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How to Transfer Shares from One Demat Account to another?

16 Mins 15 Jan 2021 0 COMMENT

A Demat account can transfer shares to another Demat account in addition to storing shares and securities. It aids in consolidating the shares, which makes it simple for a shareholder to view all of his shares collectively.

Direct ownership of shares is not possible without a demat account accessible through a demat account app. As a result, many investors and share market novices start their trading careers with a stockbroker before conducting in-depth due diligence on the platform. And a lot of times, there might be a need to transfer of demat shares from one account to another.

Reason for transferring shares between demat accounts

An investor transfers shares from one demat account to another for two main reasons:

They are choosing a different broker - If the needs of an account holder's present broker change, a new broker is required, necessitating the opening of a Demat account as well. The process of how to transfer shares from the old Demat accounts to the new ones is also important in this situation. There are a number of causes for this, including:

  • lower brokerage costs
  • better services and platforms for online trade i.e. greater security, speed, and convenience of transaction
  • value-added services such as market intelligence reports

They have multiple demat accounts. The user might have multiple demat accounts and may now want to combine them into one demat account, which would require the transfer of shares. As opposed to having many demat accounts, one may only have one and still desire to open other demat accounts to distinguish between trading and investment operations. Although the causes may differ, everyone goes through the same procedure. Each time, the shares' ownership stays under the same name, hence there is never a transaction involved in this case.

Who are the participants while transferring shares from one Demat account to another?

Primarily, there are 4 parties who are involved in the share transfer process. These are as follows:

  • The Investor
  • The Current broker
  • The New broker
  • The Depository firm (NDSL or CDSL)

Method of share transfer/types of share transfer

The Offline method

  • You are required to use the Debit Instruction Slip (DIS) booklet provided by your DP (Depository Participant) when you are transferring shares off-market.
  • Note down the names of the shares you wish to transfer, along with the ISIN numbers unique to them. It is important to check that the ISIN numbers have been entered correctly because the transactions will be processed based on these ISIN numbers.
  • Enter the 16 characters-long Target Client ID. It is a code consisting of and is a combination of the DP ID and the client ID.
  • Select the mode of transfer. The "Off Market Transfer" column must be selected if it is a transfer of the intra-depository kind. If the transfer is from one depository to another, select the option "Inter-Depository".
  • It is important to ensure that the target recipient’s name and the 16-digit ID match perfectly; otherwise, the transfer request could be rejected. The ISIN numbers need to be mentioned clearly, and if any of the digits are illegible, the request can be declined.
  • Lastly, a signature will be required. The signature should also be identical to the signature in the DP’s master database.
The Online method - Apart from using the DIS booklet, transfers of shares from one Demat account to another, like most other transactions; can be done online now. These transfers are broadly categorized as intra-depository and inter-depository. India has two national depositories – NSDL and CDSL. An example of intra-depository transfer would be the transfers within NSDL accounts or CDSL accounts. If we were to transfer from accounts between these two depositories, that would be an inter-depository transfer.

Additional Read: Features and benefits of a Demat Account

What are the Tax Implications of Transferring Shares?

Transferring shares can have tax implications if you receive payment from the receiver of the shares. Another aspect that determines the taxability is the relationship you have with the person to whom you transfer the shares, and the value of the shares to be transferred.

  • If the transfer is from one of your Demat accounts to another, then there are no tax implications as both those accounts are held by you.
  • Likewise, if you transfer your shares as a gift to your blood relatives like your children, mother, father, siblings, or spouse, you will not be taxed irrespective of the value of the shares. But, there will be tax implications for the receiver of the shares, if he/she is above 18 years of age.
  • If you have transferred shares of more than Rs 50,000 as a gift to a person other than your spouse, mother, father, or siblings, the receiver will be taxable.
  • But, if you earn capital gains from the transfer of shares to a person other than your spouse, mother, father, or siblings, it will be taxed. Your holding period of the shares will determine if the capital gains are STCG (12 months or less) or LTCG (more than 12 months).

Additional Read: Taxation on equity investments

Additional Read: Income Tax Implications on Demat Account Transactions 

Conclusion

Transferring shares is an easy task provided you have all the documentation necessary to process your share transfers handy. Moreover, transferring shares offers benefits too. For instance, a transfer of shares will help you segregate your portfolio effectively. But a prerequisite for such a transfer is to first open a new Demat account. Once that is done, you can proceed with the transfer. Transferring shares may have tax implications. Hence, before you proceed with any such transfer, you must be well aware of what is to arrive next so that there are no last-minute surprises, and your financial plans do not get disturbed. If you are not a tax-savvy person, it is advisable to consult with a tax expert or a financial advisor before executing any transfer.

Additional Read: Know how to change the name in the Demat Account

Additional Read: How to Convert Physical Shares into Demat?

Demat Account Transfer FAQs:

   1.  Can I transfer shares from one Demat to another?

Yes, you can transfer demat shares from one Demat account to another. But, in such a transfer since the ownership of shares remains the same, there are no tax implications.

   2.  What is the procedure for the transfer shares from one Demat to another online and offline?

You can transfer your shares within the same central depository (intra-depository or off-market transfer) or from one depository to another (inter-depository transfer). Moreover, you can transfer shares from one Demat to another online and offline.

  • Online:

You can process your online transfer easily using the CDSL website. Start with getting yourself registered on the CDSL website and fill the share transfer form with all the required transfer details accurately. Once you submit this to the DP, a verification process takes place. After successful verification, you will be allowed to make your future transfers online.

  • Offline:

You need to use the Debit Instruction Slip (DIS) booklet provided by your DP for transferring shares offline. You can begin with accurately filling in details such as the names of the shares you wish to transfer, along with the corresponding ISIN numbers, the target recipient’s name, client ID, etc. Remember to enter correct and legible details, otherwise, your transfer request may be rejected.

   3.  Can shares be transferred online?

Yes, shares can be transferred online. You can process your online transfer easily using the CDSL website. Start with getting yourself registered on the CDSL website and fill the share transfer form with all the required transfer details accurately. Once you submit this to the DP, a verification process will take place. After successful verification, you will be allowed to make your future transfers online.

    4.  What documents are required to transfer shares?

You require the following documents of you and your transferee, to transfer shares,

  • Identity Proof: PAN card
  • Valid Address Proof: Aadhaar Card, Electricity Bill, Passport, Driving License, Voter ID Card
  • The original share certificates of the shares that you want to transfer
  • Passport size color photo

    5.  How do I transfer shares to a family member?

You can transfer shares to your family member through the online or the offline route. The process to transfer shares to your blood relatives and people other than your blood relatives is the same. You must clear your pending Demat dues before initiating your transfer for a smooth transfer of shares. Both the transfer routes are explained below,

  • Online:

Using the CDSL website, you can easily make an online transfer. Get yourself registered on the CDSL website and fill out the share transfer form with all the required transfer details accurately. After you submit this to the DP, it will be verified. You will be able to make your own future transfers online after successful verification.

  • Offline

To transfer shares offline, you need to use the Debit Instruction Slip (DIS) booklet provided by your DP. Fill in the details including the names of the shares you wish to transfer, their ISIN numbers, the recipient's name, client ID, etc. It is important that your transfer request contains accurate and legible information; otherwise, it may be rejected.

Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No: 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of the National Stock Exchange of India Ltd (Member Code: 07730) and BSE Ltd (Member Code: 103) and has SEBI registration no. INZ000183631. Name of the Compliance Officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The information mentioned herein above is only for consumption by the client and such material should not be redistributed.