Before starting to look for a free Demat account it would be helpful if you understand what is Demat account. In simple terms, Demat account is like a bank locker where you keep you share in electronic form. As there are charges to manage a locker, sameway there are some charges associated with managing a Demat account. In case you are a F&O trader or intraday trader, you don’t need a Demat account but you just need a trading account with your broker. Please understand that brokerage account and Demat account are different.
What brokers are doing nowadays it they will says that they are opening the Demat account for free and bear the cost for you for first year but then from next year they will charge a higher rate. Just remember that there are no fixed cost associated with a Demat account like a locker. ICICIdirect can charge you 1000 a year while ShareKhan will charge you only Rs 500. In same ways different broker charges different Demat account charges.
But there is one discount broker which is actually providing Free Demat account for life. The are a discount broker and have the lowest brokerage rate also of Rs 9 per trade. There unlimited plan starts from as low as Rs 999 per month.
There account opening charges is Rs 400 but then there is no Annual maintenance charge associated with your account. So as long as you want to keep an account with them, you will not have to pay any maintenance charge.
You can read our review about SAS online here. Provide your info to them and they will explain you all the details about account opening.
While people are becoming quite comfortable with the fact that owning a demat account from a retail investor’s point of view, the some times end up paying a large Demat account charge fees of about Rs 350 which can go up to Rs 750 as well.
So if you look at it as a percentage of the investment, if a person has invested about Rs 15,000 it works out to be almost 2-3 percent of his investment amount. This is a big deterrent for retail and small investors to open a demat account.
But SEBI in August 2012, has introduced BSDA(Basic Service Demat Account) account for retail investor. It is in the same lines of a no-frills bank account.
To give you some finer cost related points of the BSDA. If a demat account has the value of securities, all the holdings in the demat account is less than Rs 50,000, then there is no annual maintenance charges (AMC) to be charged to that investor. So if he has a demat account with an holding of only Rs 20,000 in the form of stocks or any other investments, there will not be any AMC charged on that demat account.
If the value exceeds Rs 50,000 and goes up to Rs 2,00,000, then the charges are capped at Rs 100 per annum. Once the value of investments go above Rs 2,00,000, then you have to pay the charges as they are levied by the Depositary Participant (DP).
Interesting part is that existing demat account holders need not go and apply and open a new demat account under the BSDA. All they need to do is go to the DP and inform them that the value of their securities is less than Rs 50,000 or less than Rs 200,000 as the case maybe and they should be given the benefits of the preferential rates.
Also remember that if you plan to invest only in F&O then you don’t need a Demat account. You only need one if you are going to trade in cash market(delivery) with equity.