What is a Demat Account?
In a dematerialized account, you can hold your financial securities like debt or equity in electronic form. The Central Depository Services Limited and the National Securities Depository Limited maintain Demat Accounts in India. A financial institution acts as the agent between the depository and investor. This system stores all records of shares and securities electronically eliminating the need and hassle to maintain paperwork.
It is a safer process and reduces the cost of the transaction. A Demat Account holder is entitled to hold both debt and equity instruments.
What Facilities Do You Get in a Demat Account
Various access points
After you open this, you can access it using any media available to you. The transactions being electronically operated, the holders can access it, monitor trading, and conduct investing on a laptop, computer, smartphone, etc.
The holders are entitled to get access to the interests and dividends of companies whenever they provide. Equity shares like right shares, bonus issues, or stock splits get updated.
Better loan facility
The credibility for getting a loan is increased two-folds. The securities can be pledged to get a loan from the bank.
With this one, you can transfer shares easily. All you need is a Delivery Instruction Slip and all required details for conducting share trading. You can then trade from anywhere, with anyone around the world.
You will not have to worry anymore about mutilation, theft, and misplacement of your certificates.
All about Demat Account charges
You can open such an account at a surprisingly low fee-
- The opening charges are nil or absolutely nominal.
- There are several financial partners that open such an account for free if you indulge in a 3-in-1 account.
This would be a combination of a Demat Account, savings account, and trading account. This has been proved to be of great advantage for investors as they do not have to go through the trouble of opening different ones for different purposes.
Annual maintenance charges
You will have to pay a fixed amount in the form of an annual maintenance charge if your balance is above 50,000 INR, meaning that there is no fee below 50,000 INR.
- The holdings worth anywhere between 50,001 INR to 2 lakhs shall have to pay between a hundred rupees to 700 rupees.
- It depends upon the number of transactions you make yearly. If the value of your transactions goes above Rs. 2 lakh, the maintenance charge would go over 2,000 INR annually.
Some depository participants charge a quarterly maintenance fee while others charge a lump sum fee for lifetime maintenance. This fee could be anywhere adobe 2000 rupees.
When you open a Demat Account, you are required to pay a custodian fee. It is that part of the amount where the bank demands from the holder as a service fee for insuring the holder’s assets. This reduces the risk of losing assets.
In a traditional account, one has to constantly worry about keeping the certificates safe but with this one, there is no such worry about the paperwork. Since they are preserved in the electronic form, there is no chance for any theft. However, the financial institution and the depository participant charge a nominal custodian fee. This fee is generally charged annually.
The transaction Demat Account charges vary with the policy that your account is tied to. The depository participant takes the fee by calculating the number of transactions made or a fixed rent for every month. An amount of money is also levied by the discount brokerage. They charge an amount for each share that is traded. It is anywhere around Rs 1.5 to Rs 2 per share that is traded.
Demat and Remat charges
Remat or rematerialization is the process that involves transforming the electronic shares of your account into paper or physical certificates.
If you wish to rematerialized or dematerialize your shares, it also involves Demat Account charges. The depository participants would charge a nominal fee for the conversion. Dematerializing will cost the holder around Rs 15 for each document. Rematerializing your certificates will cost a lot more at about Rs 25 for the same. However, some banks charge similar charges on both dematerializing and rematerializing.
The restatement charges are anywhere ranging from Rs 10 to Rs 20 for every statement.
The holders also have to pay credit and mailing fee to the depository participants. They also have to pay a GST of 18%. This tax is applicable to both the transactions that are made and the brokerage. There is also a minimal postal charge for the concerning services.
Thus, the Demat Account charges that are levied are nothing compared to the security that you are getting. It will rid you of the anxiety of preserving your certificates in the physical form. Check Demat Account charges online by clicking here. You can have absolutely secured transactions from the comfort of your home without having to worry about the paperwork. If you are still not convinced, think of how much loss would you incur if one of your certificates were to get lost or mutilated? Accidents do not come with a warning and it is always better to be safe than sorry. If nothing, it will give you a peaceful sleep at night.
How To Open a Demat Account
You can open Demat Account in a few simple steps:
Step 1: Approach a depositary agent and fill up the required form.
Step 2: Enclose the photocopies of the documents that will be asked of you.
The documents that you will need are:
- Identity proof
- Address proof
- Proof of bank account
- Proof of income
- Passport size photographs
- PAN card
Step 3: Read the agreement carefully and sign it. It will have all the terms and conditions relating to policies and fee.
Step 4: Your account will be opened and you will receive an account number which will also be your identification number.
Do not waste anymore of your time filing your certificates and checking on them every now and then. Open Demat Account today and reap all the benefits that come with it.