Simple ways to transfer your share….!!
Trading has become quite common these days. Those who trade in securities have an idea about a demat account. It is mainly a repository, where the digital copies of one’s stocks are held. It is quite similar to a bank account. A bank account is used to hold cash, whereas it can be used to hold shares. When we buy shares, the trading account gets credited and when we sell shares, the demat account gets debited. But interestingly, one can also transfer shares from one account to another. There will be no tax implication because the ownership does not change. For a new trader, who doesn’t understand the reason for transfer shares from one account to another account. Here’s are the following cases:
- A trader generally prefers to keep his trading account with the same broker. But due to any reason, he/she prefers to transfer the shares into another brokerage account. Then he/she needs another account.
- He/she wants to maintain separate accounts for trading activity and investment activity.
- A trader may have four to five accounts. But if he/she wants to consolidate these accounts to reduce the cost.
- A trader wants to shift from a full-service broker to a discount broker or vice versa.
Procedure for transfer of shares from one account to another.
There are generally two ways to transfer shares from one demat account, i.e. Manual or online. The most popular method is the manual transfer of shares from one depository to another. In India, there are two main national depositories i.e NSDL and CDSL. Only two types of transfer happen i.e. Intra-depository transfer and inter-depository transfer. If the transfers happen between NSDL and CDSL accounts, then it’s an example of intra-depository transfer and a transfer from accounts between two depositories will be an inter-depository transfer.
Let’s look at why the distinction matters:
- So, if an investor does an off-market transfer, he/she must use the Debt instruction slip (DIS) booklet provided by his/her DP.
- An investor needs to first record the names of shares, he/she wants to transfer along with unique ISIN numbers.
- The transfer will be processed depending upon the ISIN numbers to ensure that ISINs are entered properly.
- Investors need to mention Target Client ID which consists of DP id and the client Id combined.
- The next step is the transfer mode selection. If it is an intra-depository transfer, then one must select the “Off Market Transfer’’ column.
- In case, if the transfer is from one depository to another, then one must select the Inter- Depository options.
- You need to select the option carefully based on the debiting account and the target account.
- Make sure that the name of the target recipient and the 16-digit id are perfectly matched otherwise the transfer request could be rejected.
Tax implication of Transferring to self and transferring to another person
According to the SEBI Regulations, the transferor must mention the purpose of the transfer. In the case of self-transfer, it is not so important. But in the case of transfer of shares from one individual to another, declaration of purpose becomes quite important.
If an investor transfers shares to its own other accounts, there is no tax implication as there is no change of ownership. But the investor capital gains will be calculated from the original price purchase. If one transfer shares to his other account, there will be no tax on it. In case if the shares are passed to son and daughter through demat transfers, then the tax liability will be from the date of the original purchase. Also, in case if the shares one receives in his demat account are again transferred, then one needs to pay capital gains tax on the same. One should keep a note that the capital gains tax will be counted from the initial date of purchase of the stock. The transfer date will not affect it.
*Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing