How to transfer shares from one demat account to another

If you're actively involved in investing, you might have wondered How to transfer shares from one demat account to another. The answer is yes! When you sell securities, you essentially transfer ownership to another person. However, if you maintain multiple demat accounts, you also have the option to shift shares between them.

The practice of transferring shares from one demat account to another has become increasingly common. Whether you've changed your brokerage firm, consolidated your investments, or decided to gift shares to family members, knowing how to initiate a share transfer is essential for investors. Let's explore what share transfer involves and how you can go about transferring shares between demat accounts.

What is Transfer of Shares?

Once you've set up a Demat account, you can explore its additional functionalities beyond just holding shares and securities. One of these capabilities includes transferring shares to another Demat account. This feature is particularly useful for consolidating your holdings, allowing shareholders to manage and view all their shares conveniently in one place.

What are the reasons to transfer shares from one Demat account to another?

Investors transfer shares between Demat accounts for various reasons. It allows them to consolidate their holdings from different accounts, simplifying management and enhancing monitoring capabilities. Managing multiple accounts can be cumbersome, and transferring shares reduces this burden significantly.

Additionally, consolidating shares helps investors save on annual maintenance fees associated with maintaining multiple accounts. Having all shares in a single Demat account also simplifies tax calculations. Share transfers are often necessary when investors are dissatisfied with their current broker.

Typically, investors prefer online methods for transferring shares due to the convenience it offers over offline processes. However, some still opt for offline transfers for the personal interaction and assistance they provide.

How to transfer shares from one demat account to another

Two ways exist to transfer shares between demat accounts. The methods being mentioned are as follows:

Offline Method

To move shares from one demat account to another through offline mode, simply follow the steps listed below:

Step 1:Request a Delivery Instruction Slip (DIS) from your current stockbroker. This document includes all the necessary details for initiating the transfer.

Step 2: Complete the DIS form given to you by your broker with the following information:

International securities identification number (ISIN): This code with 12 digits verifies the genuineness of the shares. Ensure you confirm it. Also, specify the number of shares along with the ISIN code.

Target client Id:This 16-digit code is a combination of your DP ID and Client ID.

Mode selection: Select the off-market transfer method when conducting an intra-depot transfer. Choose the inter-depository option for any other transfers.

Step 3: After completing all the information, sign the paperwork and provide it to your existing broker. A small fee for the transfer may be applied, with the amount depending on the broker.

Step 4: Retrieve the acknowledgment slip

Following these procedures, your stocks will be moved to your new demat account in 3-5 days.

Participants in the Transfer of Shares from one demat account to another

While talking about transferring shares between demat accounts, it is important to understand the individuals or entities participating in the process. The main individuals engaged in moving shares between demat accounts are:

• Transferor: The person currently in possession of the shares who will be starting the transfer process
• Transferee: The shares will be received by the new owner
• Depository Participants (DPs):Entities that have demat accounts with the depository (NSDL or CDSL) are registered
• Depositories: NSDL and CDSL store and manage your securities in electronic form.

What are The Tax Implications of Transferring Shares?

When you transfer shares from one of your demat accounts to another one that you own, it's generally not subject to taxation. However, if you transfer shares to someone else's demat account, it can have tax consequences. Transfers without any consideration are typically treated as gifts under the Income Tax Act, 1961, and may be subject to applicable taxes.

It's advisable for both the transferor and the recipient to seek legal advice before proceeding with such transfers to understand the tax implications fully.

Factors to Keep in Mind When Transferring Shares

When transferring shares between demat accounts, keep in mind these crucial points:

• Choose a reliable and respected DP when opening a new demat account.
• Confirm information such as client ID, beneficiary account numbers, 1DP ID, and ISIN.
• Maintain documentation of share certificates, transfer deeds, and associated paperwork.
• Keep an eye on the transfer progress and contact the DPs if there are any delays or problems.
• Consult with a certified accountant or tax counselor for guidance on the tax implications of the transfer and to guarantee adherence to reporting regulations.

Final Words

By transferring your shares, you can align your investment strategy with your financial goals. Now that you've learned about the various methods for transferring shares between demat accounts, you can manage your investments more confidently and flexibly. However, it's important to always consider the reasons for the transfer and stay aware of any tax implications involved.

FAQs

Q. How do I transfer shares between accounts?

A. You start the process by filling out a transfer initiation form. This form should be available on your new broker's website, but you can call them if you need help. Your new broker communicates with your old broker. They set up the transfer.

Q. What is the process of share transfer?

A. Share transfer deeds must be stamped in line with the Indian Stamp Act and the State's Stamp Duty Notification. The share transfer deed should be witnessed, and the witness should sign it with their name, address, and signature. Send the transfer deed and the share certificate or allocation letter to the company.

Q. What are the charges for share transfer from one demat account to another?

A. A maximum of 5 securities (ISINs) can be transferred per DIS. Use the DIS Annexure form (PDF) to transfer more than 5 securities. The charges to transfer shares in an off-market transaction are 0.03% of the transfer value or Rs 25 per ISIN, whichever is higher, + 18% GST.

Q. Can I have 2 demat accounts linked to the same trading account?

A. A trader can have multiple Demat and trading accounts. There is only one condition in this situation, you cannot open multiple Demat and trading account with the same stockbroker or same depository participant. You can only have one Demat and trading account with one stockbroker.