Off-Market Transfer of Shares: How to Move Shares Between Demat Accounts Without Selling

An off-market transfer of shares is what happens when shares move from one demat account to another without going through a stock exchange. No buy order, no sell order, no clearing corporation in the middle. You tell your depository participant (DP) to debit your account and credit someone else’s, and the depository does the rest. Parents use it to gift shares to children. People use it to consolidate three old demat accounts into one. And sometimes two parties agree a private sale and settle it this way.

It sounds simple, and mostly it is. But since 2022 the depositories have been checking the reason you give for the transfer against the accounts involved, and a wrong choice now gets the instruction rejected. So let us walk through how it actually works, which reason to pick, and where people trip up.

What counts as an off-market transfer of shares

NSDL’s own definition is plain: trades that are not settled through the clearing corporation or clearing house of an exchange are classified as off-market trades. Its off-market transfers page explains that the selling client gives a delivery instruction to their DP, and the receiving client gives a receipt instruction unless they already have a standing receipt instruction in place.

One line on that page deserves attention: the payment aspect is handled outside the NSDL environment, between the two parties. The depository moves shares. It does not move money, and it does not guarantee that anybody gets paid. That is a big difference from an exchange trade, where the clearing corporation stands between buyer and seller.

So the honest summary is this. For a gift or for moving shares between your own accounts, the lack of a payment leg doesn’t matter. For a private sale between strangers, it matters a lot.

The Delivery Instruction Slip, and its online version

The paper route is the Delivery Instruction Slip, or DIS. NSDL’s investor FAQ compares the DIS book to a bank cheque book, and the precautions it lists read the same way: take the booklet only from your DP, check that each slip is pre-printed and serially numbered with your Client ID on it, don’t leave signed slips with anyone, strike out unused lines, and tell your DP in writing if a slip goes missing.

The online route depends on the depository. CDSL account holders can enter off-market instructions through CDSL’s easiest facility, and NSDL account holders have SPEED-e, which the same NSDL FAQ mentions for electronic instructions. Many brokers also offer their own online flow that sits on top of these.

Either way, the instruction carries the same core details: the ISIN of the security, the quantity, the target account (DP ID and client ID), the execution date, and the reason for the transfer.

The depository moves shares. It does not move money, and it does not guarantee that anybody gets paid.

Reason codes: the part most people get wrong

Every off-market instruction has to state why the shares are moving. NSDL’s FAQ says that under SEBI’s guidelines the reason or purpose, and the consideration for the transfer, must be mentioned on the DIS. CDSL made the reason mandatory for online and uploaded instructions back in 2016; its communique to DPs (CDSL/OPS/DP/SYSTM/6085) said that an online instruction without a reason would simply not be executed.

The bigger shift came later. An NSDL participant circular dated June 18, 2022 (NSDL/POLICY/2022/084) recaps the history: uniform reason codes were brought in for both depositories through a July 15, 2019 circular, and system-level validation of those codes was switched on from March 25, 2022, to make sure a transfer is really for the reason the account holder declares. In other words, the system now looks at the source and target accounts and asks whether the reason you picked is even possible between them.

Here are the codes most retail investors will meet, as described in the annexure to that circular:

• Transfer to own account (code 4). Allowed only if the PAN and the pattern of holding are the same in the source and target accounts. If the source account has holders A, B and C, the target must have A, B and C as first, second and third holders too. When the target account sits with the other depository, the DP takes the target account’s Client Master List to check this.
• Transposition between joint accounts of the same holders (code 15). For joint accounts where the people are the same but the order differs. Both accounts must be joint, the number of holders must match, and the PANs must match regardless of sequence.
• Transfer between specified family members (code 89). Permitted only between individual (resident, NRI, foreign national) and HUF accounts. The circular lists the relatives covered: spouse, father, mother, son, son’s wife, daughter, daughter’s husband, brother, sister (step-relations included for parents, sons and siblings), and members of the same HUF. Your DP records the relationship.
• Transfer between minor account and guardian account (code 88). Allowed only when either the source or the target account has guardian details captured.
• Gift (code 92) and Donation (code 93). Allowed between all types of beneficial owner accounts, such as resident, NRI, HUF and body corporate accounts.
• Off-Market Sale (code 1). Also allowed across beneficial owner account types.

There is a common exception running through most of these codes. Pool accounts and specified stock broker accounts are excluded, and the circular’s notes list them: CM pool, PMS pool, the client unpaid securities account, client collateral and margin trading accounts, broker collateral and proprietary accounts, and the margin pledge and margin funding accounts. Put simply, you cannot gift shares into your broker’s pool account. That is also why the old practice of parking shares with a broker for margin is gone. NSDL’s FAQ states that transferring securities to a trading or clearing member’s demat account for margin purposes has been prohibited since September 1, 2020. The route now is a margin pledge, where the shares stay in your account.

