Along with what is Demat Account, we will learn about many more things like how to open a Demat account, and what are the uses and benefits of this account, today we will discuss in detail the topic of a Demat-account in this article Hope you like this article of ours.
A few years ago, buying and selling shares of any company required a lot of paperwork. But as we all know today most things have become digital and now a lot of online facilities have come to buy or sell shares of a company and now it has become so easy that any common man can invest in it.
Although the paperwork is still done today all are saved on the online server, so whenever you buy a share, for that you have to create a Demat account separate from the savings and current account, almost all the big broker platforms in India, have your own. A Demat-account can be opened for free and it is as easy as opening a Facebook account.
If you want to enter the world of the share market, then your first step is to know about Demat Account and open it, then this article is going to be very helpful, so stay till the end of the article.
What Is Demat Account?
A Demat account is used by people to buy and sell shares, just as people keep their money in a bank account, in the same way, shares are kept in a Demat-account, you must have a PAN card to open a Demat account.
Whenever you withdraw money from your bank account, you get them in physical form but as long as the money is in the bank, they are in the form of digital currency. Whenever you make a payment with a debit card, you use a form of Digital Payment i.e. Electronic Money Transfer.
Similarly, when you have a share in a Demat account, you can digitally transfer it to another person’s Demat account and in this case, you do not need to keep the share in physical form.
In other words, Demat is a type of facility where shares are held digitally i.e. in an electric form. The full name of Demat is Dematerialise, the process of converting securities i.e. shares, etc. into physical form is called dematerialization.
As I told you earlier that when you used to buy a share in the old times, then the documents related to that share were sent to you by the company. It was proof that he had invested in the shares of his company.
That is, when you sold a share of the company, then the document first reached the office of the company, there the company used to see what was its value when you sold the share, and accordingly, you were given money, with this process being quite complicated. Along with wasting a lot of time, most people used to avoid investing in stocks.
But in today’s time, the world has made a lot of progress, within a short time of buying your shares, your money comes into your account, nowadays you can buy and sell shares directly from your mobile without a computer.
How To Open A Demat Account?
Here you can open your Demat Account in two ways –
Open Demat Account | Offline Method
- Choose a Depository Participant registered with SEBI, you can also compare their services and applicable charges before taking a decision.
- Fill out the relevant application form.
- Provide the required KYC documents which should include but not be limited to PAN card details, address proof, bank account details, identity card, and demographic details.
- Provide the original KYC documents during the in-person verification process carried out by the representative of the Depository Participant chosen by you.
- You will then be provided with a list of rules and regulations regarding the operation of a Demat account relationship along with a list of charges such as account opening charges, and account maintenance charges.
- After the verification is complete, you will get your account details and after that, your account will be opened.
Open Demat Account | Online Method
- First of all, you choose a depository participant like Groww.
- After that go to any official website or open a Demat Account and fill out the basic information form.
- After that you will receive an OTP on your registered mobile number, fill it in.
- Then upload your required documents.
- Now your Demat-account is ready to run smoothly.
Why Demat Account Is Important?
According to the guidelines issued by the Securities and Exchange Board of India (SEBI), shares cannot be bought or sold in any form other than Demat, so if you want to buy or sell stocks from the share market, then you have to have a Demat Account.
What Is Needed To Open A Demat Account?
- Pan Card
- Identity Card (eg-driving License)
- Address Proof (such As Passport)
- Income Proof
- Proof Of Bank Document (such As A Canceled Cheque)
- 1 To 3 Passport Size Photographs
- Initial Deposit Check
How Does Demat Account Work?
The shares are credited to the Demat Account by the broker on your purchase of shares and this is reflected in the details of your holdings. If you do your trading through an internet-based platform then you can view your holdings online, especially through the broker. The shares are credited by T+2 which is +2 days after the trading day.
When you sell shares, you have to give delivery instructions to your broker in which you have to give details about the stock sold. Share gets debited in your account and you pay money for biked shares.
