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We all regularly operate our trading and demat accounts while buying and selling shares. When we buy shares, the demat account gets credited and when we sell shares, the demat
account gets debited. To that extent, the demat account works exactly like a bank account; the only difference being that they transact in shares rather than in cash. But interestingly,
you can also transfer shares from one demat account to another. Remember, when you transfer your shares from one demat account to another demat account, there is no tax
implication because the ownership does not change and hence there is no transaction implication. Then why do you need to transfer shares from one demat account to another
demat account.
Five reasons to transfer shares from one demat account to another demat account
1. You normally prefer to keep your trading account and demat account with the same broker for simplicity. When you change your broker, you prefer to change your demat account
and that calls for transferring shares from your old demat account to your new demat account.
2. You may be having 4-5 demat accounts and you may want to consolidate these demat accounts to reduce your demat costs and also for your own simplicity
3. You may be currently having just one demat account and you may want to maintain separate demat accounts for your trading activity and your

investment activity. Here again, you will have to make transfers from one demat account to another.
4. You may be looking to shift from a full service broker to a discount broker or vice versa depending on your cost and advice considerations. This will again call for transferring
shares from one demat account to another.
5. You may want to build a firewall around certain shares for your long term use like retirement, child's education, bequeathing to your children etc. In such cases, the demat
accounts will be better if they are classified accordingly and the relevant transfers made.
Procedure for transfer of shares from one demat account to another
While transfer of shares from one demat to another can be done online, the more popular method is the manual transfer of shares from one depository to another. There are broadly
two types of transfer viz. intra-depository transfer and inter-depository transfer.
As we are aware, there are two national depositories in India viz. NSDL and CDSL. A transfer within NSDL accounts or CDSL accounts is an example of intra-depository transfer and
a transfer from accounts between two depositories will be an inter-depository transfer.
We will see in detail why this distinction matters.
When you do an off-market transfer, you must use the Debit Instruction Slip (DIS) booklet provided by your DP. The first step is recording the names of shares you want to transfer
along with their unique ISIN numbers. The transfers will be processed based on the ISIN numbers so to ensure that the ISINs are entered properly and also do a double check. Then
you have to mention the Target Client id, which is a 16-character code and consists of the DP id and the client id combined. Next step is the transfer mode selection! If it is an intra-
depository transfer then you must select "Off Market Transfer" column.
On the other hand, if it is a transfer from one depository to another then you must select the "Inter-Depository" option. Select this option carefully based on the debiting account and
the target account.
There are a few basic precautions to take here. Ensure that the name of the target recipient and the 16-digit id are perfectly matching otherwise the transfer request could be rejected.
Also, the ISIN numbers need to be clearly mentioned and if any of the ISIN numbers are illegible then the request is liable to be rejected. Lastly, the signature must exactly match
with the signature in the master database of the DP and there must be clear balance (without lien) available in your Demat account to effect this transfer of shares.
Transferring to self and transferring to another person with tax implications
The transfer of demat shares could be to different demat accounts of the same person or to another person. Under the new SEBI regulations, it is mandatory for the transferor to
clearly mention the purpose of the transfer. This may not be too material in case of self transfers, but in case of transfer of shares from one individual to another, this purpose
becomes very important.
For example, transfer of shares to your wife or as a gift to your children as part of your will; are legitimate transactions. What the Financial Intelligence Unit (FIU) of the government
of India wants to track is that investors are not using this facility for loss transfers and round tripping of funds.
Lastly, one also needs to understand the tax implications of the transfer of shares.
When you transfer shares to your own account, there is no tax implication as there is no change of ownership. But your capital gains will still be calculated
from the original purchase price. In case of transfer to another demat account, there is no tax as long as the transfer is genuine and is backed by a genuine
Gift Deed to maintain an audit trail of the transfer.
Even when a son or daughter inherits shares through demat transfers, their tax liability will be from the date of original purchase. Also, if the shares that
you receive as demat transfer are again transferred by you, then you have to pay capital gains tax on the same.
Jaikishan Parmar is Senior Equity Research Analyst at Angel Broking.
 . Income tax slab rates for Individuals for FY 2019-20:

