It is essential to have a Demat account to hold shares and securities securely, and you can have multiple Demat accounts with different stockbrokers. However, you may need to transfer shares from one Demat account to another at times. Therefore, understanding the process of transferring shares can be crucial.
In this blog, we will explain the transfer of shares, methods used for the transfer, reasons why people transfer shares, charges, and tax implications of transferring shares.
What Is Transfer Of Shares?
The transfer of shares refers to the intentional transfer of existing shares and the legal ownership of shares to another person. You may transfer shares to other investors, such as your parents, offspring, spouse, etc., or transfer stocks from one Demat account to other.
Why Investors Consider Transfer of Shares From One Demat Account To Another?
For availing benefits and offers
Suppose you want to reduce brokerage fees or find a stockbroker offering better services, such as a superior trading platform with faster transactions and better security. In that case, you may consider changing your stockbroker or opening a Demat account with a new one. In such cases, you might need to transfer shares from the old Demat account to a new one with a new broker.
For easier handling
If you have several Demat accounts, keeping track of them all can be challenging, so you may want to merge them into one. To do so, you would need to transfer the shares from all your other Demat accounts to a primary Demat account.
For pursuing different goals
You may prefer having different Demat accounts if you have various financial needs like your child’s education, retirement planning, tax benefits, or trading and investment activities. However, in such a scenario, you may need to transfer shares from one Demat account to other.
How To Transfer Shares From One Demat Account To Another?
There are two methods to transfer stock from one broker to another.
- Offline/Manual transfer of shares
To transfer shares in offline mode, you can follow these steps.
Step 1: To transfer shares from one Demat account to another, you will require a Delivery Instruction Slip (DIS) from your depository participant. A depository participant is generally a registered agent or stockbroker through which you can open accounts with CDSL or NSDL.
Step 2: Next, you must provide the names and 12-digit International Securities Identification Number (ISIN) of the securities you wish to transfer. The ISIN is a unique identification number assigned to each financial security.
Step 3: Fill up the 16-digit beneficiary owner ID/target client ID , which is a combination of your client ID and the depository participant ID.
Step 4: After filling up the necessary details, you may select the transfer mode.
For transferring shares between two Demat accounts held with the same depository (CDSL or NSDL), you need to choose the intra-depository/off-market transfer option.
On the other hand, for transferring shares between two different depositories (such as NSDL to CDSL or vice versa), you need to select the inter-depository transfer option.
Step 5: Finally, you must sign the DIS, submit it to your broker, and collect the acknowledgement receipt of the DIS.
Once you complete this process, your shares will be transferred to your new Demat account within next 3-5 trading days.
Online transfer of shares
To transfer shares from one Demat to other online you can follow these steps-
Step 1: You can utilize your depository’s online share transfer facility to transfer shares online. CDSL offers the ‘EASIEST’ facility, while NSDL provides ‘SPEED-e’ facility for the same.
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. Enter the OTP received on your registered mobile number.
Step 2: Fill out the form, take its printout and submit it to your broker.
Step 3: Once your depository participant verifies the form, you shall receive login credentials on your registered email ID.
Step 4: Use the credentials to log in and initiate transfer shares from one Demat account to another.
Charges For Transfer Of Shares
When transferring brokerage account assets, certain brokers may charge some fees. The charges for transferring shares from one Demat account to another vary among brokers.
However, if you choose to close your Demat account with your current broker, no charges will be incurred. Furthermore, no stamp duty is levied on the transfer of shares from one Demat account to other if both accounts belong to you.
Tax Implications On Transfer Of Shares
- Since the ownership of shares remains with you , there wont be any tax liability on the transfer of shares.
- You may gift shares to your friends or relatives using a gift deed which is a legal document showing you are voluntarily transferring shares. In this case, though, the recipient of shares would be liable to pay taxes to the government if the fair market value of shares transferred is above ₹50000.
Transferring shares from one Demat account to other can be required for various reasons, and the transfer can be straightforward if you are familiar with the procedure. Since online methods are also now available, it is more convenient to transfer shares. However, it is crucial to exercise caution while entering the essential details.
Shares cannot be transferred without consideration except when they are gifted.
If the transfer is between demat accounts which belong to you, then there will be no tax liability.
If shares are given as gifts, you or the recipient may not incur any tax initially. However, the recipient will incur capital gain tax on selling shares as per rules in future.
If you are transferring shares within the same depository, it can be completed within 30 minutes or less.
Transferring shares from one depository to another may take around three to four hours, while a manual transfer could take up to three to five days.
The fees charged for transferring shares between accounts varies amongst different brokers.