What are Account Maintenance Charges (AMC) for a Demat Account?
A Demat account has become a basic requirement to start your investing journey in the financial markets and for holding securities like shares, bonds, and mutual funds in electronic format. Most investors know the basics of trading; however, AMC is typically not observed while considering the costs involved in trading. These charges are imposed to maintain a Demat account in your name.
In this blog, let us discuss Account Maintenance Charges (AMC) for a Demat account, the types of Demat account charges, and what are the Account Maintenance Charges for a Demat account with Pocketful.
What is AMC in a Demat Account?
AMC stands for Account Maintenance Charges. The account maintenance charges represent the fees an investor must pay to continue using his Demat account. The depository maintains your demat account, and the AMC is imposed by the Depository Participant as it acts as an intermediary between the investor and depository to ensure the safe storage of securities in electronic format.
Why do DP’s Charge AMC?
AMCs help DPs recover the costs incurred for providing various services to their customers, i.e. investors and traders. Some of the services they provide are:
- They provide access to internet-based trading platforms.
- Act as an intermediary between depository and investor for the safe storage of securities.
- They provide regular contract notes and reports.
Though these charges are modest, they add up pretty fast and, therefore, are a cause of concern for investors. It is, therefore, pertinent to understand what constitutes the AMC charges because it helps an investor understand the overall cost of having a Demat account.
Types of Demat Account Charges
Different charges which a Demat account holder may incur are:
- Account Opening Charges: Some DPs charge their clients for opening a Demat account. However, most brokers do not charge it to attract more clients.
- Transaction Charges: Clients must pay these charges whenever they buy or sell securities.
- DP Charges: These fees are imposed by the Depository Participant (DP), which acts as an intermediary between the investor and the depository. It is used to cover the costs of maintaining your demat account and providing other services.
- Dematerialization and Rematerialization Charges: A dematerialization charge is levied every time you convert securities physical certificates into electronic securities. A rematerialization charge is imposed when you convert electronically held securities into physical certificates.
- Pledge and Unpledge Charges: Investors must pay these charges to pledge securities as collateral. Many brokers also impose a fee for unpledging the securities.
- Account Maintenance Charges (AMC): Brokers charge these to cover the costs of providing services like record keeping, providing account statements, and maintaining electronic records of your holdings.
What is AMC for Maintaining a Demat Account with Pocketful?
Pocketful is one of the best stock brokers today as it provides excellent services to its customers at low costs, as mentioned below:
- Zero Account Opening Charges: You can open an account with Pocketful free of cost.
- Free AMC for the First Year: Pocketful waives off AMC charges for the first year. From the second year onwards, Pocketful charges INR 70 + GST quarterly.
- Transaction Charges: Pocketful offers zero delivery charges on equity and charges INR 20 per executed order in the options segment.
- Dematerialization and Rematerialization Charges: Pocketful charges INR 150 per certificate for dematerialization and INR 150 per certificate + CDSL charges for rematerialization.
- Pledge and Unpledge Charges: Pocketful imposes a fee of INR 25 + GST for both pledging and unpledging securities.
- Value Added Services: Pocketful also offers value-based services like corporate actions free of cost for our users.
Conclusion
AMC charges are essential for maintaining a demat account and help the DP cover operational costs. Although many brokers charge AMC from the first year, Pocketful waives off AMC for the first year or reduction based on activity.
For an investor, it is important to know the AMC charges and compare the tariff structures of different depository participants (DP) to make a well-informed decision. After all, picking a stock broker with the lowest charges is essential to maximize profits.
Frequently Asked Questions (FAQs)
What is AMC in a Demat account?
AMC stands for Account Maintenance Charges. The AMC for a Demat account refers to the charges levied by the depository participant for keeping your demat account operational.
Why do I have to pay AMC on my Demat account?
AMC is used to cover the cost of maintaining your demat account and providing other services, such as account reports, access to the platform, contract notes, etc.
How much AMC is charged for a Demat account?
AMC is different for different brokers, which also varies with the type of demat account one wants to open. Typically, it varies from zero to a few thousand rupees per annum.
Can I avoid paying AMC on my demat account?
Some brokers offer zero AMC for the first year, but the terms regarding AMC differ between brokers.
How can we reduce AMC charges?
One can reduce or even pay zero AMC by opting for discount brokers.
