Demat Accounts and online trading have changed a trader’s life in a lot of ways. It has become very convenient and cost-effective to trade in shares and other securities. Just provide your Depository Participant (DP) with the appropriate instructions and they will handle everything for you.
For the convenience of being able to trade from the comfort of your home, you have to pay a small fee. The Opening fees, safety (or custodian) fees, Annual Maintenance Charges (AMC), service charges, and Demat and Remat fees are some examples of Demat charges.
With growing competition and more brokers and banks providing Demat services, most DPs are now offering many benefits in these payments. On one hand, many DPs have waived the fees for opening a Demat account and the fees for maintaining it for the first year. While on the other hand, some DPs offer things like better transaction fees.
Different Types of Demat Account Charges
Here are some of the common Demat account fees charged by the brokers and Depository Participants:
To open a Demat account, a DP must be present. Most of the time, these are brokerage firms or banks where you can open a Demat account. Most of the time, your DP will ask you to pay a small fee to open a Demat account. In other cases, the DP might give you the option of using a Demat account for free for one year and then charging you the next year. In either case, it is best to find out how much it costs to open the Demat account you want. Before you choose a DP, make sure that the lower Demat account opening charges don’t come at the cost of lower-quality services. ICICIdirect lets you open a Demat account for free.
For transactions, your Depository Participant would also charge a small brokerage fee. The fee is for the services that the DP grants you. You must pay this fee every time you perform a transaction using your Demat Account. Some DPs will charge transaction fees every month while others may charge them weekly. There are different transaction fees for buying and selling, meaning that some DPs might only charge you the service charge when you sell securities.
Account Maintenance Charges:
Along with the fee for opening a Demat account, you will also have to pay a fee every year to keep it running. These Demat account charges are small and can be anywhere between ₹300 and 700. The amount of account maintenance charges will vary based on the DP and how much you spend in a year. If you are a small investor you can skip the annual maintenance fee. The Securities and Exchange Board of India (SEBI) has made a Demat Account for investors with a holding of ₹50,000 or less, known as the Basic Services Demat Account (BSDA). You don’t have to pay the annual maintenance fee if you have a BSDA.
Before investing became electronic, people had to keep physical paper certificates for their shareholdings and other securities. The trader was in charge of making sure these certificates were safe. Since Demat accounts came along, the DP is in charge of making sure that a trader’s securities are safe and secure in electronic or dematerialised form. For this, traders pay a small custodian fee based on how many securities they have in their Demat account.
Learning about the different fees that come with Demat trading is important because they will affect how much money you make from your investment. To win over investors, new stockbrokers may charge less than those who have been in the market for a long time. But when it comes to investing in the stock market, find a broker you can trust and who has a good track record rather than finding the cheapest one in the market.
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