A Demat account is responsible for holding financial securities in India. Traders can hold stocks, futures contracts, derivatives, and other securities for the desired duration with a Demat or dematerialisation account. Many investors have multiple Demat accounts in India. You might have to transfer shares from one Demat to another for numerous reasons, like:
- Low custodian charges
- Low brokerage fees
- Better trading facilities
- Enhanced security
- Know Pre-requisites for Transfer
- Methods of Transfer share one Demat account to another
- Intra-depository Transfer
- Here are some pros of intra-depository transfer in India:
- Inter-depository Transfer Method
- Step-by-Step Guide for Share Transfer
- Transfer Charges
- Common Mistakes to Avoid while Transferring shares
- Transfer Time
- Legalities and Taxation
- Reasons for Transfer Rejection
- Transfer of Mutual Fund Units
- Share Transfer Process in Some Special Cases
Similar to the Demat account transfer, a share transfer facility is also available in India. Here are some points to remember when transferring shares:
Obtain the TI form or DIS from the Demat account provider to proceed with a share transfer
- You do not have to pay taxes when money is not made on share transfers
- You can go for an intra-depository or intra-depository share transfer facility
- When shares are transferred with the same depository, it is fast
- You might be asked to pay share transfer charges by the broker or depository participant
- Similar to shares, mutual fund units can also be transferred
Know Pre-requisites for Transfer
Before you understand how to transfer shares from one Demat to another, it is essential to know the pre-requisites, which are:
- Both the Demat accounts under consideration must be KYC-compliant. KYC (Know Your Customer) compliance involves verifying your identity, address, and other details with the stockbroker or depository participant.
- You must comprehend the allowable reasons for share transfer. These include share consolidation, ownership change, gifts, and other reasons.
- Both Demat accounts must be active to ensure a successful transfer of shares.
Methods of Transfer share one Demat account to another
There are two methods of transferring shares from one Demat account to another in India, which are:
Intra-depository Transfer:Intra-depository Transfer:
There are two depositories for financial securities, namely NSDL (National Securities Depository Limited) and CSDL (Central Depository Services Limited). Your depository participant or stockbroker could be registered with CSDL, NSDL, or both. Transferring shares between Demat accounts registered with the same depository is termed an intra-depository transfer.
When shares are transferred between Demat accounts registered with different depositories in India, it is called inter-depository transfer.
Recommended Read : Demat Trading Account Fees & Charges
When you transfer shares between the same depositories, it is an intra-depository transfer. The process of intra-depository transfer in India is as follows:
- Submit a TI (Transfer Instruction) form with your depository participant or stockbroker
- Wait for your Demat account provider to verify the details mentioned in the TI form
- Upon verification, the shares will be transferred from one Demat account to another
Here are some pros of intra-depository transfer in India:
- Increased convenience
- Increased transfer speed
- Low transfer costs
It is crucial to note that intra-depository transfers can only occur when both Demat accounts are registered with the same depository. Also, there might be problems with share transfer when there is a change in beneficial ownership.
Inter-depository Transfer Method
You can transfer shares from one Demat to another with the inter-depository method. It occurs when both the Demat accounts are registered with different depositories. Here's the process:
- Generate a transfer required with your depository participant by providing details like the ISIN of shares and the recipient’s Demat account number
- Wait for your depository participant to connect with the recipient’s depository participant
- Upon approval, shares will be transferred to the target Demat account
The pros of inter-depository share transfer are as follows:
- Access to new stock exchanges
- Share consolidation
- Increased flexibility
Some cons are associated with the inter-depository transfer, like increased costs and duration.
Step-by-Step Guide for Share Transfer
To understand how to transfer shares from one Demat to another online, you must know the step-by-step process, which is as follows:
- Choose the method of transfer between online and offline transfer
- Choose between inter-depository and intra-depository transfer
- Accumulate the necessary documents for share transfer
- Submit the share transfer request or application with your depository participant or stockbroker
- Track the share transfer status via your investment platform
Some charges will be applied by your depository participant or stockbroker for the transfer of shares. The charges applied for share transfers can change from one depository participant to another. The charges might be less for intra-depository transfers due to fewer hassles. For both transfer methods, the charges might range between INR 10 to INR 30 per transfer. Some depository participants might charge a percentage of the total transfer value (let us say 0.03% of the total value). Charges might differ for offline transfer of shares in India. You can choose Religare Broking for minimal charges for transfer of shares from one Demat to another
Common Mistakes to Avoid while Transferring shares
Besides understanding how to transfer shares from one Demat account to another, you must also avoid some mistakes, like:
- Refrain from providing wrong information, as it may lead to the cancellation of your share transfer request
- Do not ignore share transfer charges, as the request will not be approved without paying them
- You can check the share transfer status online at regular intervals to ensure everything is fine
You must understand the transfer time required for transferring shares from one Demat account to another. The transfer time might differ from one depository participant to another. The average share transfer time in India:
- For inter-depository transfer of shares, the time required ranged between 3 to 4 hours. Do check with your depository participant or stockbroker to know the exact duration of the share transfer.
- The time required for the intra-depository transfer of shares is usually less than the inter-depository transfer. In some cases, the transfer of shares can be completed within 30 minutes.
Legalities and Taxation
Besides knowing how to transfer shares from one person to another online, you must understand the tax implications. Usually, the transfer of shares from one Demat account to another is not subjected to tax. However, it is true only when you aren't making an income from the transfer of shares. The income made from the share transfer will be treated as a short-term capital gain. If the same income is held for at least a year, it will become a long-term capital gain.
The tax for short-term and long-term capital gains is 15% and 10%, respectively. It is crucial to note that overall taxes will not change when transferring shares between Demat accounts under the same ownership. Overall, taxes might change when you transfer shares to a different person. You can save taxes on a share transfer to another person by indicating it as a gift. Don't forget to complete the documents related to share transfers, like DIS (Delivery Instruction Slip) and Transfer Instruction (TI) form.
Recommended Read : How to open demat Account ?
Reasons for Transfer Rejection
Your share transfer request might be cancelled due to the following reasons:
- Since share transfer charges cannot be paid due to insufficient balance in the Demat account, the share transfer request might be cancelled
- The share transfer request will be cancelled on providing incorrect recipient details
- Your share transfer request will be cancelled for not following the regulations
Transfer of Mutual Fund Units
Similar to shares, you can transfer mutual fund units from one Demat account to another. Here's the process:
- Ask for your depository participant or stockbroker for a DIS (Delivery Instruction Slip)
- Fill out the DIS in its entirety and submit it to the Demat account provider
- Wait for the verification process
- Once the DIS is verified, units of mutual funds will be successfully transferred
Share Transfer Process in Some Special Cases
The share transfer process in some special cases is as follows:
- For a deceased person, the legal heirs can acquire the shares. Death certificate, succession certificate, probate, TI form, and other documents are required in such a case.
- Shares can be transferred in case of a name change. However, you must provide a marriage certificate, adoption papers, gazette papers, or other documents to proceed.
- In the case of mergers and demergers, a composite scheme is formulated by the regulatory authorities for the transfer of shares. Concerned individuals must follow the scheme and submit a few documents for the share transfer process.
Shares can be transferred from one Demat account to another after paying a small charge. Most individuals opt for the transfer facility for share consolidation. You can also choose the share transfer facility for lower brokerage charges. It is mandatory to submit the TI form, DIS, and other documents required for the share transfer facility. Transfer your shares online with minimal effort now!