Open Your Demat A/C
A Demat account also referred to as a dematerialised account is meant to hold share certificates and financial securities in electronic form. Having a Demat account in today’s world is almost indispensable to maintain track of all the investments made by an individual in shares, bonds, exchange-traded funds (ETFs), insurance and mutual funds in one place. Demat accounts in India were introduced in 1996 and are maintained by two depository organisations, National Securities Depository Limited and Central Depository Service Limited. The bank acts as an intermediary between the investor and the depository.
In today’s date, a Demat account is a must for someone interested in trading/investing in the stock market (NSE & BSE) or any alternate securities. The primary reason for maintaining dematerialisation accounts is digital security and accessibility. In the older days, shares were held in the form of physical certificates which were inconvenient and vulnerable to theft, forgery, tampering and loss alongside being susceptible to error and delays. Dematerialisation makes this entire documentation process hassle-free and seamless.
Demat accounts are generally accompanied by trading accounts which are prerequisites for buying and selling shares in the stock market. The basic difference between Demat and trading accounts is that while a Demat account contains the details of all the securities (shares, etc.) in your name, a trading account is required for enabling you to purchase and sell shares.
What Are The Benefits Of A Demat Account?
Apart from offering a safe entry into the world of the stock market, a Demat account also serves as a security deposit for your savings. Apart from the fact that you can access your Demat account anywhere, anytime through your smartphone and laptop, here are some of the reasons why you should consider opening a Demat account.
- Highly convenient and time-efficient storage and transfer of shares: You can store numerous shares, monitor the details of all the shares in one single Demat account and trade in large volumes. This helps the rapid transfer of shares during online trading.
- Bonus stock splits get automatically credited to your Demat account: Imagine you are holding the shares of a company that decides to make bonus issue or stock split changes to its stocks, then it gets updated in your Demat account automatically.
- Storehouse for multiple assets, apart from shares, like mutual funds, bonds, ETFs, government securities, etc.
- Loan facility: You can pledge your securities maintained in your Demat account, as collateral and gain access to a variety of bank loans.
- Reduced costs: Pay only pre-informed brokerage charges. No additional costs such as handling expense and stamp duty.
- Nomination facility: The appointed nominee is entitled to receive the shareholding amount in the Demat account in case of the investor’s demise.
- No “odd lot” issue: Using physical materials while trading requires quantification. However, to scale profits, it is essential to remove the cap on the number of shares traded. Demat accounts provide smooth transactions when dealing with single security deposits and odd lots.
- No TDS (Tax Deducted at Source) on Demat properties: The Central Board of Direct Taxes (CBDT) has granted exemption from TDS for payments made using Demat accounts. Besides, zero TDS will be deducted from the interest received on bonds and securities.
How To Open A Demat Account?
When you open a Demat account, you need to save your securities in Demat mode and make sure they are listed on NSE and BSE. An appropriate understanding of the types of Demat accounts and their classification aids in more meaningful stock market participation and selecting the type of account best suited for you.
Types of Demat accounts:
Regular Demat Account: This is for traders who are residents of India. This type of account is ideal for individuals dealing in equity shares alone. For someone who is on the lookout for trading in futures and options, a regular Demat account is not required since futures and options have an expiration date and need not be stored.
Repatriable Demat Account: This type of Demat account is meant for NRIs and permits the transfer of wealth abroad. NRIs will have to use an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account to redirect their investments.
PINS account (Portfolio Investment NRI Scheme) allow NRIs to buy and sell equities through stock exchanges in India. These are of two types NRE and NRO PINS accounts. The NRO PINS accounts do not permit fund repatriations for executed transactions but an NRE PINS account allows funds to be repatriated to foreign countries.
Non-Repartiable Demat Accounts: This one is also meant for Non-resident Indians but does not allow transfer of funds abroad. This account mandates having an associated NRO bank account.
Just follow the steps mentioned below to open a Demat account:
- Opt for a depository participant, any authorised bank, financial institution or stockbroker. Select a DP based on annual charges, brokerage charges and leverage provided.
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Submit the duly filled account opening form along with the KYC form. This would require attaching copies of the following:
- PAN card
- Residence Proof
- ID Proof
- Passport-sized photographs
- If you are opening a Demat account online, simply visit your DP’s website, click on “Open Demat Account”
- Fill in the required fields like Name, Email ID, Mobile Number, etc. Enter the One-time password that you receive.
- The DP will then get in touch with you to complete the formalities.
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Once through, you will receive these from your DP:
- a unique client ID or DP ID
- Demat Account Number or Beneficiary ID
- Power of Attorney (POA)
