“Is it possible to transfer shares from one demat account to another?” is a question that many active investors may have asked. Certainly is the response! Your shares are transferred to a new owner when you sell securities. On the other hand, you are able to move your shares from one demat account to another if you own them all.
It has become standard procedure to move shares across demat accounts. Investors need to understand how to transfer shares, regardless of whether they have consolidated their interests, switched brokers, or given shares as gifts to family members. Let’s examine share transfers, what they include, and how they happen between demat accounts.
What is Transfer of Shares?
The act of transferring stocks from one demat account to another is referred to as “transferring shares.” Physical share certificates are superseded by electronic share certificates kept in India via Dematerialized (demat) accounts. Before we look at how to transfer shares from a demat account, let’s look at some of the main causes.
Reasons behind the Transfer of Shares from One Demat Account to Another
There can be several reasons that can prompt investors to transfer shares between demat accounts. These can include the following:
- Switching brokers or depository participants (DPs) due to better services or lower brokerage charges.
- Consolidating investments from multiple demat accounts into a single account for better portfolio management.
- Transferring shares as a gift or inheritance to family members or loved ones.
- Transferring shares to a new demat account when relocating or changing residence.
How To Transfer Shares From One Demat Account To Another
One can transfer shares from one demat account to another either through a manual method or online mode. Note that there is a proper process to transfer shares from one demat to another. However, the instructions regarding how to transfer physical shares to a demat account are different.
Manual Transfer of Shares
Follow these steps to manually transfer your shares from demat account to another:
- The transferor needs to obtain the Delivery Instruction Slip (DIS) from the current stockbroker. The slip contains all the essential information relating to the transfer of shares. The transferor shall fill in all the necessary details for transferring the security.
- The transferor shall mention the Beneficiary Broker ID on the DIS. The ID should be provided for both the existing broker and the new broker. It is a 16-digit unique ID allotted to the broker or the bank.
- Then, the transferor shall mention the International Securities Identification Number (ISIN). This number helps in the identification of the individual shares in the demat account. The transferor shall also mention the number of shares along with the ISIN.
- The transferor shall select the off-market mode of transfer in case of intra-depository transfer. In other cases, the transferor shall select the inter-depository option.
- After filling in all the relevant information, the transferor shall sign the document and submit it to the existing broker. The broker will charge a nominal fee for transferring your shares. These charges may vary across different brokers.
Online Transfer of Shares from One Demat Account to Another
Online transfer of shares is a convenient method and one can do it at the convenience of his home. You can undertake the online transfer of shares either through CDSL’s ‘Easiest’ facility or NSDL’s ‘Speed-e’ facility. Following are the steps involved in transferring shares from one demat account to another:
- Visit the CDSL or NSDL website. Register for the ‘Easiest’ facility or ‘Speed-e’ facility. Fill in all the relevant details and submit the form.
- Send a copy of the form to your depository participant. The depository participant will further send it to the Central Depository.
- Your details will be verified and you will receive your login credentials after 1-2 days.
- Login using the credentials received by you. Now, you can transfer your shares online from your demat account.
Participants in the Transfer of Shares
We need to be aware of the parties involved in this transaction even if we just talked about how to move shares between demat accounts. The principal parties engaged in the process of transferring shares between demat accounts are:
- Transferor: The current owner of the shares who will be initiating the transfer.
- Transferee: The new owner who will be receiving the shares.
- Depository Participants (DPs): Entities registered with the depository (NSDL or CDSL) that provides demat account services.
- Depositories: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) hold and maintain your securities in dematerialised form.
Time Required for Transfer of Shares
The time required for transferring your shares from one demat account to another varies depending on the transfer method and the efficiency of the DPs involved. In manual transfers, the process may take several weeks to complete. Online transfers are generally faster, with the shares usually reflected in the new demat account within a few days. More often than not, the entire process gets completed within one week.
What are The Tax Implications of Transferring Shares?
If one transfers shares from one demat account to his/her another demat account, then it is considered a non-taxable event. But, if the shares are transferred to the demat account of another person, then it can invite tax implications. Transfers done without consideration should be treated as gifts and shall be taxed accordingly as per the provisions of the Income Tax Act, 1961. The transferor and the transferee should take appropriate legal advice before undertaking such transfer.
Things to Keep in Mind While Transferring Shares
When transferring shares between demat accounts, it is essential to consider the following points:
- Choose a reliable and reputable DP for the new demat account.
- Verify the accuracy of details such as ISIN, DP ID, client ID, and beneficiary account numbers.
- Maintain records of the transfer deed, share certificates, and other relevant documents.
- Keep track of the transfer process and follow up with the DPs if there are any delays or issues.
- Consult a tax advisor or chartered accountant to understand the tax implications of the transfer and comply with reporting requirements.
In India, there are two ways to transfer shares between demat accounts: manually and online. Online transfers are more convenient and quicker to complete than manual transfers, which require physical papers and take longer to process. It is vital for investors to comprehend the procedures, parties involved, deadlines, and tax consequences related to share transfers in order to guarantee a seamless and trouble-free ownership transfer.