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.

Bsda meaning to provides almost similar benefits to regular Demat account, but there are differences in maintenance charges. Unlike regular Demat account, 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 & 2 lakh, you will have to pay nominal maintenance charge of INR 100 annually. Understanding the differences between BSDA vs regular Demat account can help investors choose the most cost-effective option for their needs.

Features Of Basic Service Demat Account

Although BDSA has all the same capabilities as conventional Demat account, it differs from regular Demat accounts in few specific ways. The following are the features unique to BDSA:

-A quarterly transaction statement for their BDSA is sent to investors. This implies that you receive complete record of all your transactions every three months. However, in the event that there are no transactions, this statement will not be given. These statements are additionally available for download in both electronic & paper formats. While the electronic form is free, you will need to pay ₹ 25 for each physical statement copy beyond the third in order to obtain more than two copies.

-An annual holding statement is also sent to investors, in paper or electronic format depending on the account holder's preference. In the latter instance, it is mailed to the registered address of the holder. 
-Investors with registered mobile phone can receive SMS alerts on their BDSA purchases.

-Two delivery instruction cards are also sent to investors when their BDSA opens.

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.
 

SEBI Stipulates the Following Conditions for BSDA Accounts:

-If the entire value of the holdings on BSDA account is less than ₹50,000, DPs are not permitted to charge AMC fee.
-DPs may impose annual management charge (AMC) of more than ₹100 for holding values ranging from ₹50,001 to ₹2,00,000.
-At any point in the year, if the holding value above ₹2,00,000, the DP has the right to apply fees that are specific to non-BSDA accounts. 
By understanding what is BSDA account, investors can benefit from lower maintenance fees if their holdings are within specified limits.

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.

Benefits of Basic Service Demat Account?

When it comes to saving money, there are number of advantages to the BSDA. The main advantages of BSDA are enumerated here.

– There are reduced fees for hard copy statements that are mailed to the client.
- The dematerialization fees are terminated.
- There are reductions in annual maintenance fees for amounts between ₹600 & ₹ 800.
For those wondering what is BSDA account, it allows investors to hold securities in electronic form with minimal costs.

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Conclusion

What is BSDA account? It's demat account that offers limited services at reduced charges. BDSAs are easier to maintain than Demat accounts because they are significantly less expensive. Due to their affordability, BDSAs are very beneficial for small investors with modest capital, allowing them to trade stocks and profit without having to lose a significant portion of their capital to AMCs.