Demat and Trading account services Charges in India: AMC, DP Fees and the Hidden Costs Nobody Mentions

Demat Account vs Trading Account: What are you actually paying for?

A Demat account holds your eligible securities in electronic form and a trading account allows you to place buy and sell orders via your broker.

These accounts have different purposes and may well have different fee arrangements.

A Demat account will have maintenance and transaction charges and a trading account will have brokerage, statutory charges and other fees depending on the transactions you're carrying out.

Before comparing account charges, check whether the broker offers a combined account-opening package or charges separately for each service.

1. Account Opening Charges

Some brokers will open an account for you free of charge, others may charge you a fee depending on the type of account, customer category or onboarding method.

Free account opening doesn't necessarily mean that the account will stay free to maintain and use.

Before you go any further, have a look at the broker's tariff sheet to check whether there are any account opening, documentation or activation fees.

2. Annual Maintenance Charges (AMC)

AMC is the charge for maintaining a Demat account and it can be charged annually, quarterly or as per the broker's schedule.

The amount will vary from broker to broker and from account type to account type. Some brokers will offer a first year waiver or a promotional rate, others will charge AMC from day one.

What is a Basic Services Demat Account (BSDA)?

A Basic Services Demat Account is a category which is designed to provide eligible investors with a lower cost Demat account.

Under the SEBI framework, eligible individual investors will be eligible for a reduced AMC on the basis of the value of their holdings and other conditions.

For instance the current BSDA framework allows for zero AMC where the value of eligible holdings is up to Rs 4 lakh and a maximum AMC of Rs 100 per year for holdings above Rs 4 lakh and up to Rs 10 lakh. Regular AMC will apply in the case of holdings above the prescribed limit.

Eligibility criteria do apply (number of Demat accounts the investor holds being one of them). Always check the latest SEBI rules and your broker's tariff before you assume that your account is eligible.

3. Depository Participant (DP) Charges

DP charges are linked to certain debit transactions from a Demat account (typically where securities are sold or transferred).

These charges may be a fee taken by the depository and a separate amount charged by the broker or the Depository Participant.

For instance a broker may charge a DP charge per scrip on a sale transaction regardless of the number of shares sold. The amount will be determined by the broker's pricing and the applicable taxes.

Investors should check whether DP charges are:

• Applied per scrip or per transaction
• Different for equity and other securities
• Applicable to off-market transfers
• Inclusive or exclusive of GST

DP charges are separate from brokerage and should be taken into account when working out the total cost of selling securities.

4. Brokerage Charges

Brokerage is the fee the broker charges you for carrying out the trade.

The amount will vary according to the broker's pricing structure and the segment in which you are trading. Equity delivery, intraday, futures and options will all have different brokerage structures.

Some brokers will charge a % of the transaction value, others will charge a flat fee per order executed (subject to their terms).

Before you open an account check whether the brokerage is charged on both the buy and the sell side and whether the amount you're being quoted is in fact capped at that amount.

5. Statutory Charges and Taxes

Other than the broker's fees there are also statutory charges which may be imposed by the Government, the exchanges or the market regulator.

These may include:

• Securities Transaction Tax (STT)
• Stamp duty
• Exchange transaction charges
• SEBI fees
• Goods and Services Tax (GST) on applicable services and charges

These costs are not necessarily determined by the broker. Whether they apply and how they are calculated will depend on the nature of the transaction and the rules in force.

A low brokerage rate doesn't wipe out these statutory charges.

6. Other Charges Investors May Overlook

Some services will be subject to additional fees depending on the broker and the level of activity in the account.

Pledge and unpledge charges: Investors using margin against securities will be subject to fees where securities are pledged or unpledged.

Call and trade charges: Some brokers charge an additional fee when an order is placed through a dealer instead of the online platform.

Account reactivation charges: Accounts which are inactive or dormant may be subject to a process and/or a fee to reactivate in accordance with the broker's terms.

Physical statement or document charges: There may be additional charges for certain physical communications or service requests.

Delayed payment / debit balance charges: A debit balance in the trading account may be subject to interest or other charges as per the broker's policy.

These charges may not apply to all investors. You should check the broker's full schedule of charges to see which services are in fact chargeable.

How to Compare Demat and Trading Account Charges

Before you go for a broker, look at the full cost structure rather than just the brokerage rate that they're advertising.

Ask these questions:

1. Is account opening free?
2. What is the AMC and how often is it charged?
3. Does the account qualify for BSDA benefits?
4. How are DP charges calculated on a sale of securities?
5. What broker is your preferred trading segment?
6. Are there any additional charges for the optional services?
7. Are the applicable taxes included in the displayed charges?

You can also compare your broker's tariff sheet against the fee information published by the relevant depository and then check what the fees actually are as reflected in your account statements.

Understand the Full Cost Before You Invest

Demat and trading account charges will vary considerably from one broker to another, depending on the type of account and your level of activity.

AMC will have an effect on the cost of maintaining the account, DP fees may be charged where securities are debited and there are also brokerage and statutory charges which can add to the cost of the transaction.

A careful look at the tariff sheet will go some way towards helping the investor to understand what they may end up paying prior to opening an account or placing a trade.