How to transfer shares from One Demat account to another?

Key highlights

• It is easy to transfer shares between demat accounts.
• You can transfer shares online or offline.
• Ownership of shares does not change when you transfer them to your other demat account. Hence, there are no applicable taxes.
• If an investor transfers shares to a demat account of another individual, capital gains tax will be applicable. The amount of tax depends on the holding period.
• The broker may charge a fee for handling the transfer request, but if the previous account is closed, no fee will be charged.

Transferring shares from one demat account to another is a common process for investors. Whether you want to consolidate multiple accounts, switch brokers, or segregate investments for specific goals, understanding how to transfer shares ensures a smooth transition.

It also helps streamline your portfolio management, reduce unnecessary complications, and maximise financial efficiency. Additionally, it allows you to manage investments according to changing needs, whether for tax planning, long-term goals, or enhancing your investment strategy.

This process also ensures better control over your assets and investment diversification. Here’s a detailed discussion on how to transfer shares from one demat account to another, the reasons for transferring, types of share transfers, cost and tax implications, common issues faced, and a step-by-step guide to the process.

What is transfer of shares?

Transfer of shares is the process of transferring the ownership of existing shares from the present holder to another individual. An owner of shares can sell them at any time to obtain cash or change the composition of his investment portfolio. Share transfers popularly happen either through selling or gifting.

Here are some reasons why you may want to transfer your shares:

1. You have multiple demat accounts, and you want to consolidate all the shares in a single account.

2. You want to separate the shares into different accounts. This is good for long-term plans like retirement, children’s education or marriage.

3. You want to change your existing broker for some reason.

4. You want to go for a full-service broker, like Kotak Securities, to get more comprehensive services like analysis reports and trading tips.

Reasons for Transferring Shares

There are several reasons why an investor may choose to transfer shares from one demat account to another:

1. Consolidation of multiple accounts If you have several demat accounts, you might want to consolidate your shares into a single account for easier management and tracking, reducing clutter.

2. Segregating investments Transferring shares into separate accounts can help organise investments based on specific goals, such as retirement, children’s education, or marriage planning, providing better clarity.

3. Switching brokers You may choose to move your shares to another broker offering better services, lower fees, or advanced trading platforms for a more efficient experience.

4. For better services Opting for a full-service broker, like Kotak Securities, may provide more personalised services such as detailed market analysis, research reports, and trading tips tailored to your needs.

Understanding how to transfer stock from one demat to another ensures better portfolio management and allows you to align your investments with long-term financial goals, maximising returns.

The process to transfer shares from one demat to another

Your shares can be transferred from one demat account to another using the guide given below.

• Step 1: Get the Delivery Instruction Slip (DIS) from your current broker. If your current broker is Kotak Securities, you can get it on the Kotak Neo App. Just follow this path: Go to Profile - Additional Services - Services & Support - Raise a Service Request - Raise a DIS request

• Step 2: Fill out the Delivery Instruction Slip (DIS) and submit it to your current broker. To fill the DIS with Kotak Securities, follow this guide:

• Select appropriate box for Market Trade OR Off-Market Trades OR Inter Depository Transfer (i.e. NSDL to CDSL or vice versa).

• Accordingly fill target account details. CM BP ID, CM Name, Market Type and Settlement Number for Market Trades.

• For Off-Market trades, fill out Target DP ID, Target Client ID, Target DP name and provide appropriate reason code and reason/ purpose and consideration (if applicable).

• For Inter Depository Transfer, in addition to Target DP ID, Target Client ID and Target DP name, please provide Off-Market details i.e. Reason code, reason/purpose and consideration (if applicable) OR settlement details.

• Specify the ISIN of security to be transferred. Confirm this with your transaction statement. A maximum of 4 ISINs can be transferred per DIS. Use multiple DIS if you wish to transfer more than 4 ISINs.

• Specify the name of the security to be transferred, its quantity in figures and in words.

• The account holder’s signature has to be affixed as per the signature recorded in the Kotak Securities demat account.

Once you have filled in the DIS, you will need to submit it at the Kotak Securities branch. Scanned copies of DIS will not be executed. We will fill in the instruction reference number and execution date once the DIS is executed.

• Step 2: The broker will forward the DIS form to the Depository.
• Step 3: The Depository will transfer your current shares to the demat account.
• Step 4: Once the transfer is completed, your transferred shares will appear in your new Demat account.

Who is involved in the transfer of shares from one demat account to another?

Several parties are involved in transferring shares from one demat account to another to ensure a smooth, secure, and efficient process. These parties include:

1. Depository participant (DP) The intermediary between the investor and the depository, facilitating the transfer of shares.

2. Transferor (seller) and transferee (buyer) The investor initiating the transfer (transferor) and the recipient (transferee) receiving the shares in their demat account.

3. Depository The central entity (like NSDL or CDSL) that holds the records of demat accounts and oversees the transfer process.

4. Registrar and transfer agent (RTA) They handle the processing of share transfers, ensuring accurate updating of records.

5. Stock exchange The platform where the shares are listed and traded, ensuring compliance with regulations and settlement rules. Together, these entities ensure the transfer is executed without errors, adhering to legal, regulatory, and procedural standards.

Types of share transfers

There can be two types of share transfers. They are as follows.

