Mutual Fund in Demat Account

Personal finance
1

Can someone please help me with 2 simple questions.

  1. Can i assume that if I buy any Mutual Fund from Coin it will be stored in my demat account by default?
  2. I wanted to buy a mutual fund of Franklin but I could not find it in Coin. Can you please tell if there is future plan to include Franklin too?

Regards

2
  1. Yes, all mutual funds bought using Zerodha’s coin platform will be in demat mode only. All units will get credited to your Zerodha demat account on purchase.
  2. We’re speaking to Franklin to get them on board, you should be able to buy direct Franklin funds soon. For now, regular funds from Franklin are available on coin.
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3
  • So if I move out from Zerodha to some other broker later (or want to do it on my own using AMC websites) how am I going to do that?
  • Does this demat account move with me to another broker?
  • “regular funds from Franklin are available on coin” - you mean non-direct regular funds? Wasn’t Coin supposed to be just for direct funds?
4

If you’re closing only your trading account, you can choose to continue holding the units in your Zerodha demat. In the unlikely circumstance that you wish to close your demat account as well, you can transfer these units to the new demat account that you would have opened. You can choose to receive credit of units purchased through AMC website also to your Zerodha demat.

No, you’ll have to open a new demat account if you wish to close the existing account.

Yes, Coin is a platform for direct funds, but there are a bunch of funds that aren’t available on Direct yet, which you can purchase in the regular mode if you desire.

5

Thank you for the response.

Both parts of your comments mention “closing” an account and then one says I can keep the demat and another says open another demat.

Did you mean that:

  1. If I just close my Zerodha trading a/c I can keep my shares and funds in (Zerodha? Or opened through Zerodha) demat a/c
  2. And if I want to move to another broker then I can’t take my “opened with Zerodha” demat a/c to them, in that case I will have to open a new demat a/c with them and transfer my assets to that demat account

Right?

You can choose to receive credit of units purchased through AMC website also to your Zerodha demat.

Even after I’ve closed Zerodha account (the trading a/c but not the demat a/c opened with Zerodha) or till my Zerodha trading a/c is active?

6

If I just close my Zerodha trading a/c I can keep my shares and funds in (Zerodha? Or opened through Zerodha) demat a/c

Ideally if you’re closing your relationship with any entity, you would close both trading & demat accounts. However technically, you can still close only your trading account and keep your demat account open. In such a case you can hold shares in your demat account, you can’t keep funds since your trading account is already closed.

And if I want to move to another broker then I can’t take my “opened with Zerodha” demat a/c to them, in that case I will have to open a new demat a/c with them and transfer my assets to that demat account`

Yes, if your demat account is still open, you can link the same demat account to the new trading account that you open. But the other entity with which you’re opening your trading account will only allow you to buy stocks with them. This is because when you sell stocks, a broker needs to have a power of attorney to debit shares from your demat account, since the demat account in this case is Zerodha’ demat, the new broker where you’ve opened your trading account with cannot mark his poa to the Zerodha demat. So if you wish to buy & sell without any hassles, best to have a trading & demat with the same broker.

Even after I’ve closed Zerodha account (the trading a/c but not the demat a/c opened with Zerodha) or till my Zerodha trading a/c is active?

Yes, if you’ve closed only your trading and have retained your demat, you can choose to receive credits of MF’s to your Zerodha demat.

7

Thank you for clarifying.

Few more minor doubts.

Can’t the new broker have POA on my demat a/c? Can it not be changed? It is not possible or the hassle isn’t worth it and it’s easier to just move on to a new demat a/c?

As for POA - are there any checks and balances on this POA or theoretically it’s a “no limit” POA given to a broker over the customer’s demat account?

Are there at least checks like whether the action that broker performed was requested/initiated/authorized by the customer and the broker has proper proof/log of that authorization?

8

No, the new broker can’t exercise his PoA on your existing demat account.

It’s a limited PoA that you sign, it can only be used for specific purposes like to meet exchange payin obligation when you sell stock etc. We’ve explained the PoA bit at length here: https://zerodha.com/z-connect/queries/stock-and-fo-queries/poa-power-of-attorney-for-your-demat-account

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9

@siva @Bhuvan @ShubhS9 @VenuMadhav

Suppose I am holding mutual fund in demat form. Now, I get gift of mutual funds (same fund which I am holding) in demat form from my father (which he bought long back before I start investing).

Now if I make part redemption, how will first in first out will be applied in selling mutual funds??

10

Even if your father bought it way earlier. When these are transacted to your demat account, this will be at later date. So when you redeem your mutual fund investment, the units which you bought earlier will be sold first.

11

And what will be be time stamp on mutual funds gifted for calculating short term and long term gains. i.e. date of gift received or date when father purchased those mutual funds??

12

@Quicko can you.

13

Hi @ashok_bansal,

To determine the nature of Capital Gains whether STCG or LTCG, the holding period would be determined from the date of acquisition by the previous owner till the date of sale.
To compute the Capital Gains, the Cost of Acquisition of the Capital Asset would be determined as the purchase price of the previous owner.

You can read more about Tax on Gifting of Shares and Securities here: