How to Transfer Shares from One Demat Account to another?
You frequently operate your Demat accounts to buy and sell shares in the share market. The buying of shares results in our Demat account being credited, whereas when you sell the shares, the securities are debited from the account. In this regard, the Demat account functions identical to a bank account, the sole difference being that it deals with shares, instead of cash. Transferring your shares from one Demat account to another is also possible. However, when you shift shares from your one Demat account to another; the ownership remains the same, which means that there is no tax implication, and consequently, no transaction implication as well.
Additional Read: How to Buy & Sell Shares in a Demat Account?
Then, why transfer shares from one account to another at all?
The benefits of transferring shares are numerous. They are as under
- If you have multiple Demat accounts, you may wish to consolidate them to simplify and reduce the Demat costs.
- You might have a single Demat account at present and may want to keep separate Demat accounts for different activities, which would require you to transfer shares from one account to another.
- People generally wish to keep their Demat account and trading account with the same broker to keep things simple. You might want to change your Demat account if you change your broker.
- If you have long-term plans for certain shares and may wish to build a firewall around them. In those cases, the Demat accounts need to be classified accordingly, which would again require you to transfer shares from one Demat account to another.
How to transfer shares from one Demat to another – 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. The first step is noting 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. Next, you are required to 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. Then you have to 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. Furthermore, the signature should also be identical to the signature in the DP’s master database.
Additional Read: How to transfer shares from one Demat account to another?
How to transfer shares from one Demat to another – 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. ICICI Bank Demat account holders can also use an e-instruction facility for transferring the shares online from one Demat account to the other. Let us say you want to make an online transfer using CDSL
If an online transfer of shares is being considered, it can be simply done using the CDSL website. The account holder is required to visit the CDSL website and get themselves registered. Once that is done, you need to fill out the form and submit it to the DP. After the DP has completed the verification process, the account holder will then be allowed to make their future transfers online.
Additional Read: Features and benefits of a Demat Account
Share transfer to your family members
You can also transfer shares from your account to your family members’ accounta including your spouse, kids, etc. The tax liability is computed keeping in mind the receiver of the gift and the amount of the gift. However, gifts from specified relatives are exempted, regardless of the amount. These relatives are spouse, father, mother, brother, and sister. Whether you opt for the offline or online method of transferring shares, you must ensure that your Demat account has a clear balance in order for the transfer to take effect.
Additional Read: What is a Demat account, its meaning, type, and process?
Tax implications on 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
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?
1. Can I transfer shares from one Demat to another?
Yes, you can transfer 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 of shares in Demat accounts?
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). Both of these transfers can be done through an online or offline method.
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.
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,
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.
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.
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