5 Things About Demat Account Charges You Need to Know
Share market investment is one of the many ways to create personal wealth. It’s a strategic way to make money from your accumulated money. Although the share market has its own set of profits and risks, it continues to be an actively discussed topic.
What Is a Demat Account?
A Demat account is a dematerialized electronic holding account. It is essential for trading equities on the stock market. You must contact a Depository Participant (DP) to open an account. Depository participants are intermediaries between the account holders and depository firms in India (Nationals Security Depository Limited and Central Depository Services).
Earlier, physical certificates were offered. But today, they are available digitally through a Demat account. You can always keep an eye on your assets thanks to this statement of demat holdings.
What Should You Know About Demat Account Charges?
1. Charges for Opening a Demat Account
While opening a demat account, you will have to pay some charges. These include the following charges –
- Account Opening Fee – It is usually a minimal amount and depends on the depository participant you choose. Some DPs do not charge fees at all.
- Annual Maintenance Fee – You must pay this fee in advance to the depository participant for folio maintenance. It can be anywhere between INR 300 – 1000. The DP may not even charge the annual maintenance fee for the first year.
- Custodian Fee – The total securities determine this fee in your account. For each ISIN, you may have to pay between INR 0.5-1. But there is an exemption for companies who have paid one-time costs.
- Transaction Fees – This fee covers securities trading from your demat account. The fee structure can differ from DP to DP. It may either be fixed or a percentage of the worth of the transaction. Furthermore, it depends on whether you are buying or selling.
2. Demat Account Types
Demat accounts are of 2 types – basic service accounts and full-service accounts. The charges will be determined by the type of account you choose. The fees for the latter are comparatively higher than the former. As a beginner, it is advisable first to open a basic service account.
3. Account Maintenance Charges for BSDA Accounts
Basic Service Demat Account (BSDA) attracts low maintenance fees, unlike other accounts. So if your account has securities worth under 50,000 INR, you are not liable to pay the maintenance charges.
4. Account Freezing
If a demat account is dormant for an extended period, a DP may choose to freeze it while continuing to charge yearly fees.
5. Multiple Accounts
You are allowed to have multiple demat accounts. However, this will increase the combined fees for opening and maintaining the accounts.
Before opening a Demat account, know your requirements for share market investment. Research the DPs extensively, compare the charges for demat account and see who suits your needs the best. Also, don’t forget to read up on their policies!