Demat Account Charges: From maintenance fees to transaction cost, a list of charges associated
Demat Account Charges: Charges associated with demat accounts include annual maintenance fees and custody charges. Brokers deduct a transaction fee when buying or selling shares, which can be a flat fee or a percentage of the transaction amount.
Demat account charges: Demat account charges can vary based on the brokerage firm and their services, however, some of the common charges are account opening fee, annual maintenance charges (AMC), transaction charges, among others.
These days, opening and operating a demat account has become much easier, largely due to the proliferation of mobile trading apps. Even traditional brokerage firms, with decades of experience, have developed their own mobile trading platforms.
This convenience has made it possible for young Indians to open a demat account within hours and start trading right from their mobile devices. These modern mobile trading platforms offer a plethora of features, including live portfolio review, market updates, notification alerts, stock price alerts, real-time news updates, free research reports, intraday tips, and visually appealing charts and analysis through eye-catching infographics.
In this article, let's explore the charges associated with opening a demat account, along with some common questions: Are there separate fees for accessing mobile trading platforms? What are the additional charges for accessing derivative trading or trading in other securities apart from stocks?
Demat account opening charges
To open a demat account, you need to first choose a depository participant (DP). These are typically brokerage firms or banks that offer the option of opening a demat account with them.
You can then upload the required documents yourself, following the DP's guidelines, or seek assistance from a relationship manager at the DP. Amid stiff competition, many DPs in India are offering demat accounts at no cost. However, DPs typically charge an annual maintenance fee for demat accounts, which can vary from one DP to another.
Stock market regulator SEBI has revised the Basic Services Demat Account (BSDA), from June 2019, where there are no annual maintenance charges for debt securities up to ₹50,000. Conversely, a maximum amount of ₹100 plus taxes would be levied if the holding was from ₹50,000 up to ₹2 lakhs.
Also Read: Demat account offers more than just facilitating buying, selling of shares. Here are 5 main benefits
Custody charges
Custody charges refer to the fees associated with safely storing your securities in digital form by entities like NDSL or CDSL as trading transitions from physical to electronic formats. Typically, depository participants (DPs) collect one-time custody charges, although some DPs may waive these fees.
Transaction charges
After your demat account is set up for trading, you can deposit funds into it and begin trading. When you buy or sell shares, your broker will deduct a percentage of amount from the total transaction value. Some brokers may charge a flat fee, regardless of the total transaction value.
For example, if your transaction value is ₹100,000, the broker may only charge ₹20 instead of 0.10% of the total transaction value, which would be ₹100.
These flat brokerage charges have gained popularity in recent years as many brokerage firms offer them at low rates to attract more customers.
FAQs
Do brokers still charge transaction fees even when I experience losses in the stock market?
Yes, brokers typically base their transaction fees on the value of your transactions. Regardless of whether you make significant profits or incur hefty losses, the transaction fee remains the same. It's unrelated to your overall profit or loss in the stock market.
Does the transaction fee vary for derivatives and equity trading?
Yes, the transaction fees can vary between derivatives and equity trading.
In equity trading, you have the flexibility to choose the number of shares you wish to buy or sell. However, in derivatives trading, transactions are conducted in lot sizes, which are predetermined multiples of shares. This is similar to IPOs, where purchasing individual shares isn't possible.
Regarding transaction fees, brokers typically charge either a flat fee or a percentage of the total transaction amount in the equity segment. In the derivatives segment, transaction fees are charged on a per-lot basis. For example, if you purchase a Nifty 50- 20,000 call option, you might be charged ₹20 per lot. The same fee applies when selling the lot.
It's worth noting that some brokers may charge ₹20 for both buying and selling transactions in derivatives.
Do I need to pay an additional fee to access both mobile and web trading platforms?
If your broker offers a mobile trading facility, you can access it without any extra charge. Simply download the DP's mobile trading app from the Play Store, log in with your ID and password, just as you would with the web application, and you're good to go.
Should I choose a broker primarily based on their low brokerage fees?
Selecting a broker solely based on low brokerage fees may not always be the best approach. While low fees can be attractive, it's important to consider other factors such as the quality of service, reliability, trading platforms, customer support, research tools, and overall reputation of the broker.
Offering a low brokerage fee sometimes leads the brokers to compromise on these parameters, which may impact your trading outcomes. Therefore, it's essential to weigh all these factors before making a decision.
Do I have to pay brokerage fees for holding stocks in my demat account?
No. The broker will not charge for holding stocks in your demat account. However, when you sell these stocks, transaction charges will apply. These fees may be charged as a percentage of the total sale value or as a flat fee.
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