Bigger investments, smaller costs: New Demat account rules explained

Market regulator Sebi is increasing the maximum value of investments allowed in a Basic Service Demat Account (BSDA) from Rs 2 lakh to Rs 10 lakh. This change will take effect on September 1, 2024.This means you will be able to hold a total securities' value of Rs 10 lakh in your Basic Services Demat Account (BSDA). Let's take a look at the investment limits, Demat account charges and new SEBI rules in detail.

A BSDA reduces the cost of holding securities by offering lower charges compared to a regular Demat account. Introduced by Sebi in 2012, it's best suited if you have small investment portfolios.

To be eligible for a BSDA, you must be the sole owner of the account and should not have any other Demat account. Additionally, only one Demat Account can be held under the BSDA category. If you have a joint account, you should not be the first holder of the account.

If you have a BSDA, the value of securities you will hold in it should not exceed Rs 10 lakh at any time. This is applicable after Sep 1, 2024, and for both debt and non-debt securities combined. Suppose you buy securities worth Rs 9.50 lakh, the value of which later increases to Rs 10.30 lakh. Since the value of securities held has gone beyond the threshold, the usual brokerage charges will apply, and your account will not be treated as BSDA as per SEBI rules.

Demat Account Charges

If you have a regular Demat account, apart from Demat account opening charges, you have to pay an annual maintenance fee toward it. This charge could range between Rs. 300 to 800, depending on the Depository Participant you choose. (A depository participant or DP is a financial intermediary that helps you manage your securities).

If your portfolio is up to Rs 4 lakh, no annual maintenance charge is required. For portfolios between Rs 4 lakh and Rs 10 lakh, a Rs 100 charge applies. Portfolios exceeding Rs 10 lakh will be converted to regular Demat accounts. These new rules aim to make investing in the Indian market more accessible and cost-effective.

If you have a BSDA, there will be no charges applicable on electronic statements. In case you opt for physical statements, a charge of Rs 25 per statement will be applicable.

• Automatic Conversion: Depository Participants (DPs) will automatically convert eligible Demat accounts to Basic Service Demat Accounts (BSDAs) starting September 1, 2024.
• Opt-Out Option: Investors can choose to retain their regular Demat account by notifying their DP via email.
• BSDA Benefits: These accounts offer lower maintenance charges, making them suitable for small investors.

Essentially, if you have a small investment portfolio and don't explicitly opt out, your account might be converted to a BSDA.