Skip to main content

Demat Account

In the last decade or so, the stock market has moved towards paperless trading. For investors, who used to burdened with reams of stock certificates, a demat account has become a necessity. Not having a depository or demat account has now become the biggest entry barrier to investing in equities. It is no wonder that more and more entities (commodities futures and spot market) are moving to the dematerialised form of trading.

A demat or 'dematerialised' account holds shares in electronic form, thus saving you the bother of holding shares in paper form.

DEPOSITORY FUNCTIONS

A depository is similar to a bank. It holds shares, which belong to investors, in electronic form. The investor has to open an account with the depository, through a Depository Participant (DP). The DP is an intermediary between the depository and the investor. In India, there are two depositories, viz., National Securities Depository and Central Depository Services. A number of banks (HDFC Bank, ICICI Bank, SBI, and so on), brokers ( India Infoline, Motilal Oswal and Indiabulls) and institutions function as DPs.

FACILITIES OFFERED BY DPs

The shares bought and sold by you are reflected in your demat account. Any shares you are holding in paper form can also be dematerialised and maintained by way of electronic credit in your demat account. Recently, stock exchanges have facilitated purchase and sale of mutual fund schemes on the exchange.

The DP, at regular intervals, provides you with an account statement showing the balance of shares in your demat account and transactions during a period. DPs also offer many services such as electronic settlement of trades in stock exchanges, pledging/hypothecation of dematerialised securities against bank loans, nomination facility for demat accounts, etc.

HOW TO OPEN

You can open a Demat account with any bank or with brokers and financial institutions. Usually, banks offer attractive rates for a demat account in case you have your savings account with them. However, if you wish to go for online stock trading, you would find it more convenient to open a DP account and trading account with the same broker or financial institution.

DPs charge annual maintenance fees, transaction charges for debit of securities, fees for pledge of securities and various other charges such as charges for dematerialisation. The fees charged for DP services differ across the industry.

BENEFITS

In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. This provides numerous benefits. Dealing in physical securities is open to risks like theft of stocks, mutilation of certificates and loss of certificates during movements to and from the registrars.

This problem does not arise in the depository environment. There is no stamp duty for transfer of shares in electronic form, unlike the physical segment. In the depository environment, once the securities are credited to your account, you become the legal owner of the securities. There is no further need to send it to the company's registrar.

Also, the depository provides for direct credit of non-cash corporate entitlements, like rights and bonus to your account, thereby ensuring faster disbursement and also leading to reduction in brokerage costs.

CLOSING AN ACCOUNT:

However, if you are one of those who does not use the account, closing it is necessary. For one, there yearly maintenance costs. There is also a threat that dormant account can be used for fraudulent purposes. For the closure, you need to submit an application with the DP. And return all unused delivery instruction slips and pay off all the dues. Remember, ademat account can be closed only if there are no shares in it.

By having a demat account, you will always an opportunity to invest in various asset classes. These include, gold ETFs and commodity futures as well. Many investors are unable to participate in the markets because they don't have one. It's time.

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now