Documents Required for Demat Accounts
The extent of documentation required to open a Demat account may vary according to your relationship with the institution. If you plan to open a Demat account with a bank, a savings account holder has an
edge over the non-account holder. In fact, banks usually offer additional incentives to customers who open a Demat account with them.
Along with the application form, your photographs (with co-applicants) and proof of identity / residence / date of birth have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper.
In addition to the other fees (see box), the DP also charges a fee for converting the shares from the physical to the electronic form or vice-versa. This fee varies for both Demat and remat requests. For Demat, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only Rs.25 as the request fee and Rs.3 per certificate as the variable fee. However, SBI charges only the variable fee, which is Rs.3 per certificate. Remat requests also have charges akin to that of Demat. However, variable charges for remat are generally higher than Demat.
Some of the additional features (usually offered by banks) are :
- Some DPs offer a frequent trader account, where they charge frequent traders at lower rates than the standard charges.
- Demat account holders are generally required to pay the DP an advance fee for each account which will be adjusted against the various service charges. The account holder needs to raise the balance when it falls below a certain amount as prescribed by the DP. However, if you also hold a savings account with the DP you can provide a debit authorization to the DP for paying this charge.
- Finally, once you choose your DP, it will be prudent to keep all your accounts with that DP, so that tracking your capital gains liability easily. This is because, for calculating capital gains tax, the period of holding will be determined by the DP and different DPs follow different methods. For instance, ICICI Bank, uses the first in First Out (FIFO) method to compute the period of holding. The proof of the cost of acquisition will be the contract note. The computation of capital gains is done account-wise.
Opening Cost and Other Charges.
The cost of opening and holding a Demat account.
There are four major charges usually levied on a Demat account:
- Account opening fee,
- Annual maintenance fee,
- Custodian fee and
- Transaction fee.
All the charges vary from DP to DP.
Depending on the DP, there may or may not be an opening account fee. Private Banks, such as ICICI Bank, HDFC Bank and UTI Bank, do not have it. However, players such as Karvy Consultants and the State Bank of
Annual Maintenance Fee
This is also known as folio maintenance charges, and is generally levied in advance.
Custodian Fee
This fee is charged monthly and depends on the number of securities (international securities identification numbers – ISIN) held in the account. It generally ranges between Rs.0.5 to Rs. 1 per ISIN per month.
DP will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the depository.
Transaction fee
The transaction fee is charged for crediting / debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to the transaction value, subject to a minimum amount.
The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debeting the securities while others charge for both. The DPs also charge if your instruction to buy/sell or is rejected.
In addition, service tax is also charged by the DPs.
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