What is Off-Market Transfer

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Brief introduction to off-market transfer as the demat-to-demat movement of shares directly between two parties without routing through a stock exchange. Off-market transfers are governed by SEBI, executed through NSDL or CDSL, and are commonly used for gifts, inheritance, transfers between family members, transfers between an investor's own demat accounts, off-market sales, and pledge-invocation scenarios under a Loan Against Securities. This guide explains what off-market transfer means, the DIS-based process, on-market vs off-market differences, applicable charges and stamp duty, tax implications, and how off-market transfer interacts with pledged securities held as LAS collateral in 2026."    https://www.idfcfirst.bank.in/finfirst-blogs/finance/what-are-off-market-transfer-of-shares

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Define off-market transfer with full context:

(1) An off-market transfer is the direct transfer of securities from one demat account to another, executed outside the Clearing Corporation of a stock exchange. The transaction is not routed via the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), or any clearing house.

(2) Off-market transfers are facilitated by the two Indian depositories — National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) — through Depository Participants (DPs) such as banks, brokers, and NBFCs.

(3) The transfer can occur within the same depository (NSDL-to-NSDL or CDSL-to-CDSL, called intra-depository) or between depositories (NSDL-to-CDSL or vice versa, called inter-depository).

(4) Ownership changes hands as soon as the transfer is settled in the depository system. The transferor signs a Delivery Instruction Slip (DIS) or executes the transfer online via NSDL's SPEED-e or CDSL's Easiest facility; the transferee must hold a valid demat account.

(5) Off-market transfer is distinct from a pledge of shares. In a pledge — including the one created for a Loan Against Securities — the lien is marked in the depository system but ownership of the securities remains with the original demat account holder. In an off-market transfer, ownership actually moves.

With effect from 1 January 2024, depositories require the target beneficiary account to be added in advance and the transfer to be authenticated by OTP for added investor protection."    https://www.samco.in/glossary/off-market-transfer

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An off-market transfer can be initiated either offline using a Delivery Instruction Slip (DIS) or online via the depository's electronic facility. Both methods follow the same depository-level rails.

Step-by-step process for an offline off-market transfer:

Step 1 – Obtain the DIS: The transferor (sender) collects a Delivery Instruction Slip from their Depository Participant (DP). For an off-market sale, a separate off-market annexure is also required.

Step 2 – Fill in transfer details: The DIS must contain the transferor's DP ID and Client ID, the transferee's DP ID and Client ID, the ISIN (International Securities Identification Number) of each security, the quantity of shares, the reason code (gift, transfer between own accounts, off-market sale, etc.), and the execution date.

Step 3 – Add target beneficiary in advance: Effective 1 January 2024, the transferee's demat account must be added as a target beneficiary in the transferor's account before the transfer; the addition itself requires depository OTP authentication.

Step 4 – Submit the DIS and confirm via OTP: The transferor signs the DIS and submits it to the DP. On the execution date, NSDL or CDSL sends a link and OTP to the transferor's registered mobile and email; the transferor must confirm the transaction via OTP.

Step 5 – Receipt at transferee end: The transferee's DP processes the inward credit. In some cases, the transferee may also need to submit a Receipt Instruction Slip (RIS) to formally accept the incoming securities.

Step 6 – Stamp duty and DP charges: Stamp duty is collected automatically by the depository at 0.015% of the consideration for off-market sales; the DP's transaction fee is debited separately.

For online off-market transfers, the same steps are followed digitally through NSDL's SPEED-e or CDSL's Easiest portals."    https://www.tradejini.com/blogs/transferring-shares-offmarket-offline

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Lead-in: An investor selling shares on the exchange and an investor gifting shares to a family member are doing structurally different things. The table below summarises the practical and regulatory differences between on-market and off-market transfers.

