Demat accounts: Everything you should know about the annual maintenance charges on them
Demat account simplifies stock investing by storing securities electronically and removing the hassle of physical certificates. Opening an account is now convenient and free, with Annual Maintenance Charges (AMC) ranging from ₹100 to ₹1000 depending on the depository participant.
Demat account acts as your gateway to the world of stock investing, allowing you to invest in various financial instruments and engage in trading to capitalise on price fluctuations in stocks.
Similar to your bank account, a demat account safeguards your securities in electronic form, providing convenience and security. It eliminates the need for physical share certificates, making it easier to manage and track your investments efficiently.
You can open a demat account with any depository participant listed with depositories like CDSL and NSDL. Unlike in the past, opening a demat account has become hassle-free; you can now do it through your mobile device and start trading in less than a day.
The cost to open a demat account is typically free, as many depository participants do not charge their customers for account opening. However, there are some charges associated with maintaining a demat account, which we will explore in this article.
AMC
Many brokerage firms in India impose an annual maintenance fee on demat accounts. This fee is deducted directly from your demat account fund balance by the brokerage firm. You will be notified about this deduction via email or message once the amount has been debited from your account.
The Annual Maintenance Charges (AMC) vary depending on depository participants. Some depository participants charge investors every year, while others charge every quarter. Generally, the AMC would be between ₹100 and ₹1000.
For instance, brokerage firm Zerodha charges an AMC of ₹300 plus 18% GST for individuals, HUFs (Hindu Undivided Families), and partnership firms. For corporations, such as LLPs (limited liability partnerships), private, and public companies, the AMC may increase to ₹1,000 plus 18% GST, according to the company's website.
At the time of opening a demat account, the depository participant will provide information about brokerage charges, AMC, and other associated fees. You can negotiate with the depository participant to potentially lower these charges if they are high compared to their peers.
Low charges for BSDA accounts
A Basic Services Demat Account (BSDA) is a unique category of demat account designed for small investors who do not frequently engage in stock market trading. Maintenance fees for this account are lower compared to non-BSDA accounts.
Depository participants do not offer BSDA accounts separately. Instead, if your stock holdings in your demat are less than ₹2,00,000 and you have only one demat account registered with a PAN across different DPs, then that account will be considered as a BSDA.
As per market regulator SEBI, if your stock holdings in your demat are less than ₹50,000, the Annual Maintenance Charges are zero. If the value of your holdings falls between Rs. 50,001 and Rs. 2,00,000, the maximum AMC will be Rs. 100.
FAQs
Do I need to pay account maintenance charges for my demat account even if it's inactive?
Yes. Even if your demat account is inactive, you are liable to pay the account maintenance charge.
Is registration for the SMS alerts (SMART) facility mandatory for BSDA category accounts?
Yes. SMART registration is mandatory for BSDA accounts.
Can I convert an existing demat account into the BSDA category?
Yes, provided no other demat account exists under the same PAN number across the depositories. The value of the securities held in the demat account does not exceed ₹2 lakhs.
What will happen to my demat if I don't open it regularly?
If your demat account stays unused for an extended period, your depository participant may freeze it. To reactivate the demat account, you'll need to complete the e-KYC process again.
Will my DP sell my holdings to recover the AMC if I don't have sufficient funds in my demat account?
If you don't have sufficient funds in your demat account to cover the AMC, your depository participant will send reminders via SMS, phone calls, and email. If you fail to respond to these reminders, your broker will convert your demat account into a dormant account, rendering it inactive.
This means you won't be able to conduct any transactions from this account until you reactivate it. To reactivate, you'll need to pay the reactivation charges along with any pending dues.
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