Maintenance Charge for Demat Account
Several changes have been introduced in the life of a trader by the introduction of a demat account. A demat account online has eased the process of holding and monitoring your financial commodities and made trading and investing convenient and cost-efficient.
The demat account has rid investors of the worries about theft and damage of their shares and securities. Having a demat account online helps an investor save time as they don’t have to visit the bank physically to trade and invest. When they open a demat account, they can trade and invest in the financial market by simply instructing their depository participant (DP) from the comfort of their homes.
In simple terms, with a demat account online, your trading and investing can continue without interruptions to your routine life.
With these favourable advantages, every potential investor will want to open a demat account in India. However, to prevent unpleasant surprises in the future, it is important to know the factors associated with opening a demat account.
One important piece of information to bear in mind is that when you hold a demat account in India, you are expected to pay some amount for trading with and maintaining your account. Every investor must therefore acquaint themselves with the maintenance charges for a demat account before they open a demat account in India.
Charges Associated with a Demat Account in India
The maintenance charges for the demat account depend on your particular DP (Depository Participant). Nowadays, several banks and brokers offer demat account facilities with competitive rates, and they offer investors several incentives. Some DPs also waive off certain charges such as those to open demat account, maintenance charges for demat account for the first year, etc.
Here is a list of the general maintenance charges for a demat account:
- Charges to Open a Demat Account:
This is the first charge levied when you seek to open a demat account with your chosen DP. The charges to open your demat account online vary depending on the DP you are dealing with.
Usually, banks charge an amount between ₹700 - ₹900 to open a demat account. Some DPs waive off the account opening charges. The rising competition within the sector has encouraged competitive charges to open a demat account online.
- The Custodian Fee for Demat Account:
Most DPs levy a one-time custodian fee, and some DPs waive off the custodian fee altogether. The custodian charges are levied for the safekeeping of your financial commodities.
The charges depend on the number of securities one holds. The charge might be as little as ₹1 for every International Security Identification Number (ISIN) mapped to your account.
Formerly, most DPs charged investors for both debits as well as the credits of the account. Now, however, these charges are restricted to debits only.
It is recommended that the potential investor ask the DP upfront about the custodian charges and how often are these are levied to steer clear of any confusion in the future.
- Transaction Charges:
The transaction fees on your demat account are usually charged monthly. The transaction fees are levied upon the credit and debit of securities to and from your demat account online.
While some DPs charge a flat fee, some others charge on a percentage based on the transaction value. Typically, the charges are ₹1.5 per transaction. The terms associated with the charges must be clarified with your DP before account opening.
- Account Maintenance Charges (AMC):
For the services rendered by the DP, an investor will have to pay an annual account maintenance charge, otherwise known as the folio maintenance charge. These charges are to be paid in advance annually and usually range between ₹300 - ₹900.
Some DPs might also charge these fees quarterly, while some others may levy a lifetime charge of ₹2000 and above. However, owing to the rising competition, some DPs either waive off the charges or discount these charges for the first year.
A tip to save on the AMC is to have your saving account with the same bank that you have a demat account.
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A depository participant (DP) is an agent of the depository (either the NSDL or the CDSL) who act as an intermediator between the depository and the investor. A potential investor can open and maintain their demat account through a DP. A DP can be a bank, an institution, or a brokerage.
NTypically, there are four charges that potential investors should be mindful of before opening a demat account online:
- The demat account opening charges
- The custodian fee for the safety of your securities
- Transaction fees for the debit and credit of securities
- Account Maintenance Charges (AMC) charges annually
The documents needed to open a demat account online are:
- Proof of identity: PAN card, Aadhar card, etc.
- Proof of address: Ration card, Passport, etc.
- Proof of income: salary slip, Form no. 16, etc.