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What are the demat account charges and fees?

The demat account is a repository where we hold shares. It is exactly like a bank account, the only difference being that instead of cash you holds shares and other securities in your demat account. You can open a Demat account with an authorized DP, who could be your broker or a bank. Eventually, all the shares will be held in custody by one of the depository viz. NSDL or CDSL.

The world of Zero Demat account opening charges:

If you open any newspaper or website today you will find ads announcing zero account opening charges for demat accounts. Most banks will offer you free demat account opening. The reasons are quite simple. If you have a demat account, you will also have a bank account with the same bank. That means your trading account float will lie with the bank and that more than compensates them and allows them to waive the accounting opening charges. Nowadays most brokers are also offering zero cost account opening or charging very nominally. However, discount brokers do charge you a small fee for the account opening and in some cases also charge you separately for executing the Power of Attorney (POA) for your Demat Account.

But, account opening charges is not the only demat cost:

Remember, waiving off the account opening charges does not mean that your demat account becomes free. There are other charges that will continue to apply. There are two types of demat accounts. There are Basic Service Accounts where the Annual Maintenance Charges (AMC) will not apply till a custody value of Rs.50,000. This is meant for very small investors. Then there are Full Service Accounts where there will be an AMC levied on an annual basis. This fee ranges from as low as Rs.300/- per year to as high as Rs.800 per year. Some banks and brokers even waive the first year AMC but charge the AMC from the second year onwards. The GST at the rate of 18% will be applicable on these AMC charges. When you are opening a demat account with a bank beware of the hidden charges. For example, banks like Axis charge you a sharply higher AMC if your demat account is not mapped to Axis Bank account. Normally, AMC charges are lower for more transactions and the charges are higher when there are lesser transactions.

Other variable charges entailed:

Demat costs are not just about the AMC. There is a custodian fee that is charged by some DPs at the rate of Rs.0.50 to Rs.1.00 per ISIN per month. However, since most companies pay this fee directly to the depository, most DPs do not charge this to the customer. The most important cost is the transaction fee which is charged by your DP each time a security is debited or credited to your demat account. Nowadays, DPs are not charging for credit to the demat account but they do charge you each time a share gets debited to the demat account. These are debited on a monthly basis. Then there are miscellaneous charges. Any failed instruction or rejected instruction is charged for by the DP. Most DPs will insist you use the online DP facility. In case you want physical statements mailed to you, it is charged separately. There are also charges for demat and remat of shares. The moral of the story is that Demat charges are not about account opening charges alone. There are a host of other charges for which you need to read the fine print.

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Attention Investors

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