What is a Basic Service Demat Account?

If you are a stock market investor, you likely understand the importance of having a Demat account. For those who may not be familiar, a Demat or Dematerialized account plays an important role in facilitating the buying and selling of shares. When you buy or sell shares through a broker, the shares are transferred or sold from your Demat account in T+2 days. This means that if you buy or sell shares on Monday, the shares will be credited to or debited from your Demat account by Wednesday unless any holidays fall within this timeframe. Demat accounts are managed and maintained by Central Depository Services Limited (CDSL) and National Depository Services Limited (NSDL).

However, investors often face difficulty selecting the correct type of Demat account. In India, You can open four types of Demat accounts which include - Regular Demat Account, Basic Service Demat Account, Repatriable Demat Account, and Non-Repatriable Demat Account.  In this article, we will discuss the Basic Service Demat Account (BSDA) and the top features and benefits of a BSDA account. 
 

What is a BSDA Account?

BSDA or Basic Service Demat Account is a special type of Demat account introduced by the Securities & Exchange Board of India (SEBI) in 2012 for eligible Indian citizens. The account’s primary purpose is to encourage small investors with no or little prior knowledge of stocks, mutual funds, and ETFs to enter the market and trade or invest.

A BSDA account provides almost similar benefits to a regular Demat account,  but there are differences in maintenance charges. Unlike a regular Demat account, a basic Demat account holder does not need to pay any charges on holdings below INR 50,000. Also, if your holding amount is between INR 50,000 and 2 lakh, you will have to pay a nominal maintenance charge of INR 100 annually.

Limitations of a Basic Service Demat Account?

A basic Demat account has some limitations. Firstly, you cannot keep more than INR 2 lakh (capital+profit) in your Demat account at any time. For instance, suppose you invested INR 1.5 lakh and made a profit of INR 60,000, taking your total holding to INR 2.1 lakh. In such a situation, your account will be converted from a basic Demat account to a Full-Service Demat Account (FSDA), and you will have to pay INR 25+18% GST per month as the Account Maintenance Fee. Also, BSDA accounts can be opened by a sole account holder, meaning you cannot apply for a joint account. Moreover, BSDA Demat accounts can be opened only by retail investors and not institutional investors.

What are the Eligibility Criteria for Opening a Basic Service Demat Account?

Although a basic service Demat account provides exceptional cost-efficiency, an investor needs to fulfill some eligibility criteria to open an account. Here is a laydown of the BSDA Demat account eligibility criteria:

1. The investor must open the account in their sole capacity.
2. The investor must be a first-time Demat account holder.
3. An investor can keep only one BSDA Demat account.
4. The gross value (Principal+Profit) of the BSDA shares must not exceed INR 2 lakh in a financial year.
5. If the investor is part of any joint Demat account, s/he must not be the primary account holder.
 

Can a Full-Service Demat Account be Transformed into a BSDA Account?

Technically, you can convert any full-service Demat account into a basic-service Demat account. However, the market regulator SEBI (Securities & Exchange Board of India) may verify the investor's status before permitting such a change. Hence, converting a full-service Demat account into a basic-service Demat account depends on the market regulator's approval.

However, before placing a request to convert your existing account into a BSDA account, you must ensure that you do not operate any other Demat account in your sole capacity. If you maintain more than one account, your application will be summarily rejected. Moreover, if after converting your existing Demat account into a BSDA Demat account, your holding value exceeds INR 2 lakh or you open another Demat account, your BSDA account will be converted into a full-service Demat account.
 

How to Open a Basic Service Demat Account

Depository Participants in India generally follow an automatic mechanism to convert eligible Demat accounts into BSDA accounts. A DP typically calculates the annual maintenance fee quarterly. On the date of billing, the DP checks whether the holding amount exceeded INR 2 lakh in the quarter or not. If your holding amount does not cross the 2 lakh mark, your account will be automatically converted to a BSDA account. However, you must not have more than one Demat account to avail of the benefits of a BSDA account. Also, you can find an option to tick on the BSDA facility during account opening. If you want to apply for a BSDA account, you must select that option.

5paisa Simplifies Basic Service Demat Account Opening

If you are looking to open a BSDA account, whether online or offline, look no further than 5paisa. 5paisa provides a convenient account opening process and seamless trading experience through its world-class online trading app. Click here to open a Demat account.