In the last decades of the 20th century, the economy of India was passing through a crucial stage. The stock market activities were significantly growing, and hence the need of computerization was the demand of time. The SEBI decided to have all the shares in Demat form only and made it mandatory for every investor and trader to have a Demat account with either NSDL or CDSL. One can open this account with the help of any broker or Broking Company as well as a broking house.
It is mandatory to open a demat account in India for buying and selling the shares in India via the stock exchange. Shares that are held in the form of certificates can also be bought and sold. If you are new in the area of investment, it is compulsory to open a demat account. Though there are few procedures to follow and documents to submit for opening the demat account, it is worth the hassle. After all, it’s just one-time procedure which is meant for KYC guidelines and the benefits are availed for a lifetime.
Here’s a look at the advantages of having a Demat Account:
- No chance of theft
There is no risk of your certificates getting stolen and forged as shares by someone else as they are stored in the electronic form. It eliminates the risk that came earlier with physical certificates of shares. It is one of the greatest advantages of the best demat account which is appreciated by shareholders.
- Immediate transfer of shares
Earlier, when there were just physical copies of the shares, they were supposed to be sent to the registrar or the company for getting it transferred in the individual’s name. The process took months, and sometimes the certificates also got lost in the transition. There is no possibility that in the demat account as the shares are transferred immediately.
- No stamp duty
While one pays security transaction tax, there is no need of physically purchasing the share transfer stamps and paste them below the certificate which was the case earlier. When there were no demat accounts, the process was cumbersome, and one had to visit the stock exchange for purchasing share transfer stamps.
- No selling limit
Earlier, the shareholder was not allowed to sell the shares in odd numbers. It was difficult to sell shares in odd numbers such as 33. One could sell shares only in the 50s, 100s, and 200s. But, this issue has long been eliminated by the demat account. Now, one can sell any lot of shares in the market, even as low as one share.
It is now possible to nominate others when opening the demat account. It wasn’t possible previously with share certificates. One had to have a joint holder. The depository participant will help in adding the nominee.
- Single account
One doesn’t need to open separate accounts for dealing with bonds, NCDs, and the likes. Most of the instruments are allowed to be held in a single demat account.