A demat account is a prerequisite for you to hold your securities in a safe manner. It is an account where investors can deposit stocks. Typically, you can open a demat and trading account to carry out both activities. You can transfer your holdings in a demat account to another individual rather than the account itself.
What happens when you wish to transfer your demat holdings to another family member, say your spouse or children? There are two methods of transfer of shares: the offline and the online method.
One of the first things to bear in mind is a delivery instruction slip or DIS. You would need to fill in the details of the shares you wish to transfer or gift, the account of the recipient and hand it over to the depository participant or DP, who will then transfer the shares. Keep a note of the shares you wish to transfer and the ISIN number, which is specific to the shares of different companies. You would also need to enter the target client ID, which is a 16-digit code.
The recipient would need to submit a receipt instruction to their DP in order to receive the shares. A depository participant or stockbroker/broking firm is the agent of the depository like the NSDL (National Securities Depositories Ltd) or the CDSL (Central Securities Depositories Ltd). If the transfer is within the same depository or is an intra-depository transfer; if it is another, then it is an inter-depository transfer.
The method of settlement of shares by submitting a DIS without involving the stock exchange is called an off-market transaction. If the share transfer occurs between blood relatives/family members, the gift or transfer of shares is exempt from tax, irrespective of the amount transferred. Family members or blood relatives include spouse, brother/sister, brother or sister of the donor’s spouse, brother or sister of the individual’s parents, any descendant or ascendant of the individual or their spouse or spouses of the ascendant/descendant or brother/sister of the donor.
Here you can use the e-DIS option, where there is no need to submit the documents physically. The recipient would need to login to their demat account and accept the transfer of shares. The donor would then have to authorise transferring of said shares by way of using a one-time password or a PIN.
In the case of an account holder’s death, the process of transferring the securities of the person is called transmission. In this process, the shares are transferred to the nominee or legal heir of the demat account holder who is deceased. If the person has a joint demat account holder, then the securities are transferred to the other person. The transfer of shares from your demat account to another family member is a voluntary act whereas transmission is a legal act.
Whether you want to safeguard all your securities in one place or transfer the securities to a family member, it is important to first open a demat account. Opening a demat account online is a simple process and can be done by the click of a button.
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