Combine Your Demat Accounts To Save Money

There are three key requisites for trading in the stock market – a bank savings account, trading account and a demat account. Just like multiple bank accounts, many investors also own many demat accounts.

However, there are benefits of consolidating all accounts. Here’s a look:

• When you buy a share, you own a portion of a company’s assets. To prove your ownership, you are given a certificate. Today, this certificate is electronically available in your demat or dematerialized account. All certificates are held in two central depositories – CDSL and NSDL. They hold your share certificates on your behalf.

• Banks, brokers and financial institutions offer demat account services. They are called depository participants (DPs). They act as an intermediary between the two depositories and the investor.

• The DPs charge an annual or monthly fee for maintaining your account. These vary according to the depository that holds your shares. They also charge a fee per transaction. These may just be a meagre fraction of the total transaction.

• Often you buy shares on behalf of your spouse, father, mother or children. For this purpose, you may create a new joint demat account. As a result, many investors have multiple demat accounts.

• Whether these are with the same broker or different firms, you will have to pay fees for each account. For a single account, this cost may be negligible. But, when put together, it could cost you thousands of rupees. A single account will thus cut down the amount you pay.

• Not just money, but consolidating your accounts will also save time and paperwork in maintaining the accounts as well as tax filing.

• Transferring your holdings is very easy. All you have to do is submit a delivery instruction slip to your broker with the details of the transfer value and the destination account. It is as simple as writing a cheque. Remember to mark this as an ‘off-market transaction’.

• If all your accounts are with a single DP, you can also file a single request form. However, they have to be singularly owned. In case of joint accounts, the delivery instruction slip has to be signed by all owners.

• However, many DPs charge fees for transfer of securities. These could either be a fixed sum between Rs 25 and Rs 100 or could cost 0.01-0.04% of the value of securities.

• The transfer is also not eligible to taxes if the accounts are held by the same person. Transfer to the accounts of relatives is also tax-exempt if the total value of the shares is less than Rs 50,000 in a year. Any value higher would be counted as capital gains, and taxed accordingly.

To learn more about Demat account and various FAQs related to it visit FAQ

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Kotak Securities Ltd is one of the oldest and largest stock broker in India. We offer you investing facilities in various instruments like equities, derivatives, currency derivatives, Mutual Funds and IPO, through our branches and the internet. In addition to this we have a full-fledged Research Team with years of experience in the industry.

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