What is Transfer of Shares? How to Transfer Shares in India
Transfer of shares refers to the movement of share ownership from one person to another. In the stock market, this happens in two main ways: through a sale on the exchange where the clearing corporation handles the transfer automatically, and through an off-market transfer where shares move directly between two demat accounts without going through the exchange.
When you sell shares on NSE or BSE, the shares are automatically debited from your demat account and credited to the buyer's account through the settlement process. You do not need to do anything beyond placing the sell order. The exchange and clearing corporation handle the transfer.
Types of Share Transfers in India
| Type | How It Works | When It Is Used |
|---|---|---|
| Market transfer | Through exchange during trading | Normal buying and selling |
| Off-market transfer | Direct between demat accounts | Gifts, family transfers, estate |
| Inter-depository | Between NSDL and CDSL accounts | Switching brokers or DPs |
| Transmission | From deceased to nominee/legal heir | After account holder's death |
How Does a Market Transfer Work?
On T+1 settlement, when you sell shares, the clearing corporation debits the shares from your demat account and credits them to the buyer's account the next trading day. The money moves in the opposite direction. The entire process is automated and you do not interact with the buyer at all.
When Would You Use an Off-Market Transfer Instead?
Off-market transfers are used when you want to move shares without selling them. Common situations include gifting shares to family members, moving shares between your own demat accounts with different brokers, settling estate distributions, or transferring shares as part of a private deal outside the exchange.
Investments in securities market are subject to market risks. This article is for educational purposes only.
Frequently Asked Questions
Can I transfer shares from one of my demat accounts to another?
Yes. If you have multiple demat accounts with different brokers, you can transfer holdings between them through an off-market transfer. Submit a DIS (Delivery Instruction Slip) or use the online transfer facility offered by your DP. The process takes one to two working days.
Is there a tax impact when transferring shares to a family member?
Transfers without consideration (gifts) to specified relatives are exempt from tax under the Income Tax Act. However, when the recipient eventually sells the shares, their cost of acquisition is the original buyer's cost, not the market value at the time of transfer. Consult a CA for the specific tax implications of your situation.
Can physical shares be transferred between two people?
SEBI has restricted the transfer of physical shares for listed companies. To transfer ownership, the shares must first be dematerialised. Once in demat form, they can be transferred electronically. This rule was implemented to reduce fraud and ensure traceability.
How long does an off-market transfer take?
An off-market transfer typically settles on the next working day after the instruction is accepted by both the delivering and receiving DPs. If both accounts are with the same DP, it can be even faster. Inter-depository transfers between NSDL and CDSL may take one to two additional days.
Are there charges for transferring shares between demat accounts?
Yes. The delivering DP typically charges a fee per ISIN or per transaction for the debit. The receiving DP usually does not charge for credits. Charges vary between Rs.25 and Rs.50 per ISIN at most DPs. Check with your specific DP for their current transfer charges.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice.
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