Around twenty-five years ago, the concept of a dematerialisation (demat) account was introduced in
India. The primary purpose of this account was to remove the hassles of handling the paperwork
involved in trading. It converted paper receipts, claiming ownership of shares, into an electronic
format. With the help of a demat account, when you trade, all the details of the shares and other
securities you have invested in are stored online. It is now mandatory to have a demat account to
buy and sell shares at the Bombay stock exchange (BSE) or the National stock exchange (NSE).
How does it work
The demat account is linked to your bank account and your trading account. The trading account
enables you to buy and sell on any stock exchange. The trading account places the transactions. The
funds needed to buy shares are debited from your bank account, and the demat account stores all
the shares you traded.
How to open a demat account online
- Enter your mobile number
- Link your bank account
- Identify yourself by validating Aadhaar
- Enter personal details and upload documents
- Verify your live photos and e-sign documents
Once you open your account, your depository participant needs to provide you with the following details
- A Demat Account number: It will be a mix of 16 characters from your depository participant identification number and your customer ID.
- Depository participant ID: This is the identification number of the depository participant member.
- POA number: The power of attorney gives limited or legal authority to the broker to operate your demat account. You need to have that number for future use.
You will also be provided with your login ID and password to operate your demat account online.
Now that you have all the details you require, you are ready to invest in shares and securities with
your demat account.
Benefits of a demat
Elimination of risks
Having a demat account eliminates therisk of having paper shares that might get lost or misplaced.A
demat account also removes the risk of the share certificates getting forged or ink or paper damage on
the certificates.
It can be used to receive loans
The assets you have in your demat account can be pledged and used as collateral to receive loans. Your
stockbroker can provide you with a loan based on the value of your shares in your demat account. You
can use that amount for more investments and several other expenses.
Stock ideas
You also receive the advantage of receiving several analytical reports from researchers on which is
the right stock to invest in.It will help you in making the right investment decision.
Instant transactions
The process of buying and selling shares with the demat accountisalmost immediate There is an instant
transfer of securities. This prompt service will help you benefit from even the most minor change in
the prices of the stocks and other securities that you have invested in.
Exempted from payment of tax
You do not have to pay taxes on payments made in your demat account. And you do not have to pay
taxes on the interest received on your securities.
Eliminates the odd lot problem
An odd lot is the order for particular security that is less than a regular unit for trading an asset. The
standard unit is generally 100 shares for stocks. With a demat account, you do not have to worry about
this problem. You can buy and sell even a single share.
Easy change of details
With a demat account, you can easily update essential details like an address change without the
hassle of going through several processes. Once you inform your depository participant, the
information will automatically be updated in every transaction that you make.
Conclusion
While the demat account will open the world of trading to you, you have to be careful to know about
the charges with this account. You should also choose a depository participant who offers you a full
range of brokerage services, right fromproviding you customer support for any technical difficulties
that you might face to providing you with research-backed analytical reports that will help you decide
on the investment that you have to make.
Disclaimer
ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Centre,
H. T. Parekh Marg, Churchgate, Mumbai – 400020, India, Tel No : 022 – 2288 2460, 022 –
2288 2470. The contents herein above shall not be considered as an invitation or persuasion
to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind
arising out of any actions taken in reliance thereon. The contents herein above are solely for
informational purpose and may not be used or considered as an offer document or
solicitation of offer to buy or sell or subscribe for securities or other financial instruments or
any other product. Investments in securities market are subject to market risks, read all the
related documents carefully before investing. The contents herein mentioned are solely for
informational and educational purpose.