Comparison Table (9 rows):

Parameter | On-Market Transfer | Off-Market Transfer
Route | Through a recognised stock exchange (NSE or BSE) | Direct demat-to-demat; no exchange involvement
Settlement | Through the Clearing Corporation under T+1 settlement | Through the depository (NSDL or CDSL) on the execution date
Price discovery | Open-market price; matched by the exchange order book | Mutually agreed between transferor and transferee; not necessarily market price
Common use cases | Buy-sell trades via broker, intraday, F&O, MTF | Gifts, family transfers, inheritance, off-market sale, exit offers, pledge invocation
Securities Transaction Tax (STT) | Applicable | Not applicable
Stamp duty (2026) | 0.015% on delivery trades, collected by exchange | 0.015% on off-market sales with consideration, collected by depository
Documentation | Broker contract note | Delivery Instruction Slip (DIS) + off-market annexure if it is an off-market sale
Authentication | Broker authentication and pay-in/pay-out cycle | OTP authentication via NSDL or CDSL on the execution date
Primary regulator | SEBI + Stock Exchanges + Clearing Corporation | SEBI + NSDL or CDSL (depositories)

Follow-up line: Both channels are SEBI-regulated and use the same demat infrastructure, but they serve fundamentally different purposes — on-market is price-discovery driven, off-market is consent-driven between two known parties."    https://www.idfcfirst.bank.in/finfirst-blogs/finance/what-are-off-market-transfer-of-shares

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Off-market transfers are used in any situation where shares need to move between two demat accounts without price discovery on a public exchange. The most common scenarios in 2026 are:

• Gifts to family members: A parent gifting shares to a child, or a spouse gifting to a spouse, is the single most common off-market transfer. The reason code ""Gift"" is selected on the DIS, and the transferee does not pay any consideration.

• Inheritance and transmission: When a demat account holder passes away, shares are transmitted to the legal heir's demat account through an off-market transmission process, which is a variant of off-market transfer.

• Transfer between an investor's own demat accounts: An investor may consolidate holdings from multiple demat accounts into one — for example, moving shares from a discount broker's CDSL demat to a bank-linked NSDL demat. The reason code is ""Transfer between own accounts"".

• Off-market sale (private sale): Two parties may agree to transfer shares at a mutually-agreed price without going through an exchange — particularly common for unlisted shares, pre-IPO shares, ESOPs, and large block deals where the parties want to avoid market impact.

• Pledge invocation under a Loan Against Securities: If an LAS borrower defaults and the lender invokes the pledge, the pledged shares may be transferred off-market from the borrower's demat to the lender's demat for subsequent sale to recover the outstanding loan.

• Corporate restructuring: Mergers, demergers, and intra-group restructurings often use off-market transfers to move bulk holdings between related entities.

For each scenario, the correct reason code must be selected on the DIS, since this drives stamp duty and downstream tax treatment."    https://wwipl.com/download/off-market-annexure-nsdl-cdsl

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Unlike a market trade, an off-market transfer does not attract Securities Transaction Tax (STT) or exchange transaction charges. The actual cost structure for a 2026 off-market transfer typically includes:

• Stamp duty: Levied under the Indian Stamp Act, 1899 (as amended by the Finance Act, 2019). For off-market sales with consideration, stamp duty is 0.015% of the consideration value (or 0.003% for non-delivery debt securities), collected automatically by the depository. Off-market transfers without consideration — gifts, transfers between own accounts, family transfers — are typically exempt from stamp duty.

• Depository Participant transaction fee: Each DP sets its own off-market transfer charge. A common structure is 0.05% of the transaction value or a flat ₹150–₹200 per ISIN per debit, whichever is higher. Some DPs charge an additional handling fee for physical DIS submission.

• Depository charges: NSDL and CDSL recover nominal transaction charges from the DP, which are typically embedded in the DP's fee schedule rather than charged separately to the investor.

• GST: Goods and Services Tax at 18% is applied on the DP's transaction fee.

• Pledge release charges (if applicable): If the off-market transfer involves shares that were previously pledged — including pledged for a Loan Against Securities — a pledge release request must be processed first by the lender, which may carry its own administrative fee.

Investors can use the NSDL Stamp Duty Calculator (available at nsdl.co.in) and their DP's tariff schedule to estimate the exact cost before initiating the transfer."    https://nsdl.co.in/downloadables/pdf/Off%20Market%20Transfers%20and%20Stamp%20Duty%2001062021.pdf

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Lead-in: Off-market transfer and the pledge of shares for a Loan Against Securities are governed by the same depository system but serve very different purposes. Understanding the interaction is essential for any LAS borrower, especially during loan tenure, default, or release.

