Certificates of shares held by individuals in electronic or dematerialized form are stored on the Demat account. This will make it possible for securities in all asset classes, e.g., mutual funds, ETFs, and fixed-income investment products, to be bought and sold more easily. To hold securities and make trades, the Demat account may be opened with a broker or depository participant.
Before you open demat account, it is important to understand the charges required to open and maintain a demat account. One of the major charges for maintaining a demat account is the annual maintenance charge. This article below will help you understand all the major and primary information about the AMC of a demat account.
Understanding Annual Maintenance Charges
Demat account maintenance charges (AMC) or folio maintenance fees are levied by brokerage firms and depository participants (DPs) in exchange for the services they render. You should be aware that the India Securities Exchange Board only authorizes a select group of banks and securities firms to hold investments for depository institutions in electronic form as official depositary undertakings.
These DPs must pay a price for this. The AMC can be paid either once or on a quarterly basis and ranges in price from Rs. 300 to Rs. 900. DPs frequently provide free AMC Demat charges for the first year in an effort to draw in new clients. A trading account and a bank account usually get opened alongside a Demat account when a consumer opens one with one of the banks. The AMC is quite low in that kind of circumstance.
On the other hand, if a Demat account was set up with different banks and its savings were linked to each other’s accounts, it would be subject to an increased AMC. You can get some of the lowest AMC charges for an account with Demat at a few banks and brokerages. However, you should be aware of what Demat services are offered in AMCs and whether other financial institutions charge more ASMC for benefits associated with maintaining a Demat Account if you select the depository participant, any bank, or another financial institution to open your Demat account.
Other Types Of Demat Account Charges
The other types of charges related to the demat account are as follows.
1. Account Opening Fees
You must pay a certain fee as an account opening fee to open a Demat account. Depending on the depositary participant, that charge can range from Rs. 200 to Rs. 500. In order to attract new investors. However, a few banks and NBFCs offer specific offers for these account opening charges. Some brokers may also waive the opening charge for a Demat account.
2. Transaction Charges
For every transaction activity from or to your Demat account, you also need to pay a transfer charge to the depositary participant. For a whole month of transactions, some DPs can charge an unchanged fee. Transaction fees may differ between the various brokers, as they do with any other fee. This charge may be no more than Rs. 1.5 for each share.
3. Custodian Fees
The security charge shall also be referred to as the fee for custody. This fee is charged by depository participants in order to ensure the security of your securities and other vital documents. The number of securities associated with a Demat account is subject to custody charges. For each security held in a Demat account, the fees may vary from 0.5 to 1 per security, depending on which depositor party waives the fee.
4. Demat or Remat Charges
The Depository Participants may also charge the Demat or Remat fees for dematerializing or rematerializing securities on a Demat account. Your securities’ dematerialization may incur a depositor fee of Rs.5 per certificate. For each certificate, however, the rematerialization of securities might cost Rs. 25.
The demat accounts make it incredibly simple for shares and securities to be stored and traded. Nevertheless, some money may be required from the broker for maintenance charges on your Demat account, safekeeping of securities, and any other transactions you wish to authorize. There are several ways in which DPS can make those payments.
There are several associated charges for each Demat account. These charges are different between the participants in the depository and each other. Opening a Demat account is an ongoing obligation. Consider, therefore, checking its annual maintenance fees and any additional charges before setting up a Demat account. Trading platforms and demat account app like Share India offer very affordable AMC charges to their users.