What Are AMCs in a Demat Account

Dematerialised account (Demat Account), is a digital vault that is used to store financial securities in an electronic form. To maintain this Demat account and safeguard your financial securities, you need to pay certain charges called Account Maintenance Charges (AMCs). These are one of the four types of Demat account charges and cover the costs for processing transactions, providing regular account statements, etc.  

 

This fee is incurred by the Depository Participant (DP) and is usually between ₹300 and ₹900, depending on the DP you choose. DPs decide AMCs based on several factors including type of the account and are usually charged annually, monthly or quarterly. 

Demat account charges are categorised based on several factors including what type of Demat account it is, and what services are being offered. Here are the different types of Demat account charges:

Account Maintenance Charges (AMCs)

Account Maintenance Charges are the fixed fees that are incurred for the ongoing maintenance of the Demat account. The charges can differ based on the type of account and who the service provider is.

Transaction Charges

Transaction charges are the fees charged by depository participants for the Demat account transactions. Whenever any shares are debited or credited in the Demat account a transaction charge is levied. DPs either charge a fixed fee for every transaction or a percentage of the transaction. 

Dematerialisation and Rematerialisation Charges

These Demat account charges are the fees that are levied for converting physical share certificates into electronic format, the phenomenon called Dematerialisation, or converting the electronic holdings in a physical share, which is called Rematerialisation. 

Custodian Fees

Sometimes DPs hold securities on behalf of the investors. The fees charged for such a holding are called custodian fees. These depository participant charges depend on the number of securities held in the Demat account.

Here are several factors that affect the Annual Maintenance Charges (AMCs) of a Demat account:

Category of Demat Account

A Basic Service Demat Account (BSDA) offers reduced AMCs for the investors holding less than ₹4 Lakhs. However, standard AMCs apply if the value of the holdings exceed. Whereas, a Regular Demat Account typically comes with standard AMCs. 

Depository Participants (DPs)

AMCs also depend on the Depository Participants. Different DPs, like banks, online platforms, stockholders, offer different services and hence charge different AMCs accordingly. 

Value of Holdings

AMCs change with the number of holdings. With higher number of holdings, higher AMCs might be charged, while for lesser holdings lesser fee might be incurred.

Status of Account

If any account remains inactive for an extended period, the concerned DP might levy a higher AMCs.

Promotions and Waivers

AMCs might come at discounted rates as a part of the promotional deals from some DPs. However, the standard charges might revert once the promotional term ends.

You can follow the below pointers to avoid AMCs: 

• You can opt for a Basic Service Demat Account if you have lower value holdings. In these accounts, if the balance is under ₹50,000, there are no AMCs

• To avoid AMCs, you can keep the account active without any breaks

• If you maintain minimum required holdings in the Demat account, you can easily avoid AMCs

• Go for DPs who offer lesser or zero AMC

• Choose DPs who offer discounts or waive AMCs for certain time periods

• Combine multiple Demat accounts reducing overall charges for account opening on all of those accounts in bulk

It is important for investors to understand AMCs and their impact on investment. Here are few factors that AMCs can impact:

• If you are planning a long-term investment, choosing DPs with lower AMCs can prove to be profitable. Higher AMCs might gradually drain your returns.

• If you don't trade frequently or have smaller investments, selecting a low-cost Demat account can be beneficial as you can avoid the high-maintenance charges

• Ensure you compare different AMCs from various DPs to find the most cost-effective option aligning with your investment strategy