Everything You Should Know About Demat Account Charges
3 min read 26 May 2023, 11:53 AM ISTBefore you open your Demat account, you must understand all about AMC as it is a cost that you bear
PremiumA couple of clicks on your smartphone or computer system is all it takes to purchase and sell stocks and securities belonging to different asset classes. Today, more than ever, it is convenient to make investments in the stock market, thanks to your Demat account. A Demat account is a digital account that safely stores your securities in a digital form. Being an electronic platform, a Demat account frees you from the risks associated with holding securities in a physical form. It also allows you the luxury to trade from your place of comfort and create wealth for yourself. But holding a Demat account comes with a cost commonly known as AMC. Before you open your Demat account, you must understand all about AMC as it is a cost that you bear.
What are AMC Charges?
Annual Maintenance Charges or AMC are the fees that are levied on your Demat account for holding it and maintaining it. It is a small price you pay to your banker or registered broker for enjoying the ease of trading online. These charges may vary from broker to broker and also depend on your Demat account type. Many components make up your Demat account’s AMC. Let's take a look at what constitutes the AMC.
Account Opening Fees
When you open a Demat account, you do so with a Depository Participant (DP), typically a reputed brokerage firm or bank. These financial institutions that provide you with the opportunity of opening your Demat account charge a nominal amount to open the account with them. These costs differ from one DP to another. While one DP might give you the benefit of extending your Demat account free for a year, another may charge you for the following year.
So while you may be drawn towards the idea of opening your Demat account for free, it may not necessarily guarantee you exceptional features or services. Regardless of the DP, you choose to open your Demat account, it can be a good idea to pay close attention to the amount you have to pay as opening charges.
Demat Maintenance Costs
In addition to the fees to open your Demat account, you also have to pay an annual maintenance cost to sustain the account with the DP. Demat maintenance charges are typically billed every year and come at a small cost, depending on the brokerage institution and your transactional values.
SEBI has defined a Demat account known as Basic Services Demat Account (BSDA) that works as an ideal recommendation for new and small investors. The BSDA account is not required to have an annual maintenance cost. If your balance is less than ₹50,000, the annual maintenance charges on the BSDA account are waived off.
Custodian Fees/Safety Charges
In the days of physical share trading, traders and investors had to safeguard their paper-based share certificates and other securities from harm or theft. It was their duty to ensure that the certificates were safe. Today, your Demat account provides you with safety as your shares and securities are stored electronically in it with the depository participant. A minimal custodian charge is levied to maintain the safety of your securities depending on the number of electronic assets you hold in your Demat account.
Transaction Fees
To debit and credit securities in your Demat account, a very tiny fee is charged. It is the transactional charge that the depository participant levies on your trading activities. Demat account charges on transactions depend on the kind of DP you choose and the type of brokerage plan you pick. One DP may charge you a transactional fee based on every transaction you make, while another may charge a flat fee for an entire month regardless of the number of transactions.
Conclusion
Trading in securities today is far more accessible and easier thanks to your trading and Demat account. Buying and selling of shares have come a long way since the days of paper-based share certificates. Today, it gives you an open playing ground to participate in the stock market more freely and quickly than ever. Paying a small cost in return for the ease and convenience in trading and investing is almost negligible. However, remember to stay updated on new Demat account charges when they occur and note how you can minimize them based on your trading activities.
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