Having a Demat account is essential to hold the shares and securities safely, and you can also have multiple Demat accounts with different stockbrokers. In the case of multiple Demat accounts, you may sometimes need to transfer shares from one Demat to another. Therefore, understanding the process of transferring shares may be essential for you.
This article covers what the transfer of shares is, why investors transfer shares from one Demat account to another, and the methods, charges and tax implications of the transfer of shares.
What Is Transfer Of Shares?
Transfer of shares means intentionally transferring existing shares and the title of shares (legal ownership) to another. You may transfer shares to another investor/other investors, for instance, to your parents, offspring, spouse, and so on. You may also transfer stock from your one Demat account to another.
Why Do Investors Transfer Shares From One Demat Account To Another?
1. To avail of benefits
You may change your stockbroker to reduce brokerage fees. You may change your stockbroker or open a Demat account with a new stockbroker if you find one with better services, such as a better trading platform offering quick transactions, better security, etc. In such instances, you may need to transfer shares from your old Demat account to a new one held with a new broker.
2. To make it easier to handle
If you have multiple Demat accounts, you may find it difficult to track them all and, therefore, may want to merge them into one. In such a case, you would have to move shares from all your other Demat accounts into a primary Demat account.
3. For different goals
You may want separate Demat accounts for different financial needs, such as a child’s education, retirement, taxation benefits, trading and investing activities, etc. In such an instance, you may need to transfer shares from one Demat account to others.
Also Read: What Factors Determine Stock Prices?
How To Transfer Shares From One Demat Account To Another?
Mainly, there are two methods/ways to transfer stock from one broker to another.
1. Offline/Manual transfer of shares
To transfer shares in offline mode, you may follow these steps.
Step 1: You would need a Delivery Instruction Slip (DIS) from your depository participant. A depository participant is a registered agent or stockbroker through which you open accounts with CDSL or NSDL.
Step 2: You may fill up the names and 12-digit ISIN numbers of securities you want to transfer from one Demat to another. (ISIN – International Securities Identification Number represents a unique identification of financial security.)
Step 3: Next, you may fill up the 16-digit beneficiary owner ID/ target client ID. It is a combination of the client’s ID and the depository participant’s ID.
Step 4: Then, you may choose the mode of transfer. If both the DPs are registered with the same depository, i.e. both with CDSL or NSDL, you need to select intra-depository/off-market transfer.
Instead, to transfer shares with different depositories, i.e. to transfer shares from NSDL to CDSL or vice versa, you need to select inter-depository transfer.
Step 5: You may sign the DIS and submit it to your broker. Plus, you need to collect the acknowledgement receipt of the DIS.
Once you complete this process, your shares may be transferred within 3-5 trading days to your new Demat account.
2. Online transfer of shares
Here is how to transfer shares from one Demat to another online.
Step 1: You may transfer shares online using your depository’s online share transfer facility. CDSL has the ‘EASIEST’ facility, while NSDL has the ‘SPEED-e’ facility.
For NSDL – Go to website > new user registration > SPEED-e > register
For CDSL – Go to website > register for EASIEST > enter DP ID, Client ID, email, phone number, etc. Then, enter the OTP you received on your registered mobile number.
Step 2: After filling out the form, you may take its printout and submit it to your broker.
Step 3: Once your depository participant verifies that form, you will receive login credentials on your registered email ID.
Step 4: You can use that credentials to log in and transfer shares from one Demat account to another.
Charges For Transfer Of Shares
Some brokers may charge a fee to transfer brokerage account assets. The charges, for the transfer of shares from one Demat to another, vary among different brokers. There would be no charges if you close the Demat account with an existing broker.
There would also be no stamp duty on the transfer of shares from one Demat to another.
Tax Implications On Transfer Of Shares
- Transferring shares from one of your Demat accounts to another may not attract tax, as you didn’t earn any income from the transfer, since the ownership title remains with you only.
- You may gift shares to your friends or relatives and use a gift deed for the same, which is a legal document that shows you are transferring shares voluntarily. When a gift deed backs the transaction, the recipient would incur tax liability if the fair market value of shares exceeds ₹50,000.
Final Thoughts
You may need to transfer shares from one Demat account to another for multiple reasons. If you know the process, the transfer of shares may not look much complicated. Plus, the online process has made it more hassle-free. Though, being careful while putting necessary details is important.
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FAQs
Except for gifts, shares cannot be transferred without consideration.
– When you transfer stock from one of your Demat accounts to another, it may not attract tax.
– When you transfer stock to another person as a gift, you or the recipient may not incur any tax. However, the recipient would incur capital gain tax on selling shares.
The time taken to transfer your shares from one Demat account to another may depend on the type of transfer. If you transfer shares within the same depository, it may take 30 minutes or less. Transferring shares from one depository to another may take up to three to four hours, and the manual transfer may take three to five days.
While some brokers charge a fee to transfer brokerage account assets, some don’t. The fees charged for transferring brokerage accounts vary among different brokers.
