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As scary as it may sound, investing in the stock market isn’t really challenging if you have the patience and the right tricks up your sleeves.
In fact, technology has made it easier with a demat account – dematerialized account – which enables you to move beyond traditional investments like real estate and gold.
It also provides the opportunity for transfer of shares. Read on to know more if you are wondering how to transfer shares.
So, what exactly is a demat account?
Previously, all share certificates had to be stored physically. However, dematerialisation enabled conversion into electronic formats. And with a depositary participant (DP) like CDSL or NSDL, one can easily maintain and transact digitally.
Dematerialisation was introduced by the formation of the National Securities Depository Limited (NSDL) in 1991, and in 1999, the Central Depository Services (India) Limited (CDSL) was created to make it stronger. Both entities are responsible for making the process secure and cost-effective.
A demat account is an electronically enabled platform that allows an investor to hold various securities, such as shares, bonds, and mutual funds, in a single place. A third-party institution, a central securities depository or a broker, maintains all necessary records. A depositary participant takes charge of the process once an investor opens a demat account and purchases securities. It also ensures that your queries and concerns regarding how to transfer shares are solved conveniently.
Every investment made in the stock market, whether directly or through another company, needs regular tracking and security, which a demat account ensures. A demat account lessens paperwork and reduces the loss of certificates, in addition to providing a quick and secure way of transaction.
One of the most significant conveniences of a demat account is that it allows the quick and effortless transfer of shares.
Transfer of shares: Reasons
You might be wondering how will knowing about the transfer of shares help.
Well, it will not only ensure a hassle-free process but also give you a better command over your shares and services offered. Here are several reasons why the transfer of shares is beneficial:
Consolidating into a single account: Having multiple accounts with multiple brokers can make it challenging to keep track and make better decisions. Generally, people start with numerous brokers, and once the best one for them is found, all shares can be brought under a single account by transfer of shares. Transferring all shares into a single account with the most favourable broker can make it hassle-free, cost-effective, and regulated. It is also beneficial for making more stable financial planning and future investments.
Distribution of shares: Alternatively, one might choose to distribute shares over various demat accounts based on specific but different needs like retirement, marriage, or future education of children. It can also be separated based on the tenure, like long-term or short-term.
Change of broker’s service: An investor can opt for two different types of brokers: discount or full-service. While a discount broker charges very little and provides minimal services like buying and selling shares, a full-service broker offers a more personalized and detailed service, including market research and analysis, at a higher fee. Transfer of shares allows changing between both, depending on whether you need discounts or better service and availing of desired benefits.
Bad experience: It can also be because of a simple reason like a bad experience. If someone has had an unpleasant experience with a current broker, they can always shift to a new one without worrying about any loss.
How to transfer shares: types
You can choose to transfer your shares from one demat account to another demat account based on two types, depending on whether they are in the same depository or different. The two types of transfer options are:
Intra-depository transfer: if the account you want to switch to and the account you want to change from are both within the same depository, then you can avail of this option.
Inter-depository transfer: when you are planning to switch between different depositories, then an inter-depository transfer is your available option.
Transfer of shares: Process
You can choose either an online or offline version for the transfer of shares from one demat account to another demat account.
Online
For the online process, you will have to visit the CDSL website and register yourself. Follow these simple steps to complete the process and learn about how to transfer shares:
Step 1: Go to the CDSL website
Step 2: Register yourself by clicking on the “Register Online” link
Step 3: Scroll and click on the option “EASIEST”
Step 4: Fill in all necessary details asked required for the transfer of shares
Step 5: Take a print and submit it to your depositary participant (DP)
Your DP will verify your details and generate your login credentials. It will be forwarded to your registered email.
Step 6: Using your login details, you can now check your broker list and select the shares you wish to transfer.
Offline/ Manual
Instead of visiting any website, you will need to physically fill out forms by visiting and collecting the form from your depositary participant (DP). Follow these simple steps to complete the process and learn about how to transfer shares.
Step 1: Collect the DIS (delivery instruction slip) from your broker (with whom your current demat account is registered).
Step 2: Fill in the following mandatory details:
- Beneficiary Owner ID (BO ID) – this is the unique 16-digit number of your demat account registered with the CDSL. It is also known as the Target Client ID (a combination of the broker’s ID and DP’s ID). If you are changing your broker, keep your current and new broker’s ID ready for the transfer of shares.
- International Securities Identification Number (ISIN) – this is the unique 12-digit alphanumeric ID code provided for each of your securities (equities, stocks, debts) present in your demat account. Carefully fill in the ISIN of the shares you wish to transfer.
- Mode of transfer – select which option you want to choose. In the case of different depositories, select “inter-depository transfer.” In case of the same depositories, select the option “intra-depository transfer” (also known as Off market transfer).
- Signature (exact as per DP database)
Step 3: Submit the DIS to your current broker
Step 4: Get an acknowledgement receipt
Your current broker will require a few days (3 – 5 working days) to complete the process of transfer of shares to your new demat account with your new broker.
Also, you could be charged a fee for this transfer, the amount of which shall depend on your broker. However, no cost is involved if you plan to close your demat account with your current broker.
Summing it up
In a few simple steps and working days, you will be able to transfer your shares conveniently. You can do it both online and offline. However, the best advantage is that the entire process of the transfer of shares is hassle-free and requires minimal effort.