1. Intra-depository transfer: If the transfer is within a depository, it is called an intra-depository transfer.

2. Inter-depository transfer: An inter-depository transfer involves transferring shares from one depository to another.

The Manual Procedure

For the manual procedure, you will have to get the Delivery Instruction Slip (DIS) from your broker. You will have to fill out some mandatory fields in the DIS. These include:

1. Beneficiary owner ID (BO ID): It is the 16-digit ID of the broker. You will have to mention the ID of both the brokers involved.

2. International securities identification number (ISIN): It is a unique identification number for identifying the shares in a demat account. You must mention this number to specify the shares that need to be transferred.

3. Mode of transfer: If it is an intra-depository, you must choose the ‘off market transfer’ option. Otherwise, it’ll be an inter-depository transfer. Once you fill out the form, you must sign it. The signature needs to match the one saved in the DP database. After this, you need to submit the DIS slip to the current broker. Your broker may levy some charges for the transfer. This amount may vary from one broker to another. However, the broker cannot charge any fee if you close the demat account.

The Online Procedure

There are two ways to transfer shares online from one demat account to another. One is via Central Depository Services Limited (CDSL) and another is through National Securities Depository Limited (NSDL). CDSL has a feature is called ‘EASIEST’ while NSDL has a ‘Speed-e’ facility to help you transfer shares from one demat account to another online. You need to register yourself on these websites to use these. The process for this is as follows:

1. Visit the website.
2. Register for EASIEST or Speed-e facility.
3. Fill in the details and submit the form.
4. Take a printout and give it to the DP.
5. The DP will forward the transfer request to CDSL, which will verify your details. You will get the login credentials in your email within a couple of days.
6. Login with the credentials and transfer your shares.

The time required to transfer shares

Your current stockbroker will usually take 3 to 5 working days to transfer shares from your existing demat account to the new one. However, this may vary from one broker to another. Generally, online transfer of shares takes place faster than manual transfers.

In addition, if there are weekend holidays, it may take a few more days. The depositories are closed on national holidays. Some brokers may not work on those days. So, your transfer request gets processed when the depositories reopen on the next working day.

Tax implications when transferring shares

Shares can be transferred to different Demat accounts of the same individual or other person. In case of transfer of shares to the same person, there will be no added tax liability. However, note that the capital gains tax will be calculated for the period from the initial date of purchase of the stock. The transfer date will not affect it.

If you transfer shares to another individual, you will have to mention the reason for the transfer. There will be no extra tax liability if you gift the shares. However, it should not exceed the specified limit. Here, taxes are calculated from the original purchase date.

Capital gains tax is applicable if you transfer the shares you have received initially via a transfer.

Cost Implications for Transferring Shares

Transferring shares from one demat account to another may incur certain costs. Brokers generally charge a fee for processing the transfer, and these charges can vary depending on the broker you use.

Typically, this fee is based on a per-transferred ISIN or a flat fee for the entire transfer request. However, many brokers do not charge a transfer fee if you are closing your demat account. In addition, if the transfer is intra-depository (within the same depository), the costs might be lower compared to inter-depository transfers, which involve transferring shares from one depository to another (e.g., NSDL to CDSL).

If you are transferring a large number of shares, brokers may offer discounts on transfer fees. Some brokers may also waive fees for specific types of transfers. It is always advisable to confirm the fee structure with your broker before initiating the transfer to avoid unexpected costs and ensure a smooth, cost-effective process.

Things to keep in mind while transferring shares

1. Brokers may levy charges for transferring shares, with costs varying from one broker to another. These fees can depend on the number of ISINs, type of transfer, and the broker’s policies, so it is important to confirm upfront.

2. If you are closing your demat account, remember to return any unused Delivery Instruction Slips (DIS) to the broker. Failing to do so may result in unnecessary charges.

3. Ensure all details on the DIS are correct to avoid delays. Incorrect or missing information can lead to rejections or processing delays.

4. Keep track of transfer progress, especially if multiple ISINs are involved. Monitoring the status helps ensure timely completion and allows you to address any issues promptly, avoiding complications.

Common Issues Faced When Transferring Shares and How to Resolve Them

1. Incorrect details on the DIS If there are any discrepancies in the DIS, such as incorrect ISIN, account details, or signatures, the transfer will be delayed. Ensure that all information is correct and double-checked for accuracy. Mistakes can cause significant delays, so it is best to verify each detail thoroughly before submission.

2. Signature mismatch The signature on the DIS must match the one registered with the depository. If there is a mismatch, the transfer request may be rejected. Ensure your signature is up to date with your DP. Any inconsistency can cause the transfer to be rejected, so it is essential to update your signature regularly.

3. Delayed transfers Sometimes, transfers can be delayed due to holidays or weekends. Keep in mind that transfers may take longer during these times. Communicate with your broker for updates and track the transfer progress. Proactive communication can help you stay informed about any unexpected delays.

4. Transfer fees Some brokers may charge higher fees for transfers, particularly inter-depository transfers. Always inquire about any associated costs to avoid surprises. It is also helpful to compare charges between brokers to ensure you are getting the best value for the transfer process.

Conclusion

Transferring shares from one demat account to another is a straightforward process that can be done for various reasons such as consolidating accounts, segregating investments, or switching brokers.

While it involves multiple parties like brokers, depositories, and transfer agents, the process is efficient when done correctly. It is important to be aware of potential costs, taxes, and common issues such as incorrect details or signature mismatches.

Always ensure that you provide accurate information and follow the right steps, whether online or offline, to avoid delays and additional fees. Proper understanding of the process allows you to streamline your investments and achieve better financial management.