How to transfer shares from one demat account to another? A step-by-step guide

For active investors, the question of whether shares can be transferred from one demat account to another is common, and the answer is affirmative. While selling securities typically involves transferring shares to another party, having multiple demat accounts allows investors to transfer shares between them.

The practice of transferring shares from one demat account to another has become widespread. Whether prompted by changing brokers, consolidating investments, or gifting shares to family members, understanding the process of share transfer is crucial for investors. Exploring what share transfer entails and learning how to execute transfers between demat accounts can greatly benefit investors seeking to manage their investments effectively.

What is transfer of shares?

The transfer of shares involves relocating securities from one demat account to another. In India, shares are stored electronically in dematerialised (demat) accounts, eliminating the necessity for physical share certificates. 

Read here: What are the charges associated with a demat account?

How to transfer shares?

There are 2 methods of transferring shares from one demat account to another - online and offline. Let's understand both.

To initiate the transfer of shares from one demat account to another, the transferor must follow these steps.

Offline transfer

1) Obtain the Delivery Instruction Slip (DIS) from the current stockbroker, containing all essential transfer information.

2) Fill in necessary details on the DIS, including the Beneficiary Broker ID for both the current and new brokers, and the International Securities Identification Number (ISIN) identifying individual shares.

3) Select the appropriate transfer mode, opting for off-market for intra-depository transfers and inter-depository for other transfers.

4) After completing the DIS, sign the document and submit it to the existing broker. A nominal fee will be charged for the transfer, varying among brokers.

Read here: How to open a demat account online? A comprehensive step-by-step guide

For online transfer of shares:

1) Visit the CDSL or NSDL website and register for the 'Easiest' or 'Speed-e' facility.

2) Fill out the required details and submit the form.

3) Send a copy of the form to your depository participant, who will forward it to the Central Depository.

4) Your details will be verified, and you will receive login credentials within 1-2 days.

5) Once logged in, you can transfer shares online from your demat account at your convenience.

Read here: Want to open a demat account? Here's a list of documents you are required to submit

In the process of transferring shares between demat accounts, several crucial points merit consideration. Firstly, selecting a dependable and esteemed Depository Participant (DP) for the new demat account ensures reliability throughout the transfer process. Additionally, meticulous verification of details such as the International Securities Identification Number (ISIN), DP ID, client ID, and beneficiary account numbers is imperative to prevent any discrepancies. It is also essential to maintain comprehensive records of the transfer deed, share certificates, and all pertinent documents to facilitate seamless documentation and ensure transparency. Vigilant monitoring of the transfer process and prompt follow-up with the DPs in case of delays or issues encountered further ensure the smooth progression of the transfer. Lastly, seeking guidance from a tax advisor or chartered accountant is advisable to comprehend the tax implications associated with the transfer and ensure compliance with relevant reporting requirements.

FAQs

Why would I need to transfer shares between demat accounts?

There are several reasons why you might need to transfer shares between demat accounts. These include changing brokers, consolidating investments from multiple accounts, or gifting shares to family members.

Read here: Can investors hold multiple demat accounts in India? MintGenie answers

Are there any charges associated with transferring shares?

Yes, there may be charges associated with transferring shares between demat accounts. These charges can vary depending on factors such as the number of securities being transferred and the policies of your DP or brokerage firm.

How long does it take to transfer shares between demat accounts?

The timeframe for transferring shares between demat accounts can vary depending on factors such as the processing speed of your DP and any regulatory requirements. In general, transfers typically take a few days to complete.

Can I track the status of my share transfer request?

Yes, you can usually track the status of your share transfer request through your DP or brokerage firm. They will provide updates on the progress of the transfer and notify you once it has been completed.

Read here: Choose your language as CDSL launches multi-lingual initiatives for users

What are the tax implications of transferring shares?

Transferring shares from one demat account to another owned by the same individual is typically regarded as a non-taxable event. However, if shares are transferred to the demat account of a different individual, it may incur tax implications. Such transfers, conducted without any consideration, are treated as gifts and are subject to taxation under the provisions of the Income Tax Act, 1961. It is advisable for both the transferor and the transferee to seek appropriate legal counsel before initiating such transfers to ensure compliance with relevant tax regulations.