How to Transfer Shares from one Demat Account to another 

Before we discuss the process of transferring our shares from one Demat to another, let us understand why a Demat account is necessary.

Demat is an abbreviated word for Dematerialisation (converted from physical to electronic shares). A Demat Account allows users to hold shares and other financial securities in electronic format, for easy trading, unlike previously, when it was physical and the transactions were done manually.

Through this Demat account, the whole procedure of investing, trading, holding, and monitoring has become easy, hassle-free, faster and cost-effective.

Depositories in India

In India, we have two major depositories for Demat accounts– the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL). Demat account is generally opened with either of the depositories with whom the Depository Participant (DP) is listed or partnered. We can easily identify, by seeing the account numbers, with which of the depositories we are holding the account. The Demat account with CDSL is a 16-digit numerical figure, while on the other hand, the account with NSDL is an alphanumeric 16-digit figure with “IN” at the beginning.

The situation for Change of Broker

Now coming to the point, how can we transfer shares from one Demat account to account? Transferring the shares from one Demat to another might seem frightening at times, but when we follow the steps properly, things seem easy and convenient.

• There could be reasons that as an individual you are not happy with the interface or the current services of your broker and hence you want to switch to another. 
• Or sometimes, it could be you are looking for a broader range of product-line which better suits and aligns with your financial goals and strategies.
• It could be you hold many Demat accounts and want to consolidate all of them and hence you need to transfer your shares from one Demat to another. 
• You may want to shift from a full-service broker to a discount broker or vice versa as per your needs and investment strategies and the cost implications of either.

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Transfer Process

The process of transferring the shares from one Demat account to another can be done “manually” or through an “online process”.

Manual Transfer

• As the name suggests, this mode of transfer requires paperwork and so physical forms have to be filled to initiate the transfer.
• The manual transfer of the shares can be Intra-Depository Transfer/ an Off-Market Transfer or Inter- Depository Transfer.
• When the two Demat accounts involved in the transfer process are in the same depository, then the shares do not circulate back in the market, and hence such a transfer is called off-market, or Intra-Depository transfer.
• When the two Demat accounts are in separate depositories, then this type of transfer is called an Inter-Depository market.
• As account holders, we need to follow the following steps to carry out either of these transfers
  • For both the manual transfer processes, the account holder must have a Debit Instruction Slip (DIS Booklet) provided by their Depository Participant (DP), ie. the brokerage firm with whom your Demat account is registered.
  • Write down the names and the ISIN number of the shares or the securities, which we have to transfer. ISIN is the 12-digit code required to identify various securities. It stands for International Securities Identification Number.
  • Now mention the Target Client ID, which is a 16-digit code that has the client’s ID with the DP’s ID
  • Then select the mode of transfer. As mentioned earlier, it could be Intra-Depository transfer (DPs registered with the same depository) or Inter-Depository transfer (DPs registered with different depositories).
  • At last, we need to submit the filled-in DIS form to your existing broker and then take the acknowledgement receipt from the broker.
  • It is now done, and the broker will initiate the transfer process in 3 to 5 days.

Online Transfer

As the name suggests, it does not involve any physical form to be submitted, rather, everything can be done online using the CDSL website. The online process involves the following steps:-

• Open the CDSL website, and click on the “Register Online Link”
• Fill in the required details mentioned in the form 
• After filling the form, click on the “Print Form” option and it will initiate the transfer to your DP
• Then the DP will initiate the verification process of the form and once that is done, a password (login credentials) will be sent to the account holder’s email id, within a couple of days
• The password can be used to register to the myEASI (Electronic Access to Securities Information) platform
• Then the account holder can see the broker lists and initiate the transfer of shares

 Tax Implication in the Transfer Process

Generally, when you transfer your shares from one Demat account to another Demat account, there is no tax implication because the owner does not change but the capital gains will still be calculated from the original purchase price of the stock.

If we have to transfer the shares to a different person’s account, we have to give the reasons for such a transfer. If the transfer is initiated with the purpose of a gift deed and does not exceed the defined limit, no extra tax will be charged on it.

For instance, when a son or daughter inherits shares through Demat transfers, their tax liability will be from the date of original purchase. Also, if the shares that you receive as Demat transfer are again transferred by you, then you have to pay capital gains tax on the same.