Introduction

When we talk about finance, stock market, trading, one thing pops up in our mind how to transfer shares from one demat to another demat account, isn’t it? Well, to answer this question there are some key factors you must consider. Whether you are switching brokers or consolidating your investment portfolio, transferring shares is a common practice among investors. In this comprehensive guide, we will walk you through the process of transferring shares from one Demat account to another seamlessly.

Share transfer refers to the process of moving securities such as stocks, bonds, or mutual funds from one Demat account to another. You can do this transfer for various reasons, including changing brokers, merging accounts, or gifting securities to someone else.

Let’s understand all of this in deep. 

What Does the Transfer of Shares Mean?

Once opening a trading account, you can explore its full range of functionalities. Beyond merely holding shares and securities, a Demat account allows you to transfer shares to other accounts seamlessly. It also aids in consolidating shares, offering a streamlined way for shareholders to get a comprehensive overview of their entire portfolio.

There are several situations in which an investor might need to transfer shares from one Demat account to another. Some common reasons include:

• Simplifying management by consolidating all shares into one account.
• Switching to a new depository participant that offers better services or lower costs.
• Moving shares due to a negative experience with a previous broker.
• Exploring different investment options or timeframes, or transitioning from a discount broker to a full-service broker, often appealing to risk-tolerant investors.

Type of Share Transfer

Transfer shares from one demat to another online between two Demat accounts can be performed either offline or online. Here’s an explanation of each method along with the steps involved:

1. Offline Transfer (Physical Transfer)

Offline transfer, also known as manual or physical transfer, involves filling out physical forms to transfer shares between Demat accounts. 

Steps for Offline Transfer

1. Obtain the Delivery Instruction Slip (DIS):

• The DIS is a physical form provided by your Depository Participant (DP). This form is used to instruct your DP to transfer shares from your Demat account to another.

2. Fill Out the DIS Form:

• Account Details: Enter your Demat account number and the target Demat account number.
• ISIN (International Securities Identification Number): Write the ISIN of the securities you want to transfer.
• Quantity: Specify the number of shares to be transferred.
• DP ID and Client ID: Enter the DP ID and Client ID of both the transferor and transferee accounts.

3. Signature:

• Sign the DIS form as per the signature registered with your DP.

4. Submit the DIS Form:

• Submit the filled and signed DIS form to your DP. Ensure that you keep a copy for your records.

5. Processing:

• The DP processes the DIS form and transfers the specified shares to the target Demat account. This may take a few days to complete.

2. Online Transfer

Online transfer is a more convenient and faster way to transfer shares using internet-based services provided by the depositories (NSDL or CDSL) or through the DP’s online platform.

Steps for Online Transfer

1. Login to Your DP’s Online Portal:

• Access the online portal or app provided by your DP using your login credentials.

2. Navigate to the Transfer Section:

• Find the section for transferring shares or securities. This may be labeled as a “Transfer of Securities,” “Transfer Request,” or something similar.

3. Select the Transfer Type:

• Choose the type of transfer you want to perform. Common options include intra-depository (within the same depository, like NSDL to NSDL) or inter-depository (between different depositories, like NSDL to CDSL).

4. Enter Transfer Details:

• Beneficiary Account Details: Enter the target Demat account number and DP ID.
• ISIN and Quantity: Provide the ISIN of the securities and the number of shares to be transferred.

5. Verify and Confirm:

• Review the details entered and confirm the transfer. Some DPs may require OTP (One-Time Password) authentication for security purposes.

6. Submit the Request:

• Submit the transfer request. You will receive a confirmation message or email once the transfer is successfully initiated.

7. Processing:

• The online transfer is usually processed within a few hours to a day, depending on the DP’s processing times.

Both methods serve the same purpose but differ in terms of convenience, speed, and the process involved. Online transfers are generally preferred for their ease and quick turnaround time.

NSDL to CDSL Share Transfer

How to transfer shares from NSDL to CDSL? The answer to this question lies in various factors. NSDL to CDSL share transfer involves moving securities from an account held with the National Securities Depository Limited (NSDL) to an account with the Central Depository Services Limited (CDSL). This process is necessary when an investor wants to change their depository participant (DP) from one under NSDL to one under CDSL, or vice versa. 

Here’s a detailed explanation of the process:

Reasons for Transferring Shares from NSDL to CDSL

• Switching Depository Participants: Investors may find better services or lower charges with a DP under the other depository.
• Consolidation of Accounts: Simplifying management by consolidating all shares under one depository.
• Service Issues: Poor service experience with the current DP.

Steps for NSDL to CDSL Share Transfer

1. Obtain and Fill Out the Delivery Instruction Slip (DIS)

• DIS Form: Obtain the Delivery Instruction Slip (DIS) from your current DP (NSDL).
• Details: Fill in the details such as your NSDL Demat account number, target CDSL account number, ISIN (International Securities Identification Number) of the securities, the number of shares to be transferred, DP ID, and Client ID of both the transferor (NSDL) and transferee (CDSL) accounts.

2. Select Inter-Depository Transfer

• Inter-Depository Transfer: Ensure you select the option for an inter-depository transfer on the DIS form, as you are transferring between two different depositories (NSDL to CDSL).

3. Submit the DIS Form

• Submission: Submit the filled and signed DIS form to your current DP (NSDL). Make sure you keep a copy for your records.