There are two depositories in India, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), by which a DP ID (Depository Participant Identification) number is assigned to various share depository participants (such as banks, broking firms, financial locations).
What Are The Types Of Demat Accounts?
There are three types of Demat accounts which are as follows:-
1. Regular: This is a standard Demat account, when you make a new entry in the stock market, then your regular Demat account is created. Any Indian investor or trader can buy and trade shares while staying in the country, you can open them through a registered broker or broking firm, and can be opened in any depository (NSDL / CDSL).
2. Repatriable: This account plays a very important role in transferring funds abroad to NRIs, however, unlike regular Demat account holders, repatriable Demat-account holders need to link their NRI (Non-Resident External) account with the Demat-account. And if the law permits it, then the government does not face any hindrance in the transfer of funds.
3. Non-Repatriable: This is the second Demat account option available for non-repatriable NRIs, investors having regular Demat before attaining NRI status can transfer to a non-repayable Demat-account category or to a new account after leaving India without any shares You can choose to open fully and it will require a related NRO bank account to continue to function effectively.
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Uses of Demat Account
Even in today’s time, many people are not aware of the use of Demat accounts, so today we will throw light on what are the uses of Demat-Account, so let’s know the uses of Demat-accounts.
1. Safe Holding
One of the biggest uses of a Demat Account is that it keeps your valuable financial securities under the protection of the National Depository, it assures you that your shares and stocks are safe in a central electronic location with a high degree of encryption security.
If the investor wants to convert the physical record of his shares, stocks, bonds, or other investments into electric form, he can take the route of dematerialization. Due to this, the investor does not have to face problems like loss of required share certificates and delay in certificate transfer results.
3. Investment Transfer
A Demat account provides the facility to transfer financial securities from one account to another. The investor just needs to enter the complete and accurate details of his investment on the delivery slip instruction and he/she gets the facility to transfer any type of securities. There are no restrictions and they can be transferred from account to account.
4. Availing of Loans
The investor’s holdings are used as a subsidiary while applying for a loan, just like physical assets like a car, house, or jewelry, the investments made in your Demat account act as a security during the loan tenure. does.
5. Corporate Activities
It becomes difficult to track all your investments like shares, stocks, and bonds then a bonus is issued and it directly affects the position of your securities. Demat Account ensures that the Demat securities are updated as per the changes made by the company.
NSDL allows the investor/account holder to transact online and submit the e-slip to their respective depository participant to close the transaction. This makes it easy for the investor to transact without any delay.
7. Freezing Account
Imagine you have lost the physical copies of your share certificates, reporting the loss to the company, filing a complaint, getting the copies reissued, etc. It is a complicated process but due to a mistake with the Demat Account or the loss of your copies. There is no worry of losing even if you have to freeze your investment, you can temporarily freeze the Demat account.
Benefits of Demat Account
- Although there are many benefits of the Demat account, let us know about some of the major benefits of Demat account:-
- After buying or selling shares through Demat Account, the risk of their theft remains negligible because all the shares are safe in electronic i.e. digital medium.
- Earlier, it was very difficult to sell shares, you could sell shares only in groups at that time, but in today’s time it is not so, now you can sell or buy only 1 share through Demat Account.
- In earlier times it used to take a lot of time to transfer shares sometimes it used to take months but now it is not so you can transfer shares through a Demat account immediately and shortly after sending These start appearing in the other person’s account.
- In earlier times there used to be certificates for shares but in today’s time, you can nominate your Demat account/ Demat account personally.
- You do not need unnecessary paperwork to do the transaction.
How Much Does It Take To Open A Demat Account?
Demat account opening charges are the nominal charges charged by the DP (Depository Participant) at the time of account opening, DP charges different charges depending on the bank, firm, etc you are dealing with at the time of Demat Account opening Banks charge between Rs 700 to Rs 900. Nowadays some DPs waive the fee completely.
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