Advantages Of Opening A Demat Account

A Demat Account allows one to hold shares and securities in electronic format, with the aim to facilitate easy trade for users. The entire procedure of investing, trading, holding, and monitoring can thus be made convenient, cost-efficient, and faster. A Demat Account allows the investor to transact in a whole lot of products, other than shares and stocks. This can all be done conveniently under one roof, and without the need of any sort of paperwork. 

These Are Some Of The Advantages Of Opening A Demat Account

1. Lower risks

While dealing with physical securities, risks are high due to thefts, losses or damages. In addition, bad deliveries or fake securities pose further risks. These risks are completely eliminated with the opening of a Demat Account.

2. Easy holding

A Demat Account can give quick and easy access to your investments and statements through net banking. Also, these details can be available to you anywhere – computer, smartphone or any other smart device.

3. No issue with odd lots

If trading occurs in the form of exchanging paper materials, it has to be quantified. In order to make large scale profits, the limit on the number of shares traded should be removed. One of the benefits of holding a Demat Account is that it offers convenience when dealing with odd lots and single security deposits.

4. Reduced costs

When you deal with physical securities, it involves additional costs such as handling expenses and stamp duty. These charges are difficult to determine beforehand. All of these extra costs are eliminated if you switch to a Demat Account. You will only have to pay brokerage charges, which will be informed in advance.

5. Reduced time

The process of buying and selling shares using a Demat Account is instant. If physical certificates were involved, it would take a lot of time. Transactions which are made using a Demat Account are seamless and inexpensive. This is mainly because securities are stored in a dematerialized form.

6. Loan facility

You can gain access to a variety of bank loans through the securities maintained in your Demat Account by pledging your securities as collateral.

7. Eliminates Loss

In case of physical shares, chances of misplacing the securities increase, whereas they are safe in a Demat Account.

8. Paper or ink damage

Over time, paper decays and ink may leave dabs. With a Demat Account, you can have a digital record of your securities.

9. No TDS on Demat securities

The Central Board of Direct Taxes (CBDT) has granted dispensation from tax deduction at source (TDS), when you make payments made by Demat Accounts. Moreover, no TDS will be deducted on the interest received on your bonds and securities. When you open a Demat Account online, you have to make sure that your securities are saved in the Demat mode and should be listed on NSE and BSE.

10. Easy access and monitoring

Demat Accounts are operated electronically, which means these can be accessed using multiple modes. These accounts can be accessed through the Internet using a computer, smartphone, or other smart devices.

11. Corporate gains

Demat Accounts have replaced the time-consuming process with quick and easy methods to receive dividends, interest or refunds. It is all auto-credited in the account. It is also extremely convenient when it comes to updating investors’ accounts with stock splits, bonus issues, rights, public issues, etc. through electronic clearing service (ECS).

12. Easy share transfer

Transfer of shares on buying or selling have also become much easier. Earlier physical transfer of shares would take about a month. With this process simplified, costs have also come down. There is no stamp duty on transfer of securities held in the electronic form.

Additional Read: Documents Required To Open A Demat Account

13. Faster dematerialisation & rematerialisation of securities

Demat account holders can provide instructions to their depository participant (DP) to convert physical certificates into electronic form. Alternatively, electronic securities can also be reconverted to physical form, if required.

Additional Read: Difference between dematerialisation and rematerialisation

14. Freezing Demat accounts

Demat account holders can freeze their accounts for a certain period, if needed. This option can be beneficial if one wants to prevent unexpected debit or credit into one’s  Demat Account. The freezing option is also available for a specific quantity of securities held in the account.

Additional Read: What is the procedure to open a Demat Account?

Conclusion

Opening a Demat Account has numerous advantages for those who want to trade different securities in Indian markets. From lowered risks to eliminating the possibilities of theft and loss, Demat Accounts have a leg up over holding physical securities. It is now mandatory for investors to have a Demat Account to trade in securities.

FAQs:

   1.  What are the advantages and disadvantages of Demat Account?

Holding securities in a Demat Account makes trading and transferring them easy. It eliminates the possibilities of loss, theft or damage. Demat Accounts also reduces the cost of trading eliminates the need for TDS. The disadvantages of Demat Account include annual maintenance costs and being tech-savvy to operate the account.  

   2.  Is it good to open Demat Account?

Opening a Demat Account is mandatory if you want to trade in securities. Apart from that, it has numerous advantages such as easy handling and trading of securities, reduced transaction time, reduced cost of trading, etc.

   3.  Can I lose money in Demat Account?

Demat Accounts attract certain charges such as account opening charges and annual maintenance fees. These may be deducted from your account. Apart from that, you may incur losses on the trades that you do.

   4.  What is Demat and its importance?

A Demat Account is an electronic account to hold securities. It is mandatory to have a Demat Account if you want to trade in Indian markets. You need to link your Demat Account with your Trading Account to be able to trade securities.

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.