DEMAT ACCOUNT

DEMAT ACCOUNT

Demat account functions like a bank account, where your bank balance is a mere entry in the bank passbook and you do not hold the cash physically. Securities too are held in an electronic form (demateralised form), in a similar manner and debited credited.

Why should you have a Demat Account?

As per SEBI guidelines shares cannot be bought and sold in any form except in demateralised form. Therefore, if you want to buy and sell shares through the stock exchange, you necessarily have to have a demat account. How does it work When you buy shares, the broker credits your demat account with the shares and these are reflected in your statement of holdings. if you are trading through an internet based platform, you can view your holdings online. Typically the broker credits the shares on T+2, that is trading day + 2 days after that. When you sell the shares, you need to give your broker a delivery instruction note, where in you fill the various details of the stock sold. Your account is debited with the shares and you are then paid the money for the shares sold. If you are trading through the internet, the account will automatically reflect a debit of the shares and amount credit to your account. There are two Depositories in India – the National Securities Depositories Limited (NSDL) and the Central Depository Services Limited (CDSL), through whom the shares are held by the various depository participants. 

Features & Benefits of opening Demat account :

As opposed to the earlier form of dealing in physical certificates with delays in transaction, holding and trading in Demat form has the following benefits:

- It eliminates risks associated with forgery, counterfeiting and loss due to fire, theft or mutilation and reduces brokerage charges,

- Settlement of Securities traded on the exchanges as well as off market transactions,

- Reduces time taken to stock trading drastically avoiding problems encountered in case of physical shares like signature mismatch, postal delays and loss of certificates in transit,

- Enables quick ownership of securities resulting in increased liquidity,

- Easy settlement of the ownership title of securities, and provides easy receipt of public issue allotments,

- Pledging of Securities,

- Auto Credit of Rights / Bonus / Public Issues / Dividend credit through ECS,

- Auto Credit of Public Issue refunds to the bank account,

- No stamp duty on transfer of securities held in Demat form (as against 0.5 per cent payable on physical shares),

- Increased liquidity, as securities can be sold at any time during the trading hours (between 9:55 AM to 3:30 PM on all working days), and payment can be received in a very short period of time,

- It do away the requirements of filling up of transfer deeds,

- Change of address, Signature, Dividend Mandate, registration of power of attorney, transmission etc. can be effected across companies held in Demat form by a single instruction to the Depository Participant (DP),

- Holding / Transaction details through Internet / email.

Steps for opening a Demat account:

As majority of shares trading happens through a Demat account, it is imperative that an individual dealing in shares has such an account.

The minimum age for opening a Demat account is 18 years. To open a Demat account, you must:

1) Choose a Depository Participant or DP (A Depository Participant can be a financial organization like banks, brokers, financial institutions, custodians, etc., acting as an agent of the Depository to make its services available to the investors)

2) Fill up an account opening form provided by DP, attach relevant documents, and sign an agreement with DP in a standard format prescribed by the depository

3) The DP provides the investor with a copy of the agreement and schedule of charges for his future reference

4) DP opens the account and provides the investor with a unique account number, also known as Beneficiary Owner Identification Number (BO ID)

Documents required for opening a Demat Account? ?
 

• To open a demat account you have to fill demat request form
   
• One Passport size photograph, proof of address like Voter ID card, electricity bill or Ration Card, Employee ID Card, Bank attestation and Latest IT Return
   
• Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent.
   
• Deface the share certificate(s) you want to dematerialize by writing across Surrendered for dematerialization.
   
• After dematerialization, your depository account with your DP would be credited with the dematerialized securities.
   
• You have to Submit the PAN Card as a proof of identity .As of April 2006 it is mandatory, if any person want to open a demat account should have a PAN CARD (Permanent Account number) . Without a PAN CARD you are not be eligible to open a Demat account.