A guide to transfer shares from one demat account to another

As an investor, you may want to transfer your shares from one demat account to another for various reasons. It could be due to a change in your broker or simply because you want to consolidate your holdings. Whatever the reason, transferring shares from one demat account to another is a simple process that can be done both online and offline. 

So, let’s get into the depth of understanding of what the transfer of shares exactly is, what’s the process, who are the participants, the time required, implications and points to keep in in while transferring the shares.

Understanding about the transfer of shares

The transfer of shares is the process of moving ownership of shares from one person or entity to another. It is facilitated through a demat account, which holds electronic records of the shares owned.  

Things to Assure prior share transfer

Before you begin to transfer your shares from one demat account to another, you need to ensure that:

1. Your current demat account and another demat account, both should be KYC (know your customer) compliant. KYC compliance is the compilation of your identity, details, address and further details with the depositary participant and the stock broker.
    
2. You must be aware of the legal justifications for share transfers. These include the combination of shares, a change in ownership, gifting, and other causes.
    
3. To guarantee that a transfer of shares is successful, both Demat accounts must be open.
    

Participants required for the process of shares transfer 

To make the share transfer process smooth, we go through numerous participants, these important participants are as follows:

• Depository Participant (DP)
• Transferor and Transferee (main players)
• Depository
• Registrar and Transfer Agent (RTA)
• Stock exchange

How can be shares transferred from one demat account to another?

Transferring shares from one Demat account to another in India can be done through two methods: 

When choosing between these methods, it's important to consider your personal preferences and circumstances. Both methods have their pros and cons, so it's crucial to weigh them carefully before making a decision. Additionally, it's important to verify the details of the transferred shares to avoid any discrepancies and ensure the security of the transaction.

Process of transferring the shares

1. Online Mode

Online transfer involves the use of electronic records and a demat account. Here are the steps to transfer your shares through online method 

• Visit to CDSL’s website www.cdslindia.com. On the homepage you’ll get an option to “Register Online” click on that.

• Select the facility you are willing to register for from (easi/easiest)

• Put the required details like Login–Id, Email-Id, etc.

• Take the print of your registration form.

• Send the registration form, duly signed by all the account holders, to your DP.

• The password will be sent to your registered email address.

• By entering your "User name" and "Password" on the homepage of CDSL's website, www.cdslindia.com, you can start utilizing easi/easiest.

2. Offline Mode

Offline transfer involves physical paperwork and the transfer of physical share certificates. This method is becoming less common as most shares are now held in dematerialized form. Here are the steps to transfer of shares though offline mode.

Step 1: Obtain a DIS booklet from your existing broker.

Step 2: Fill in the DIS with the details of the shares you want to transfer, such as the name of the company, quantity of shares, and ISIN number.

Step 3: Sign the DIS and submit it to your existing broker.

Step 4: Your existing broker will verify the DIS and transfer the shares to your new demat account.

Time duration for transferring the shares 

If you are transferring your shares from one demat account to another online, it doesn’t take more than 3-4 hours. But it also depends on the type of repository whether it is NSDL or CDSL. But in case of offline transferring of shares from one demat account to other, it may take 3-5 business days.

Tax Implications

Shares may be transferred to other demat accounts owned by the same person or by separate people. If shares are transferred to the same person, no additional tax is owed. Keep in mind that the stock's initial acquisition date will be used to compute the capital gain tax. It won't be impacted by the transfer date. 

Consider transferring shares across separate people's accounts. You must state the rationale for such transfers in explicit terms. If the transfer is supported by a gift deed and does not exceed the limit, there will be no additional tax obligation. In this case, the tax obligation dates back to the initial purchase date. 

Mistakes to be avoided while transferring the shares

While you are transferring your shares from one demat account to another, you should be careful and must keep the given points in your mind:

1. The transfer of shares may take up to 7-10 working days, depending on the broker.

2. Ensure that you have sufficient balance in your new demat account to receive the transferred shares.

3. Verify the details of the transferred shares in your new demat account once the transfer is complete.

Conclusion

Transferring shares from one demat account to another is a hassle-free process that can be done both online and offline. Follow the steps mentioned above to ensure a smooth transfer of your shares. Always remember to verify the details of the transferred shares in your new demat account to avoid any discrepancies.

Frequently Asked Questions

Q1. What are the charges for the transfer of shares from one demat account to another?

Ans: Charges for transferring shares from one demat account to another vary from broker to broker. The average charge for the transfer cost is nearly 0.33% - 18% + GST.  

Q2. What is the difference between NSDL and CDSL?

Ans:   NSDL refers to National Securities Depositories Ltd (NSDL) which is the share depositary for NSE and CDSL refers to Central Securities Depositories Ltd (CDSL) and is the share depositary for BSE.

Q3. What is the rule of transfer of shares?

Ans:  The rules for transferring shares are different in the public and private sectors. A public corporation's shares can be freely transferred unless the company has a good reason to forbid it. A private limited company's shares cannot be transferred, with some exceptions. For the transfer of shares, a transfer document is executed.