Off-market sale: extra details you must give

If the reason is an off-market sale, the slip asks for more. According to NSDL’s FAQ, along with the consideration amount you must state the date of payment and the mode of payment (cash, cheque or electronic). For cheque or electronic payment, you also need the transferee’s name, bank account number, bank name, and the cheque number or electronic transaction reference.

That list tells you what the system expects: a sale is a sale, with money and a paper trail. Choosing “gift” for a deal where money actually changed hands, just to skip these fields, is a misdeclaration. The reason you declare is a formal statement about the transaction, so it is worth getting right the first time. Costs are a separate question, and our explainer on stamp duty on share transactions covers who pays and how it shows up in costs.

Worked examples: picking the right reason

The names and numbers below are hypothetical, used only to show how the rules apply.

Example 1: Consolidating two accounts

Meera has an old demat account with a bank DP on CDSL and a newer one with a discount broker on NSDL. Both are single-holder accounts in her name with her PAN. She wants to move 150 shares of a company from the old account to the new one.

The right choice is transfer to own account. PAN and holding pattern match, so the validation passes. Because the target is in the other depository, the DP will want the new account’s Client Master List. If Meera’s new account were a joint account with her husband as second holder, the holding pattern would no longer match and this code would fail. She would then need a different reason, such as a family transfer, for the shares going into a jointly held account.

Example 2: A father gifting shares to his daughter

Rakesh wants to give 100 shares to his adult daughter’s demat account. Two codes could seem to fit: gift, or transfer between specified family members. Daughter is on the circular’s family list, and both are individual accounts, so the family code is available. Gift is available too. Your DP may have its own guidance on which one to use, so ask before submitting rather than guess. Either way, no consideration is involved, and the slip should say so.

Example 3: A private sale to a friend

Arjun agrees to sell 50 shares from his demat account to a friend for an agreed sum. The reason is off-market sale, and the slip needs the consideration, payment date, payment mode and the bank reference.

Here is the practical risk. The depository does not hold the money. If Arjun transfers first and the friend never pays, nothing in the depository system reverses it. If the friend pays first, he is trusting Arjun to submit the slip. The cleaner way is to settle the payment by bank transfer before the execution date, so the reference number already exists when the slip is filled in.

Pick the reason that is true, not the one with the fewest boxes. Since March 2022 the system checks.

Why off-market transfers fail

Most rejections fall into a few buckets, and all of them are avoidable.

Mismatched instructions. NSDL warns that the details in the delivery and receipt instructions must match, and it singles out the execution date. A mismatch on that date alone gets the transfer rejected even if everything else matches. If the receiver has a standing receipt instruction, this problem goes away.

Not enough shares on the day. NSDL’s FAQ points out a difference that catches people: for a market delivery with short balance, the account is debited to the extent of the balance available, but for an off-market transfer, if the balance is insufficient, the entire instruction fails. Not a partial transfer. Nothing moves.

Wrong reason code. Since validation went live, “transfer to own account” between accounts with different PANs, or “family transfer” into a company account, will bounce.

Blocked account types. Gifting into a broker pool or collateral account is not allowed under most codes, as covered above.

Sloppy slips. Unsigned joint-holder slips, unused lines left open, or loose slips not from your own booklet. The NSDL FAQ asks that every joint holder signs.

A quick checklist before you submit

1. Confirm the ISIN and quantity against your holding statement, and keep the full quantity in the account until the execution date.
2. Get the receiver’s DP ID and client ID in writing, and check which depository their account is with.
3. Pick the reason that reflects what is really happening, and check the PAN or relationship conditions for it.
4. For a sale, have the payment reference ready before filling the slip.
5. Make sure the execution date on both sides matches, or ask the receiver to set a standing receipt instruction.
6. Check your DP’s tariff sheet for its charge on an off-market instruction.

Where this fits with transmission and other transfers

An off-market transfer is a voluntary act by a living account holder. When shares move because a holder has died, that is transmission, a different process with its own documents. We cover it in our guide to transmission of shares. The NSDL circular also has separate codes for things like buybacks, delisting exit offers, ETF unit creation and PMS accounts, which most retail investors will never need to pick by hand.

The short version: an off-market transfer of shares is a clean way to gift, consolidate or settle a private deal, as long as you treat the reason code as a declaration and not a formality. Choose the true reason, match the details on both sides, and keep the shares in the account until the day of transfer.

Disclaimer: This article is for educational purposes only and is not investment, tax or legal advice. Rules and depository procedures change; check with your depository participant and a qualified adviser before acting.