Opening a Demat account means you’ll not only have to consider the brokerage rates but also any yearly service charges, transaction charges, or pledge charges. Different Brokers will offer different levels of fees depending on what you use your Demat account for. Some will charge you for services even if you don’t do any trading, whilst some will only charge you if you sell/pledge your shares. Knowing what charges, you have can help new investors understand how much it will cost them to hold and manage their investments.
Account Opening and Annual Maintenance Charges
Opening charges can be applied by a broker at the time of opening an account. Many brokers will have no charge, but others may charge. It is best to look at the charges schedule first.
Annual Maintenance Charges (AMC) are charged for the maintenance of your Demat account. This includes things like maintaining your electronic account, providing you with statements and processing corporate actions such as dividends, bonuses, and stock splits. These depend on which broker you use and what type of account. Some brokers will offer free AMC for a set time period, while others charge an annual or quarterly fee. You may also incur a GST charge.
Even if you do not buy or sell any shares during the year, you will still incur AMC charges. If you are looking to invest for the long term, it is best to compare which broker has the lowest maintenance charges.
Eligible investors may also consider a Basic Services Demat Account (BSDA). This facility has lower or no AMC within the prescribed holding value limits.
Transaction Charges on the Sale of Shares
A transaction charge may apply when shares are debited from a Demat account after a sale. Depository Participant (DP) charges are generally collected for this debit, and the amount varies between brokers.
These charges are commonly calculated on a per-security basis for a trading day. For example, if an investor sells shares of the same company in multiple orders on one day, the DP charge may apply once. Selling shares of three different companies may attract separate charges for each security. The broker’s tariff schedule explains how these fees are calculated.
DP charges should not be confused with other costs shown on a trade confirmation or contract note. Brokerage, Securities Transaction Tax (STT), stamp duty and exchange transaction charges are separate trading-related costs. They may apply to eligible transactions, depending on the type of trade and applicable rules.
When comparing Demat trading costs, investors should check both the DP charge and the other fees associated with buying or selling shares.
Pledge and Unpledge Charges
Pledging allows an investor to use eligible shares as collateral for margin without selling the holdings. This may help meet margin requirements while allowing the investor to retain ownership of the securities, subject to the terms of the arrangement.
A broker or depository participant may collect a fee for creating a pledge. A separate charge may apply when the pledge is released. The amount depends on the broker, depository and applicable service terms. GST may also be added.
Each pledge request requires authorisation through the prescribed process, which may involve an OTP or another verification method. Charges can apply separately to different securities or requests. Investors who frequently pledge and release shares should account for these costs when assessing their overall expenses.
How to Compare Demat Account Charges
A broker’s tariff schedule provides details of the fees applicable to an account. Before choosing a provider, investors should review the following:
- Account Opening Fee: Check whether the broker collects a one-time amount.
- Annual Maintenance Charge: Compare the yearly or quarterly fee and check whether any waiver has a time limit.
- Debit Transaction Fee: Understand how much is charged when securities are sold and whether the fee applies per security.
- Pledge and Unpledge Fee: Check the cost of creating and releasing a pledge.
- Additional Service Charges: Review fees for transfers, statements and other account-related requests.
- GST: Confirm whether the quoted charges include GST or whether it is added separately.
Conclusion
Transaction Charges and Pledge Charges are one of the charges that are levied in order to maintain and operate a Demat Account. These depend on the number of times you sell your security, use any pledging facilities and request extra facilities. Looking at Transaction Charges along with Brokerage and Statutory Charges will give you a clear idea about the charges. Investors can look at the tariff schedule provided by 5paisa Alpha to understand what charges they would need to pay.
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