What is Account Maintenance Charges (AMC) in Demat Account

If you want comfort in anything today, you need to shell out money. Stock trading and share market trading are no different. There were days when you would have to do all the running around for investing in stocks and shares, and you were the only one managing your line of investments, going through the hassle of buying and selling stocks. However, the seizure of Demat accounts in 1996 eliminated tedious paperwork. Now, it is a lucrative opportunity for you to continue investing in stocks and shares without getting up from your chair.

You no longer need to buy share transfer tokens, go to the company register to have shares transferred, or worry about the theft of share certificates. The Demat account, which is now mandatory for stock market transactions, takes care of everything.

However, as discussed earlier, nothing comes for free. You have to pay a small amount to make your life comfortable. The same goes for Demat accounts. Don’t go in for Demat account managers who claim no charges will be applicable, as that can be quite an eyewash. Beware of such cases and keep a note of all the applicable Demat charges – out of which the account maintenance charges (AMC) in Demat Account will be discussed here.

So here is a list of the fees you must pay when opening a Demat account.

Opening fee for Demat account

Opening fees for Demat accounts are quite nominal or can even be zero. If you open a 3-1 account (savings account plus Demat account plus trading account at the same time from the same bank) or if you have quite an extensive and old relationship with the banks, they may not charge a penny from you for opening your Demat account. Even if you have to pay, it will be a minimal amount.

Security Fees (Custody Fees)

In the past, you had to worry about keeping stock certificates safe constantly. However, the Demat accounts dispelled those concerns. Your shares will not be stored electronically, and there is no risk of losing or stealing these vital documents. Depository Participants (DPs) and banks charge a custodian fee to keep them safe. It is usually billed annually unless otherwise stated.

What is account maintenance charges (AMC) in Demat Accounts

You have to pay a maintenance fee for your Demat account every year. There is usually no charge for a standard Demat account with a balance of up to Rs. 50,000. Those with assets valued at Rs. 50.001-2 lakhs should pay between Rs 100 and Rs 750, depending on how many trades you make.

Some Depository Participants or DPs may also charge quarterly fees, while others may charge a lifetime fee over Rs. 2000 and beyond. When the value of the transactions exceeds Rs. 2 lakh, the annual cost can be as high as Rs. 2,000-2,500. Unlike other waiverable charges, a Demat account holder must pay an annual maintenance fee or account maintenance charges (AMC) to the custodian for services rendered. These are also known as Folio maintenance fees and can range from Rs. 300 to Rs. 900 per year.

Banks that offer three-in-one accounts for Demat, trading, and savings tend to charge a lower annual maintenance charge for Demat accounts because the accounts are linked. However, if the Demat account is assigned to a savings account of another bank, the AMC fees may be higher.

Transaction fees

Some DPs charge fees based on the number of transactions you make or a flat rate for the entire month. Although these fees also vary, some DPs (discount brokers) charge around Rs 1.5 for each share you trade.

Demat and Remat fees

DPS charges a fee for the dematerialization or rematerialization of physical actions. Dematerialization might cost around Rs. 5 per certificate while rematerialization might cost you around Rs. 25 for each certificate.

DPS may charge credit fees and shipping fees for non-recurring statements. You will also have to pay the Goods and Services Tax (GST) of 18%. This is calculated on brokerage fees and the trades you make through your Demat account. Now that you know the fees charged by DPs, you can open a Demat account.

What is the Demat account maintenance charges (AMC)?

Today, with the advent of digitalization, stocks no longer have to be tangible assets. They are dematerialized, making it much easier for anyone to buy and sell them. The dematerialization occurs when the physical shares' deposit receipts are converted into electronic format.

This makes tracking and accessing your stocks easy regardless of your physical location. These shares are then stored in a Demat account, also known as a dematerialized account. It includes the stocks and securities you have invested in through an online or electronic platform.

If you are engaged in online securities trading, the purchased securities are held in a Demat account, making it easier for users to trade the securities. The Demat account contains the investments you make in the different asset classes. There are no Demat account maintenance charges (AMC) for your trading and commodity accounts.

Conclusion

With the advent of the dematerialization process, the fear of loss, theft, or damage to shares and investment securities is no longer a problem from the comfort of their home.

You have to make a small payment for the convenience you get by having your investments secured. Besides the other charges, the annual maintenance charge for the Demat account or the AMC charges is charged every year for the security of your account and investments.