In 2012, SEBI unveiled the idea of Basic Services Demat Accounts (BSDA). The goal was to lessen the financial burden of demat fees for investors with modest holdings under Rs 2 lakhs. There are several fees associated with demat accounts. Account opening fees and fees for credits to the demat account have previously been prohibited by SEBI. However, there are additional fees that are inherent in a demat account, and they are as follows:
- Annual maintenance expenses (AMC); typically between Rs600 and Rs800 annually
- For debits to the demat account, there is a per-folio fee.
- Fees for shipping customers their tangible statements
- Fees for the rematerialization and dematerialization of physical shares
- additional fees such as bounce fees, DIS rejection, DRF rejection, etc.
BSDA essentially saves the demat account app holder two significant fees. First, the holder’s AMC is waived according to the holdings slab into which they fall on the cut-off date. Second, holders of BSDA accounts are only eligible to receive electronic statements; paper statements are not permitted. In the case of BSDA accounts, additional fees such per-folio on debits and DRF costs would still be levied.
The value of all holdings in the demat account, including shares, mutual funds, and ETFs, is added together to arrive at the BSDA cut-off value.
What Are the Limitations of A Demat Account With Basic Service?
A standard Demat account has certain restrictions. You cannot maintain more than INR 2 lakh (capital plus profit) in your Demat account at any given time. Suppose you invested INR 1.5 lakh and earned INR 60,000 in profit, bringing your total holdings to INR 2.1 lakh.
In such a case, your account will be converted from a base Demat account to a Full-Service Demat Account (FSDA), and you will be required to pay a monthly Account Maintenance Fee of INR 25 plus 18% GST. Also, BSDA accounts can only be opened by a solitary account holder; joint account applications are not accepted. Moreover, only retail investors and not institutional investors can establish BSDA Demat accounts.
Benefits of a BSDA
BSDA was designed to minimize the operational costs of a Demat account for the investor, as evidenced by the discussion. Among the many benefits of a BSDA are the following:
- Postage costs for tangible statements mailed to the customer are reduced.
- The Dematerialization fees are terminated.
- The annual maintenance fees are reduced by between 600 and 800 rupees.
What Requirements Must Be Met in Order to Open A Basic Service Demat Account?
Although a Demat account with minimal services offers remarkable cost-efficiency, an investor must meet certain eligibility requirements in order to create an account. The qualifying requirements for BSDA Demat accounts are shown below:
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- The investor must act alone to open the account.
- The investor must be opening their first Demat account.
- A shareholder is limited to keeping one BSDA Demat account.
- The gross value of BSDA shares (principal plus profit) cannot exceed INR 2 lakh in a fiscal year.
- The investor cannot be the principal account holder if the investor is a joint holder of any Demat account.
How to Create a Basic Demat Account?
In India, Depository Participants often use an automated process to transform qualified Demat accounts into BSDA accounts. The yearly maintenance charge is generally determined quarterly by a DP. The DP determines whether or not the holding amount for the quarter surpassed INR 2 lakh on the date of invoicing.
Your account will automatically convert to a BSDA account if your holdings do not exceed the 2 lakh threshold. To use a BSDA account’s features, you may not have more than one Demat account. Additionally, you have the option to select the BSDA facility when establishing an account. You have to choose that option if you wish to apply for a BSDA account.