How To Transfer Shares From One Demat Account To Another

Have you already opened a demat account? It’s time to learn how this eases the way you transfer shares from one demat account to another. In fact, trading through a demat account is just like making transactions through a bank account. The only difference is that you transfer shares through the demat account instead of money.

• You may want to transfer shares from one demat account to another. There may be multiple reasons for doing so. Some of them are:
• You may have multiple demat accounts and would want to consolidate all the shares in a single account.
• It could be just the opposite: you may want to separate the shares in different accounts. This is typically done for long-term plans like retirement or children’s education or marriage.
• You may also want to switch from your current broker to a discount broker to save your current brokerage amount.
• You may want to switch to a full service broker to get more reports and tips on a daily basis to increase your trading amount.

Read more: How to buy mutual funds online without demat account

Process To Transfer Shares from one demat to another

The procedure for transferring shares between Demat accounts is summarized below.

Step 1: This step is completed by the investor and given to the current broker together with a Delivery Instruction Slip (DIS). Step 2: The broker submits the depository the DIS form or request. Step 3: Your current shares will be transferred to the Demat account by the Depository. Step 4: The transferred shares will appear in the investor's new Demat account once all the shares have been transferred.

We must first differentiate between two types of transfers based on two national depositories in India: NSDL and CDSL.

1. Intra-depository transfer: If the transfer is within a depository itself, it’s called intra-depository transfer.
2. Inter-depository Transfer: This is valid when the transfer is from one depository to another. All shares can be transferred either manually or online.

Things to keep in mind while transferring shares

1. The investor can be charged for this operation by their present brokerage. From broker to broker, the fees differ.
2. The procedure of closing a Demat account with an existing broker is cost-free for the investor.
3. If the investor wants to close the Demat Account, he must return any unused DIS to the broker.

What is Transfer of Shares?

When shares are transferred, the present holder of the shares transmits or transfers ownership of the shares to a new owner. The owner of the shares has the option to sell them at any time in order to obtain working cash or change the composition of their investment portfolio. The two most popular methods of such transfers are the selling and gifting of shares.

Time Required for Transfer of Shares

Mutual fund investments are not permitted if the Know Your Customer (KYC) procedure has not been finished. Each broker sets their own fee structure for this service.

One month must pass after the firm receives the share transfer agreement or share transfer certificate before delivering all of the company's share transfer certificates. Unless the corporation is prohibited from doing so by a court order or another official directive.

Manual Procedure

For the manual procedure, you will have to get the delivery instruction slip (DIS) from your broker. The DIS contains some mandatory fields that should be filled up to do the transfer of shares.

1. Beneficiary owner ID (BO ID): It’s the 16-digit ID of the broker. You will have to provide the ID of both current and new brokers in the slip.
2. International securities identification number (ISIN): It’s a unique ID number to identify each of your shares in the demat account. This number needs to be mentioned clearly to state which shares have to be actually transferred.
3. Mode of transfer: If the transfer happens to be intra-depository, you must choose the ‘off market transfer’ option. Otherwise, it’ll be ‘inter-depository transfer’. Once you fill up all the above fields clearly in the form, you must put your signature below the form. The signature needs to exactly match the one in the database of the DP. After this, you need to submit this to the current broker. You may take a day or two to determine which shares to transfer to the new demat account. The broker may apply some charges for this transfer. The amount may vary from one broker to another. However, if you close the demat account, the broker cannot charge any fees.

Read more: Demat account opening charges

Online Procedure

CDSL has a feature called EASIEST to help you transfer shares from one demat account to another online. You need to register yourself on this website before you can begin. The process is outlined in the following:

1. Click on ‘Register Online’ link
2. Select the option EASIEST
3. Fill in the details
4. Take a printout and give to the depository participant (DP)
5. The DP will further send it to the central depository, which will verify your details. You will get the login credentials in your email within a couple of days.
6. Login and see your broker list. Now, you can transfer your shares.

Who are the participants while transferring shares from one Demat account to another?

To guarantee a seamless and safe process, numerous parties are involved in the transfer of shares from one Demat account to another.

• Depository Participant (DP)
• Transferor (Seller), and Transferee (Buyer) are the main players.
• Depository
• Registrar and Transfer Agent (RTA)
• Stock exchange

Tax Implications When Transferring Shares:

Shares could be transferred to the different demat accounts of the same individual or different persons. In case of transfer of shares to the same person, there will be no added tax liability. Note that the capital gain tax will be counted from the initial date of purchase of the stock. The transfer date will not affect it. Suppose you transfer shares in the account of different persons. You will have to clearly mention the reason for such transfers. There will be no extra tax liability if the transfer is backed via a gift deed and doesn’t exceed the limit. Here the tax liability will be from the date of the original purchase. This can be traced via the audit trail. In case you transfer the shares that you have initially received via a demat transfer, you will be liable for capital gain tax. What are you still waiting for? Go ahead and open a demat account today to enjoy the benefits of online trading.

Key Takeaways

• With the right information, it is fairly simple to transfer shares between Demat accounts.
• You can transfer shares online or offline/manually.
• Transferring shares does not affect who is the beneficial owner or result in capital gains.
• When shares are transferred from one demat account to another, ownership stays constant, hence there is no transaction and no tax impact.
• The broker may charge a fee for handling the transfer request, but if the previous account is being closed, no price may be assessed.

Read more: How to convert physical shares to demat

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