Things you must Know about Demat Charges and the Way to Reduce Them | Motilal Oswal
Things you must Know about Demat Charges and the Way to Reduce Them | Motilal Oswal

Things you must Know about Demat Charges and the Way to Reduce Them

While demat accounts make investing in general and trading in particular easier than ever before, they also come with their own set of fees. These fees are a tiny amount to pay for the ease of trading over the internet. However, it is still wise to be aware of a few features of these demat account charges from a financial standpoint.

  • Charges for Opening a Demat Account

The presence of a Depository Participant, commonly known as a DP, is required for the opening of a demat account. Typically, they are brokerage firms or banks that provide the option of opening a demat account. In most circumstances, your DP will charge a small fee to start a demat account. In some circumstances, the DP may offer you the option of utilising a demat account for free for the first year and then charging you the following year.

In any case, it's a good idea to learn about the fees associated with opening a demat account. It is important to remember that, while a free demat account may appear ideal, it does not ensure the quality of your DP's services.

  • Maintenance Fees for Demat Accounts

Aside from the fees associated with opening a demat account, you may be required to pay an annual demat account maintenance fee. These fees are levied once a year and are very low, ranging from Rs. 300 to Rs. 800 depending on the DP and the value of your transactions.

In some situations, the annual maintenance expenses for demat accounts can be waived. The SEBI describes the Basic Services Demat Account (BSDA) as a form of demat account that is suitable for modest investors. Annual maintenance demat expenses are eliminated in the case of BSDA if the amount is less than Rs. 50,000.

  • Custodian Fees/Demat Account Safety Charges

Traders had to store physical, paper-based certificates for their shares and other securities before trading became electronic. The dealer was given responsibility for the security of these certificates. However, since the introduction of demat accounts, the DP is responsible for the security of a trader's securities. As a result, depending on the volume of securities housed in the demat account, traders are charged a nominal custodian fee.

  • Transaction Fees for Demat Accounts

Finally, charges for debiting and crediting securities in a demat account are included in the demat charges. These are known as transaction fees, and they vary depending on the DP as well as the trader's brokerage plan. Some DPs charge transaction fees based on the number of transactions made, while others charge a monthly flat transaction fee.

Wrapping Up
Trading has never been easier or more accessible than it is now, thanks to technological advancements. Demat accounts, in particular, have transformed the way traders buy, sell, and store their securities, making trading a more level playing field. Demat account providers charge various fees connected to various aspects of making a demat account secure and convenient in exchange for these services. As a potential trader, it's critical to be aware of these demat fees and to keep track of the methods in which they can be reduced.

Related Articles:  Why is a Demat Account a must for 21st Century Investor | Evolution of Demat and Trading Account in India | Factors to Consider When Opening a Demat Account | Eligibility Criteria to Open Demat Account in India | Types Of Demat Account & Trading Account

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