 

The Demat and Remat charges for NSDL are listed below:

CDSL

The Demat and Remat charges for CDSL are as follows

Transaction Charges

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.

NSDL

Transaction charges as per NSDL instructions are as follows:

CDSL

The specified transaction charges for CDSL are as follows:

Pledging charges

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.

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.

Final Words

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)