A Demat account is an account that holds your shares and securities in an electronic format. It is very convenient to use a Demat account as it eliminates the need for physical paper documents. The process of transferring shares to a Demat account is also very simple. In this blog post, we will take you through the process of opening and using a Demat account.
What is a Demat account.
What are the benefits of a Demat account
A Demat account is an account that holds your investments in electronic format. This includes shares, bonds, ETFs and mutual funds. The big advantage of a Demat account is that it allows you to trade electronically. This makes buying and selling shares much easier and faster than going through the process of paper share certificates.
There are many benefits of having a Demat account, including:
– Reduced paperwork: Since your investments are held electronically, there is no need for paper share certificates. This reduces the hassle and paperwork associated with buying and selling shares on any Stock Market App.
– Faster transactions: Buying and selling shares using a Demat account is much faster than going through the process of paper share certificates.
– Easy to track investments: When your investments are held in a Demat account, it is easy to track them and monitor their performance. You can also easily view your transaction history online.
– Safe and secure: Your investments are safe in a Demat account as they are stored electronically in a dematerialised form. This reduces the risk of them being lost or stolen.
How to use a Demat account.
How to open a Demat account
To open a Demat account, you will need to approach a Depository Participant (DP) of your choice and fill in the necessary paperwork. The DP could be a bank, broker, financial institution or even the company itself.
You will have to submit documents like PAN card, identity proof and address proof along with the application form. Once the KYC formalities are completed, you will be given a Beneficiary Owner Identification Number or BO ID.
This BO ID is unique to every individual and is used for all transactions related to your Demat account.
How to transfer shares to a Demat account
Once you have opened your Demat account and obtained your BO ID, you can start transferring shares into your account.
There are two ways to do this – off-market transactions and on-market transactions.
Off-market transactions are those that take place between two people without going through a stock exchange. On-market transactions are those that take place on a stock exchange.
For both types of transactions, you will need to instruct your broker to transfer the shares from their account into yours. You can do this by filling out a simple form called an ‘Instruction Slip’.
The shares will then be transferred from the broker’s dematerialised account (also known as an ‘e-broking account’) into yours within two days.
How to close a Demat account
If you decide that you no longer want to maintain a Demat account, you can close it by following the steps below:
-Send a request in writing to your DP asking them to close your account.
-The DP will then send you a ‘No Objection Certificate’ (NOC) which you must sign and return to the DP.
-Once the DP has received the NOC, they will close your account and send you a confirmation letter.
Things to remember while using a Demat account.
Every Demat account holder must comply with KYC (Know Your Customer) guidelines. KYC involves submitting identification documents like PAN card, Aadhar card, passport, etc. to the Demat service provider.
Every time you buy or sell shares, you will be charged a transaction fee by your Demat service provider. These charges vary from provider to provider and can range from Rs 10 to Rs 50 per transaction.
Account maintenance charges
Most Demat service providers charge an annual account maintenance fee of Rs 500-1000. Some providers also charge a one-time account opening fee of Rs 200-500.
A Demat account is a must for anyone who wants to trade in shares. It is a very simple and convenient way to hold and trade shares. The process of opening and closing a Demat account is also very simple. However, there are a few things that one must keep in mind while using a Demat account, such as KYC formalities, transaction charges and account maintenance charges.