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There are over 16 Demat accounts
As of June, India's number of Demat accounts exceeded 16 crores. The last few months have seen an addition of more than 30 lakh new Demat accounts every month. Broking firms are developing unique features, lower pricing, and other benefits. Individuals are rushing to open Demat accounts for various purposes.
Some of these include investing in shares for the long term, trading, applying for IPOs, etc. Whatever your reason for opening a Demat account, you should consider various factors before finalising one. One of the factors that you should consider is the charges involved in opening and maintaining a Demat account. Let us look at the various charges that a Demat account entails.
Account opening charges
To open a demat account, you have to pay account opening charges to the broking firm. Some broking firms provide you with a trading and demat account, whereas some offer a 3-in-1 trading, demat, and banking account.
The account opening fee is a one-time fee. Some broking firms may waive the account opening fee as a product feature or under a limited-time offer. For example, per the Angel One website, the Demat account opening is free.
AMC
It is an annual fee that you need to pay the broking firm for maintaining the trading and demat account with them. Some broking firms charge the fee every quarter. The AMC is usually in the range of Rs. 250 – Rs. 750 range. For example, Zerodha has an AMC of Rs. 300 + taxes, which is charged quarterly at Rs. 75 + taxes.
Brokerage
The brokerage fee is one of the most important considerations for regular traders as it is paid for each buy and sell transaction. The brokerage fee may be charged at a flat rate, a percentage of the transaction amount, or a combination of both.
For example, a full-service broking firm may charge a flat fee of 0.5% of the transaction amount. A discount broking firm may charge a flat fee of Rs. 10 per trade. A broking firm charging a combination may charge something like 0.5% of the transaction amount subject to a minimum of Rs. 25 per trade.
m.Stock offers 0 brokerage for life across products with a one-time account opening charge of Rs. 999 + taxes. The products include delivery, intraday, futures and options (F&Os), mutual funds, initial public offerings (IPOs), currency, etc. m.Stock is the online retail stock broking service from Mirae Asset Capital Markets (India) Private Limited.
STT, exchange, and SEBI turnover fees
The government levies the Securities Transaction Tax (STT) on the purchase and sale of securities. It is charged on the transaction value of securities traded on stock exchanges like NSE and BSE. The STT rate on equity delivery transactions is 0.1% on buy and sell, and on equity intraday transactions is 0.025% on the sell side.
In Budget 2024, the Finance Minister proposed to increase the STT rate on the sale of options from 0.0625% to 0.1%. The STT on the sale of futures is proposed to be increased from 0.0125% to 0.02%. The increase in STT rate will be effective from 1st October 2024.
Exchange fees are to be paid to the stock exchanges like the BSE and NSE. For example, the NSE fees are 0.00322% on equity intraday and delivery, 0.00188% on F&O futures, and 0.0495% on options premium.
SEBI turnover fees are to be paid to the market regulator Securities and Exchange Board of India (SEBI). The fee is based on the turnover and is charged at Rs. 10 per crore.
DP charges
The Depository Participant (DP) charges are to be paid to the DPs like National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The DPs (NSDL and CDSL) hold shares and other securities on behalf of investors.
When you sell the shares you hold in a Demat account, a DP charge is levied when the shares are debited from the Demat account. The fee is levied on a per scrip (irrespective of the number of shares sold) per transaction basis. For example, Upstox has DP charges of Rs. 18.5 per scrip per day on the sale of securities. Similarly, Zerodha has DP charges of Rs. 13.5 per scrip, Angel One has DP charges of Rs. 20 per debit, and m.Stock has DP charges of Rs. 12 per scrip
Call and trade charges
Most broking firms provide their clients with the facility to buy/sell securities from their website and App. However, if you need to contact customer care and transact through them, the broking firm will levy a charge for the same.
For example, Angel One charges Rs. 20/order, and Zerodha charges Rs. 50/order for transactions done through this facility. However, m.Stock doesn’t charge for the call & trade facility.
Pledging charges
If you want to take a loan against shares, you need to pledge them with the financial institution providing the loan. Once the loan is repaid, the pledge is removed. Broking firms charge a fee for pledging and its removal.
For example, Upstox and Angel One charge a pledging fee of Rs. 20 per scrip and Zerodha charges Rs. 30 per scrip.
Payment gateway charges for fund transfer
When you open a trading and Demat account with a third-party broker, you need to fund your trading account to buy securities. When you transfer funds from your bank account, the broking firm may charge a payment gateway fee. Usually, fund transfers through UPI are free.
For example, m.Stock charges Rs. 7–11 per transaction for net banking transfers, and UPI transactions are free. Similarly, Zerodha charges Rs. 9 per transaction for net banking transfers, and UPI transactions are free.
GST
The GST is payable on the various service charges collected by broking firms for their services. The GST is payable at 18%.
Choosing a broking firm for opening a Demat account
While choosing a broking firm for opening a demat account, you have to consider various factors, with pricing being one of the factors. You need to check the features and benefits offered against the price charged and whether it is worth it. You also need to consider whether you are opening a demat account to invest in shares for the long term or trading purposes. Based on your needs, you should compare the services various brokers offer and their pricing, and accordingly choose one that suits your needs.
(By arrangement with livemint.com)
