Step-by-Step Guide To Transfer Shares From One Demat Account to Another

A demat account serves as a digital repository for investors to securely store their shares, bonds, and other securities. Also called a dematerialised account, it facilitates online trading and converts physical securities into electronic form. Maintaining a demat account is mandatory for engaging in securities trading, with options available in the form of regular, repatriable, and non-repatriable accounts.

Once you have successfully created your demat account, you can transfer shares from one Demat account to another. However, before we look at the steps involved in this process, we must know about the different types of demat accounts.

Different Types of Demat Accounts

Regular Demat Account: Developed for Indian investors, these accounts cater to equity shares and enable digital ownership.

Repatriable Demat Account: Intended for Non-Resident Indians (NRIs) seeking to transfer funds abroad, this demat account requires the holder to possess a Non-Resident External (NRE) bank account. However, there is a yearly limitation of $1 million for repatriation.

Non-Repatriable Demat Account: Similar to the repatriable account, this demat account is also meant for NRIs. However, it does not allow the transfer of funds abroad. Account holders are required to have a Non-Resident Ordinary (NRO) bank account linked to the demat account.

Thus, demat accounts help investors buy shares, mutual funds and securities and get dividends and bonus issues. Moreover, these accounts remove elements of cost and risk and facilitate instant transactions.

Why Do You Need to Transfer Shares?

Investors transfer shares and securities from one demat account to another for various reasons. These include:

• Bring Shares Under One Roof: Primarily, it allows them to consolidate their equity shares and bonds in a single account, making it fairly simple to manage.

• Change the Depository Participant: The investor could also want to change the depository participant, opting for a new DP that offers better returns at a lower cost.

• Shift to a Full-Time Service Broker: Another reason why investors transfer shares and bonds is that they might want to shift to a full-time service broker.

India has two depositories: National Securities Depositories Limited (NSDL) and Central Securities Depositories Limited (CSDL). The financial securities are held in dematerialised form on these platforms, which enable trading in stock exchanges. While transferring shares from one demat account to another, you must know that they are in the depository systems. Furthermore, the mode of transfer depends on the depository linked with the brokers.

Entities Involved While Transferring Shares

The following entities are involved while transferring shares from one demat account to another.

• Existing broker
• Shareholder
• New broker
• Depository (NSDL or CSDL)

Steps Involved While Transferring Shares from One Demat Account to Another

You can transfer shares from one demat account to another either offline or online.

• Offline or Manual Transfer

In this method, you must get the Delivery Instruction Slip (DIS) from the existing broker. The DIS will consist of information pertaining to the share transfer. You must fill out the slip and provide the relevant details. These include:

Beneficiary Broker ID: You must enter the 16-digit ID of the current and new brokers or banks.
ISIN (International Securities Identification Number): The ISIN is used to identify individual shares. It is important that you enter the number correctly and provide an accurate count of the shares.

Mode of Transfer: You must select off-market if you wish to perform an intra-depository transfer. Alternatively, you can choose the inter-depository transfer.

Finally, you must sign the slip and submit it to your current broker. You must also pay a certain amount to the broker, which varies from one broker to the other.

Online Transfer

The most convenient method is online transfer, which is offered by the CSDL depository firm. This method is known as electronic access to securities information and execution of secured transactions (EASIEST for short). You must follow these steps to transfer the shares online from one demat account to another.

• Step 1: Visit and log into the CSDL website.
• Step 2: Select the 'Register Online' option.
• Step 3: Choose the 'EASIEST' option.
• Step 4: Provide the requisite details.
• Step 5: Forward a copy of the details to your depository participant (DP).

Once you send the copy to your DP, they will forward it to the Central Depository (CD). Your details will be verified, and within 1-2 days, you will obtain the login credentials. You can then login and see the broker list and transfer your shares.

Tax Implications of Transferring Shares

• If you're transferring shares to yourself, there won't be any tax liabilities.
• If you're transferring shares to another investor's account, you must mention the reason. If you are transferring shares via a gift deed to a blood relative, there won't be any tax liabilities. However, the receiver will be taxable if they are above 18.
• If you're transferring shares of above ₹50,000 as a gift to anyone other than a blood relative, the receiver will be taxable.
• If you're transferring shares you previously received through a demat transfer, you will incur capital gain tax.

Final Thoughts

You can transfer shares from one demat account to another manually (offline) or online. The transfer process is rendered simple if you have all the necessary documents. Different investors have various reasons for transferring shares, and you can choose a transfer method based on your preference and convenience. Furthermore, there may be tax implications for transferring shares; hence, you must plan properly before proceeding with the transfer.