Demystifying Demat Accounts: Everything You Need to Know
Similar to a bank account that maintains cash, a demat account is a holding account that holds shares in a digital version. In order to trade on the stock market in India, you must have a Demat account. This post will explain all the crucial Demat account details you need to know.
So, What is demat account? A Demat Account is a digital vault that enables investors to store and exchange shares electronically.
A Demat account has a lot of advantages. First off, it does away with the danger of having actual shares that could be taken, torn up, or destroyed. Additionally, trading shares is simple because you may purchase and sell them using a trading account connected to your Demat account. Last but not least, the Demat account enables simple share transfers, making it possible for shares to be rapidly and easily transferred from one holder to another.
Opening a Demat account is a straightforward procedure. Investors must provide the Depository Participants (DP), who are representatives registered with the Depositories, with their KYC documentation (PAN card, Aadhar card, voter ID, and address verification). Check more on what is demat account?
Maintaining the account
You must constantly manage your Demat account once it has been opened. This entails updating your KYC records on a regular basis and paying an annual maintenance fee to your DP.
Charges One of the biggest issues for investors is the cost of Demat accounts. These fees include transaction fees, annual maintenance fees, and account opening fees. While account setup fees differ from DP to DP, annual maintenance fees are normally in the range of Rs. 600–700. Every buy or sell deal is subject to transaction fees, which are typically calculated as a percentage of the transaction’s value.
The link between Demat account and trading account
The investor purchases and sells shares using a trading account that is connected to the Demat account. Shares are debited from the Demat account and credited to the trading account when an investor purchases shares, and they are credited to the Demat account when an investor sells shares.
The Demat account’s security is of the utmost significance. A special ID and password that should never be shared with anybody else are used to secure it. Two-factor authentication, such as OTP or biometric verification, is also used to protect it. Check more on what is demat account?
Demat account statement
The Demat account statement, which details all transactions that have occurred in the Demat account over a certain time period, is a crucial document. Investors should periodically review the statements from their Demat accounts to make sure that all transactions have been completed properly.
Shares held in the Demat account by kind
Physical shares and electronic shares are the two forms of shares that can be held in a Demat account. Electronic shares are those stored in a digital format, whereas physical shares are those held in paper form. Physical certificates are no longer necessary because the majority of shares are now held electronically.