If you wish to trade in the share market, you need to know what is a demat account and why you need it. An Online demat account is compulsory to store and maintain your shares in a digital form while you trade them online.
A demat account is credited for all security purchases and debited for all security sales.
What else do you need to know about a demat account? Let’s discuss some basics on demat accounts.
What is a Demat Account?
A demat account is like a bank account, where your purchases in the share market are stored in a paperless digital format for easy trading and can be easily converted to money.
What are the Benefits of a Demat Account?
Before starting online share market trading, a dematerialised account is necessary. It stores all your physical securities, such as shares, exchange funds, mutual fund schemes, bonds, etc., in a digital format.
Why is it beneficial to convert to digital securities?
- You will not be levied any tax while trading or conducting transactions related to your digital securities if done through an online demat account.
- Since you can conduct transactions through a personalised account, your deliveries are no intermediary delays.
- The Depository Participant (DP), who maintains your online demat account, is also responsible for guiding you and offering trading tips during your transactions.
- When a trained professional like the DP is handling your deliveries, chances of “bad deliveries” would be slim.
- The digital format of securities saves them from being lost, stolen, or mutilated unlike their physical form (e.g. paperworks).
- Corporate benefits like dividends, bonuses and rights can be claimed faster than paperwork.
If the benefits amused you, let’s make an online demat account now.
Steps to Create an Online Demat Account
- The first and foremost thing is to choose a trusted stock broking platform that offers advanced trading apps that will help you trade across all the segments.
- Once you are sure of a good stockbroker, the next thing to do is open demat account online. Complete your KYC as quickly as possible.
- Upon successful activation of your Demat account, add the required funds in your Demat through a stock trading app provided by your broker.
- And you are good to go! Now you can place your first trade.
Online Demat Account is considered safe when opened under a DP who is registered under the Securities and Exchange Board of India (SEBI). Opening a joint demat account is possible with one main owner and a maximum of two joint holders in one account. A demat account should always be in sync with the ownership pattern of the security held in the physical form. You cannot create an online demat account alone; you will always need a DP.
Ensure that you follow the guidelines given above while applying for online demat account. For more content about business and finance, please refer to our SocailTalky business section. Do not forget to share this article with your friends and family members – it can help someone.