Individual (Others)

Net Income Range Income-tax Rate*

2019-20 2018-19

1 Upto Rs. 2,50,000 - -

2 Rs. 2,50,000 to Rs. 5,00,000 5% 5%

3 Rs. 5,00,000 to Rs. 10,00,000 20% 20%

4 Above Rs. 10,00,000 30% 30%

2. Income tax slab rates for Senior Citizens for FY 2019-20:

Senior Citizen

(who is 60 years or more at any time during the previous year)

Net Income Range Income-tax Rate*

2019-20 2018-19

1 Upto Rs. 3,00,000 - -

2 Rs. 3,00,000 to Rs. 5,00,000 5% 5%

3 Rs. 5,00,000 to Rs. 10,00,000 20% 20%

4 Above Rs. 10,00,000 30% 30%

 3. Income tax slab rates for Super Senior Citizens:
Super Senior Citizen

(who is 80 years or more at any time during the previous year)

Income-tax Rate*
Net Income Range
2019-20 2018-19

1 Upto Rs. 5,00,000 - -

2 Rs. 5,00,000 to Rs. 10,00,000 20% 20%

3 Above Rs. 10,00,000 30% 30%

Sample Tax Calculations for Income Tax Liability:

TAX TABLE (including surcharge & cess)

(Resident
Super
Senior
(Resident Individual) (Resident Senior Citizen) Citizen)

Taxable Income Tax Payable Tax Payable Tax Payable

2019-20 2018-19 2019-20 2018-19 2019-20 2018-19

1 250,000 - - - - - -

2 300,000 - - - - - -

3 350,000 - 2,500 - - - -

4 400,000 - 7,500 - 5,000 - -

5 450,000 - 10,000 - 7,500 - -

6 500,000 - 12,500 - 10,000 - -

7 1,000,000 112,500 112,500 110,000 110,000 100,000 100,000

8 1,500,000 262,500 262,500 260,000 260,000 250,000 250,000

9 2,000,000 412,500 412,500 410,000 410,000 400,000 400,000

10 3,000,000 712,500 712,500 710,000 710,000 700,000 700,000

11 5,000,000 1,312,500 1,312,500 1,310,000 1,310,000 1,300,000 1,300,000

12 10,000,000 3,093,750 3,093,750 3,091,000 3,091,000 3,080,000 3,080,000

13 20,000,000 6,684,375 6,684,375 6,681,500 6,681,500 6,670,000 6,670,000

14 50,000,000 18,515,625 17,034,375 18,512,500 17,031,500 18,500,000 17,020,000

15 70,000,000 28,513,125 23,934,375 28,509,700 23,931,500 28,496,000 23,920,000

Sample Tax Calculations for Income Tax Liability:

TAX TABLE (including surcharge & cess)

(Resident
Super
Senior
(Resident Individual) (Resident Senior Citizen) Citizen)

Taxable Income Tax Payable Tax Payable Tax Payable

2019-20 2018-19 2019-20 2018-19 2019-20 2018-19

1 250,000 - - - - - -

2 300,000 - - - - - -

3 350,000 - 2,500 - - - -

4 400,000 - 7,500 - 5,000 - -

5 450,000 - 10,000 - 7,500 - -

6 500,000 - 12,500 - 10,000 - -

7 1,000,000 112,500 112,500 110,000 110,000 100,000 100,000

8 1,500,000 262,500 262,500 260,000 260,000 250,000 250,000

9 2,000,000 412,500 412,500 410,000 410,000 400,000 400,000

10 3,000,000 712,500 712,500 710,000 710,000 700,000 700,000

11 5,000,000 1,312,500 1,312,500 1,310,000 1,310,000 1,300,000 1,300,000

12 10,000,000 3,093,750 3,093,750 3,091,000 3,091,000 3,080,000 3,080,000

13 20,000,000 6,684,375 6,684,375 6,681,500 6,681,500 6,670,000 6,670,000

14 50,000,000 18,515,625 17,034,375 18,512,500 17,031,500 18,500,000 17,020,000

15 70,000,000 28,513,125 23,934,375 28,509,700 23,931,500 28,496,000 23,920,000