4. Processing the Transfer

• Verification: The DP will verify the details and process the transfer request.
• Time Frame: The transfer process usually takes a few days to complete, depending on the processing time of both depositories.

5. Confirmation

• Notification: You will receive a confirmation message or email once the shares have been successfully transferred to your CDSL account.
• Check Holdings: Verify the transfer by checking your holdings in the CDSL account.

Key Points to Note

• Accuracy: Ensure that all details in the DIS form are filled out accurately to avoid delays or rejections.
• Charges: Both NSDL and CDSL may levy charges for the inter-depository transfer. Check with your DP for the applicable fees.
• Documentation: Keep copies of all documentation submitted and received during the transfer process for future reference.

Example Scenario

Suppose you have 100 shares of XYZ Company in your NSDL Demat account, and you want to transfer these to a new Demat account under CDSL. You would:

• Fill out the DIS Form: Include details such as your NSDL account number, the CDSL account number where the shares are being transferred, the ISIN of XYZ Company, and the quantity (100 shares).
• Submit to NSDL DP: Submit the filled DIS form to your NSDL DP.
• Wait for Processing: Allow a few days for the DP to process the transfer.
• Confirmation: Receive confirmation from both NSDL and CDSL regarding the successful transfer.
• Verify: Check your new CDSL Demat account to ensure the 100 shares of XYZ Company are now credited.

Follow the above-mentioned methods to successfully transfer shares from an NSDL account to a CDSL account, ensuring you manage your investments as per your preference.

Who are the Participants in the Transfer of Shares?

The participants in the transfer of shares are essential stakeholders who facilitate the smooth movement of securities from one Demat account to another. Here’s an explanation of the key participants involved in this process:

1. Depository Participant (DP)

A DP is an intermediary between the investor and the depository (NSDL or CDSL). DPs can be banks, brokers, or financial institutions.

Role in Transfer: 

• Provides Delivery Instruction Slip (DIS) forms.
• Processes the DIS forms submitted by investors.
• Ensures compliance with regulations and accuracy in the transfer process.

2. Depositories (NSDL and CDSL)

Depositories hold securities in electronic form and provide services related to transactions of these securities.

Role in Transfer: 

• Facilitate the electronic transfer of shares between Demat accounts.
• Maintain records of securities in Demat form.
• Ensure the safety and integrity of the securities held.

3. Investor (Account Holder)

The individual or entity holding a Demat account who owns the securities being transferred.

Role in Transfer: 

• Initiates the transfer by submitting the DIS form to the DP.
• Provides accurate details for the transfer, including account numbers, ISIN, and quantity of shares.
• Verifies the completion of the transfer by checking the holdings in the target Demat account.

4. Receiving Demat Account Holder

The individual or entity who will receive the transferred securities into their Demat account.

Role in Transfer: 

• May be required to provide their account details to the transferring investor.
• Confirms the receipt of securities after the transfer is completed.

5. Regulatory Authorities

Entities such as the Securities and Exchange Board of India (SEBI) regulate the functioning of depositories and DPs.

Role in Transfer: 

• Establish guidelines and regulations for the transfer of securities.
• Ensure that the transfer processes are conducted transparently and fairly.

6. Broker

A brokerage firm that may act as a DP or facilitate the transfer process for investors.

Role in Transfer: 

• Assist investors in filling out and submitting the DIS form.
• Provide additional support and services related to the transfer of shares.

Charges for Transfer of Shares

Yes, transferring shares between Demat accounts usually involves certain charges. The charges for the transfer of shares from one demat to another can vary depending on the depository participant (DP) and the type of transfer.

1. Transaction Charges

Debit Transaction Charges: These are fees charged by the DP for debiting (transferring out) shares from your Demat account. The charges can be a fixed amount per transaction or a percentage of the transaction value.

2. Inter-Depository Transfer Charges

When transferring shares between different depositories (e.g., NSDL to CDSL), additional charges may apply. These are often higher than intra-depository transfer charges due to the involvement of both depositories.

3. Stamp Duty

For off-market transfers (not conducted on a stock exchange), stamp duty may be applicable. The rate can vary depending on state regulations and the value of the shares being transferred.

4. Courier Charges

Some DPs may charge for the courier services used to send the Delivery Instruction Slip (DIS) or other physical documents required for the transfer.

5. Rematerialization Charges

If you decide to convert your electronic holdings back into physical certificates before transferring them, rematerialization charges will apply.

Example Charges

• Intra-Depository Transfers: Typically lower, ranging from Rs. 10 to Rs. 50 per transaction.
• Inter-Depository Transfers: Can range from Rs. 25 to Rs. 100 per transaction.
• Stamp Duty: Generally, 0.015% of the value of shares transferred for off-market transactions.

Tax Implications of Share Transfer

Moving shares between Demat accounts under the same individual does not attract taxes. Conversely, transferring shares to another person’s Demat account can result in tax implications.

If shares are transferred without any payment, they are treated as gifts and taxed according to the Income Tax Act of 1961. Therefore, it is advisable for both the transferor and the recipient to consult with a legal advisor before proceeding with such transactions.

In Short! 

The transfer of shares from one demat to another online is currently the most preferred option among investors as it is convenient and doesn’t require physical involvement. Whether you choose to transfer shares online or offline, following the necessary steps and guidelines will help you complete the transfer smoothly. 

So, would you consider open a demat account with Jainam where transferring shares from one demat account to another is as convenient as it could get?