How to Transfer Shares From One Demat Account to Another?

The share transfer is the process of transferring shares from one demat account to another demat account. It involves the requirement of the depository participants to make this process without any hassle. Let's understand the concept of Share Transfer and its process deeper.

What Is Transfer Shares?

Transferring shares is just moving your shares of a company from one demat to another. Imagine you own a piece of a shop, and it’s written in one notebook (your Demat account). You decide to shift that ownership to another notebook (another Demat account). That process is called transferring of shares which is as simple as moving your toys from one box to another!

Ways to Transfer Shares From One Demat Account to Another

There are two main ways to do this:

1. Off-Market Transfer: This is like handing your toy to a friend directly, not through a shop. You tell your DP to move shares to another Demat account (could be yours or someone else’s) without selling them on the stock market. You use that DIS paper we talked about.
2. On-Market Transfer: This is like selling your toy in a market and someone else buying it. You sell shares through the stock exchange, and they go to the buyer’s Demat account. But this is more for selling, not just moving between your own accounts.

How to Transfer Shares From One Demat Account to Another?

Think of a Demat account like a bank account. There, you keep your money, and you keep your shares instead of cash. Now, if you want to move those shares from one account to another, here’s how you should do it in the traditional way(physical):

1. Get a Slip: You go to the people who manage your demat account (called a Depository Participant or DP it’s usually CDSL or NSDL) and ask them for a special paper called a Delivery Instruction Slip (DIS). It’s like a permission note to move your shares.
2. Fill It Up: On this paper, you should fill in your details:
   • Fill the personal details like Name, number, your demat number, new Demat account
   • Fill in the script name of what shares you’re transferring, each share has a special identity code called ISIN, which stands for International Securities Identification Number.
   • Mention the number of shares you want to transfer.
   • Write the reason why you’re transferring them like giving them to someone or shifting to your own another demat.
3. Hand It Over: Give this signed paperback to your DP. If you use an app called EASI & EASIEST, you can do the same process, or else you can use their website as well for transferring shares online, which is called e-DIS.
4. They Check and Move: The DP checks everything, and in 1-2 days, your shares will be transferred to the new Demat account.
5. Done: That’s it your shares are now in the new account.

Why Transfer Shares From One Demat Account to Another?

People often transfer shares for different reasons, as mentioned below.

Organizing: 

• Maybe people have two or more accounts and want all their shares in one account. 
• To keep things simple, they will use share transfer instead of selling and buying to save capital gain taxes.

Gifting: 

• People who use the share transfer option to give their shares to their family or friends as a present.

Selling Privately: 

• Some people agree to sell shares to someone directly (OTC), not through the market and will use the share transfer option.

Switching Brokers: 

• If you don’t like the bank or broker managing your demat account, so you move to a new one, you can benefit from the share transfer option.

Family Planning: 

• Like putting shares in your wife’s or child’s name for the future.

Charges to Transfer Shares From One Demat Account

Moving shares isn’t always free it’s like paying a small fee to the organization who shifts your stuff. Here’s what you might pay:

• DP Fee: Your bank or broker charges something like ₹10-₹50 per transfer, or per type of share (ISIN). Some charge a flat fee, some per share (e.g., ₹0.05 per share).
• No Fee Sometimes: If it’s within the same DP (like two accounts with the same bank), it might be free!
• Extra Costs: If you’re selling or gifting, you may have to pay taxes or stamp duty (a small government fee).

Before you start, ask your DP, “How much will this cost?” They’ll tell you the exact price for each script.

Things to Consider When Transferring Shares

Before you move your shares, think about these:

1. Why Are You Doing It? Make sure you know why—like gifting or organizing—so you don’t mess up.
2. Correct Details: Double-check the new Demat account number. If it’s wrong, your shares could go to someone else by mistake!
3. Time: It takes 1-2 days, so don’t expect it instantly.
4. Charges: Ask how much you’ll pay so you’re not surprised.
5. Rules: If gifting or selling, there might be some government rules or papers (like a gift deed). Check with your DP or a helper (like an accountant).
6. Locked Shares: If your shares are “locked” (like in a pledge for a loan), you can’t move them until they’re free.

It’s like moving house—plan a little so it goes smoothly!

Tax Implication

“Tax” is money you might owe the government when you move shares. Here’s how it works in simple words:

• If You Gift Them: Usually, there is no tax for you if it’s to a family (like your wife, kids, or parents). But if it’s to a friend or someone else, if the value of the shares are more than Rs. 50,000 then it will be taxed in the hands of the receiver as per slab rates.
• If You Sell Privately: If you make a profit (like you bought shares for ₹100 and sold for ₹150), you might pay tax on that profit. It’s called capital gains tax. If you held shares for more than a year, it’s “long-term” (12.5% tax on profit over ₹1.25 lakh). Less than a year, it’s “short-term” (20% tax).
• Just Moving Your Own Shares: If you’re shifting between your own accounts, there is no tax because you’re not selling or gifting.

Conclusion

So, moving further transfer of shares is like shifting your shares from one account to another. You tell your DP by filling out a form or applying online, and it’s done in a couple of days. Just think about why you’re doing it, check the details, and see if there’s any tax. If you’re confused, ask your bank or broker they’ll guide you like a friend.