Key interaction points between off-market transfer and LAS pledged shares:

• During the LAS loan tenure: Once shares are pledged with a lender — such as Bajaj Finance — a lien is marked in the borrower's demat account. The pledged shares cannot be transferred off-market by the borrower until the lien is released. Any DIS submitted for those securities will be rejected by the depository as long as the pledge marking is active.

• Off-market transfer before pledging: If a borrower wants to consolidate holdings from a spouse's or family member's demat into their own demat before pledging for an LAS, that is a routine off-market transfer using the ""Transfer between own accounts"" or ""Gift"" reason code. The transfer must be completed and settled before the LAS pledge is initiated.

• Pledge invocation by the lender: If the borrower defaults on the LAS and the lender invokes the pledge, the depository moves the pledged shares from the borrower's demat to the lender's pledgee demat through an invocation mechanism. In the older PoA-based regime this was effectively an off-market transfer; under the current SEBI margin-pledge framework, invocation triggers an early pay-in or a direct movement under the dedicated ""Client Securities Margin Pledge Account"" mechanism rather than a standard DIS-based off-market transfer.

• Pledge release after loan closure: Once the LAS is fully repaid, the lender releases the lien through the depository. No off-market transfer is required; the shares simply return to free-balance status in the borrower's own demat account.

For LAS borrowers, the practical rule is simple: shares pledged for a Loan Against Securities cannot be moved by off-market transfer until the pledge is released by the lender."    https://www.bajajfinserv.in/loan-against-securities

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Off-market transfers are NOT exempt from income tax — the absence of Securities Transaction Tax (STT) does not mean the absence of capital gains tax. Tax treatment depends on the nature of the transfer.

Key tax positions for off-market transfers in 2026:

• Off-market sale (with consideration): The transferor is liable for capital gains tax. Since STT is not paid, the concessional Section 112A and Section 111A rates (12.5% LTCG and 20% STCG under the Finance Act, 2024 regime) do NOT apply to listed equity sold off-market — instead, the gain is taxed under the normal long-term or short-term capital gains rules applicable to non-STT-paid securities.

• Gift to specified relatives: Off-market transfer as a gift to a ""relative"" as defined under Section 56(2) of the Income Tax Act, 1961 — spouse, parents, siblings, lineal ascendants/descendants — is exempt from tax in the hands of the recipient. The cost of acquisition for the recipient is the original cost of the donor.

• Gift to non-relatives: If the fair market value of shares gifted to a non-relative exceeds ₹50,000 in a financial year, the entire FMV is taxable as ""Income from Other Sources"" in the hands of the recipient.

• Transfer between own accounts: Not a ""transfer"" under Section 47 of the Income Tax Act; no capital gains arise. The original cost and holding period continue.

• Inheritance and transmission: Receipt by inheritance is exempt; the heir inherits the original cost of acquisition and the original holding period of the deceased.

Given the complexity, off-market transfers with material value should be reviewed with a Chartered Accountant before execution."    https://www.incometaxindia.gov.in/sale-of-shares

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Off-market transfer is the demat-to-demat movement of securities between two parties without routing through a stock exchange, executed via NSDL or CDSL using a Delivery Instruction Slip (DIS) and authenticated by depository OTP under the 1 January 2024 target-beneficiary regime. Common use cases include gifts, transfers between own accounts, inheritance, off-market sales, and pledge invocation under a Loan Against Securities. Charges include a 0.015% stamp duty on off-market sales (gifts and own-account transfers are typically exempt), DP transaction fees, and 18% GST, with no STT. Crucially, shares actively pledged for an LAS cannot be off-market transferred until the lender releases the lien. For any structured credit need against your equity, mutual fund, or bond holdings, consult Bajaj Finserv for a Loan Against Securities — and review the off-market transfer tax position with a Chartered Accountant before initiating any material transfer."    https://www.idfcfirst.bank.in/finfirst-blogs/finance/what-are-off-market-transfer-of-shares