Share transfers via Demat account are similar to a bank account. The only difference is that instead of money, you transfer shares through the former type of account.
Here are a few reasons why you may want to transfer shares from one account to another:
- Consolidate your holdings from various accounts into a single account.
- Switch to a full-service broker.
- Reduce brokerage fees by moving from your current broker to a discount broker.
- Separate the shares to different accounts to meet various long-term financial goals, like children’s education or retirement planning.
Share transfer process
India has two depositories namely the National Securities Depository Limited (NSDL) and the Central Depository Services India Limited (CDSL). The transfer may either be intra-depository or inter-depository.
- In an intra-depository transfer, the shares move from one account to another held within the same depository.
- Inter-depository transfers happen when shares are moved from one depository to another.
You may transfer shares from one Demat account to another either manually or via online procedure. Here is how both these procedures work:
Manual transfer
1. This requires the Delivery Information Slip (DIS) from your Depository participant. This slip comprises of some compulsory information that must be duly completed to commence the transfer procedure. These details include:
- The 16-digit beneficiary owner ID (BO ID), in case of CDSL and combination of DP Id and Client id in case of NSDL of the existing and the new DP.
- International securities identification number (ISIN), which helps to identify the share that needs to be transferred.
- For intra-depository transfers you need to opt for the “Off-market transfer” option, else choose the “Inter-depository transfer” option. This can only be done through pre defined reason codes allowed by the Depository.
2. After completing the aforementioned information, you need to sign the slip. It is important that your signature matches the records stored in the database of the Depository Participant (DP).
3. The next step is to submit the DIS to your DP to initiate the transfer procedure.
The broker may levy certain transfer fees; however, these are not applicable in case of closing the Demat account if the target account details with PAN are same. The transfer fees vary from one DP to another.
The broker may levy certain transfer fees; however, these are not applicable in case of closing the Demat account if the target account details with PAN are same. The transfer fees vary from one DP to another.
Online transfer
CDSL provides an extremely beneficial feature “EASIEST” that allows the online transfer of shares between Demat accounts. Before you can initiate the transfer, you need to register on CDSL’s website, on the other side NSDL has a facility Speed-e. You need to register yourself on this website before you begin. The process is outlined in the following steps:
- The account holder is required to visit the CDSL / NSDL website to register online.
- Select the facility as ‘EASIEST’ and fill in the form with the required details or select for Speed-e in NSDL.
- Once the form has been filled in, take the print out of the form, authorize the same and submit it to your depository participant (DP).
- To avail online off market transfer facility, the applicant must have valid Digital Signing Certificate (DSC) dongle in the name of applicant, which needs to be mapped to the account from which online transfer of securities are to be made. “On Market Transfers” can be made to pre-defined CM IDs (Broker account) in the same depository without DSC.
- The DP will further authorize for the pre-defined CM IDs facility and the login credentials are mailed by the Depository. For “Off Market Transfer” facility with DSC, the details are forwarded to the Depository along with DSC details for verification and activation, the login credentials mailed by the Depository on activation of the facility.
- Once logged in, you can start transferring shares on your own.
Tax implications in case of share transfer
You may either transfer the shares from your Demat account to another account held in your name. In this case, when share transfers are in the name of the same person, there is no tax liability. However, when you sell the shares, the capital gains will be calculated from the date of original purchase and not the transfer date.
In case you transfer the shares to another person, you will need to provide a clear and legitimate reason for the same. If it is transferred to your spouse or children and supported by a valid gift deed, there is no tax liability as long as an audit trail is available. The capital gains in case of sale are also applicable from the date of original purchase.
In a third scenario, if you re-transfer the shares received via a previous transfer, there will be a capital gains tax liability on the same.