Friday, March 24, 2023

Everything about Demat Account.

 

Everything about Demat Account.
Everything about Demat Account.


Table of Contents :


What is Demat Account?


A Demat Account short for "Dematerialized Account" is a type of electronic account used to hold and trade securities in India. It is similar to a bank account but instead of holding money it holds securities like stocks, bonds, mutual funds and other investment instruments in electronic form.


The Demat Account eliminates the need for physical share certificates making it a more convenient and secure way of holding securities. When an investor buys securities they are credited to their demat account and when they sell securities they are debited from the same account.


Demat Account are maintained by depository participants which are financial institutions authorized by the Depository and Settlement Corporation (DSC) in India. In order to open a demat account an investor needs to submit a Know Your Customer (KYC) form which includes their personal details, PAN card and proof of address.


Demat Account also provide various other services such as receiving dividends, corporate actions, and bonuses as well as facilitating electronic transfer of securities between accounts.



How to open Demat Account?


To open a Demat Account you can follow these steps:


  • Choose a Depository Participant (DP): A DP is a financial institution that is authorized by the Depository and Settlement Corporation (DSC) to maintain demat accounts. You can choose a DP based on their reputation, service quality and charges.

  • Fill out the account opening form: Once you have selected a DP you need to fill out the account opening form. The form will ask for your personal details, PAN card, and proof of address. You will also need to provide your bank account details for seamless fund transfer.

  • Submit the required documents: Along with the account opening form you will need to submit certain documents such as a copy of your PAN card, Aadhaar card or any other government-approved ID proof and address proof such as a utility bill, bank statement or rental agreement.

  • Complete in-person verification (IPV): As per the guidelines of SEBI (Securities and Exchange Board of India), IPV is mandatory for all new demat account holders. It can be done online or in-person. In-person verification can be done at any of the DP's branches or through a video call.

  • Sign the agreement: After completing the IPV you will need to sign an agreement with the DP that outlines the terms and conditions of the demat account.

  • Receive your account details: Once your account is opened you will receive your demat account number, client ID and other relevant details. You can use these details to log in to your account and start trading.


Opening a demat account is relatively easy and can be completed within a few days. However, it is essential to do your research and select a DP that is reliable and offers good service quality. Some well known DP examples area Zerodha, ICICI, Angel Broking etc.



How to buy and sell shares in Demat Account?


To buy and sell shares in a Demat Account you can follow these steps :


  • Open a Demat account: Before you can buy and sell shares, you need to open a demat account with a Depository Participant (DP).

  • Add funds to your trading account: You need to transfer funds from your bank account to your trading account. This can be done through online banking or through a check.

  • Place an order: Once your trading account has funds, you can place an order to buy or sell shares. You can place the order through the trading platform offered by your broker, which can be a desktop application or a web-based interface.

  • Enter details of the order: You need to enter the details of the order, such as the number of shares you want to buy or sell, the price at which you want to execute the order, and the validity of the order (day or good-till-cancelled).

  • Verify the order details: Before submitting the order, you should verify the details of the order to ensure that they are accurate.

  • Submit the order: Once you are satisfied with the order details, you can submit the order. The order will be executed if the market conditions match the criteria you specified.

  • Receive shares or funds: If you have bought shares, they will be credited to your Demat account, and if you have sold shares, the funds will be credited to your trading account.


It is important to keep track of your demat account and your trading account regularly to ensure that your investments are performing as expected. Additionally, you should be aware of the charges associated with buying and selling shares such as brokerage fees, transaction charges and taxes.


How to transfer shares from one Demat Account to another?


To transfer shares from one demat account to another you can follow these steps:


  • Initiate the transfer: To initiate the transfer of shares, you need to fill out a Delivery Instruction Slip (DIS) with the details of the shares you want to transfer, the receiving demat account number, and the name of the receiving DP. You can obtain the DIS from your existing DP or download it from their website.

  • Submit the DIS: Once you have filled out the DIS you need to submit it to your existing DP. The DP will verify the details and process the transfer.

  • Receive the shares: Once the transfer is initiated the shares will be debited from your existing demat account and credited to the receiving demat account. You will receive a confirmation from both DPs once the transfer is completed.

It is important to note that there may be charges for transferring shares from one demat account to another. These charges may vary depending on the DPs involved and the number of shares being transferred. Additionally, you should ensure that the details mentioned on the DIS are accurate to avoid any delays or errors in the transfer process.

It is also recommended to verify the status of the transfer periodically until it is completed. If you face any issues during the transfer process you can contact your DP for assistance.



What are the charges involved for having Demat Account?


There are various charges associated with having a Demat Account which may vary depending on the Depository Participant (DP) you choose. Some of the common charges are:


  • Account opening charges: DPs may charge a one-time fee to open a demat account. This fee may vary depending on the DP and the type of account.

  • Annual maintenance charges (AMC): DPs charge an AMC for maintaining the demat account. This fee is usually charged annually and varies depending on the DP and the type of account.

  • Transaction charges: DPs may charge a fee for every transaction (buy/sell) that is executed on the demat account. The transaction charges may be based on the value of the transaction or the number of shares traded.

  • Custodian charges: Some DPs charge a custodian fee for holding securities in the demat account.

  • SMS and email alerts charges: DPs may charge a fee for sending SMS and email alerts related to transactions or account activities.

  • Charges for additional services: Some DPs may offer additional services such as a standing instruction facility, Power of Attorney (POA) facility, or e-statement facility, which may come with additional charges.


It is important to review and understand the charges associated with a Demat Account before opening one. The charges may vary depending on the DP and the type of account so it is important to compare the charges offered by different DPs and choose the one that offers the best value for money.


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