Advantages of Demat Accounting

December 3, 2015 Finance Talk Valli Sarvani No comments

If you want to buy and sell shares on stock exchange, you need a demat account. It is mandatory for both new and existing investors to open a demat account for conducting investment transactions on stock exchange of India. Demat account has many advantages.

In previous days, when there was no electronic format for shares, it used to take several months to transfer the shares on the names of individuals since they needed to be sent to the company or registrar for this. It is not uncommon to miss or lose certification in this process. But now with demat, it is very easy to transfer the shares on individual’s names. The transfer process can be done instantly and there is no loss of certificates.

If the shares are kept in an electronic form, then there is no risk of them being stolen or forged. Thus, demat reduces the risk for shares compared to when they are kept in physical format.

Demat helps avoid the cumbersome process of stamp duty to buy share transfer stamps while transferring the Securities. There is no need to buy share transfer stamps after any one pays a security transaction tax now.

In olden days, it was very difficult for investors if they want to sell shares in odd lots. So, they have to be sold only in the marketable lots like 100, 200 etc. Now, it is very easy to sell in any lot and even one share can be sold.

Nomination is very easy now as one can nominate anyone while opening a demat account which was not possible in previous days.

Demat eases the transfer of the right shares and bonus shares and they can be transferred instantly.

There is no need to open separate demat accounts for various investments. A single demat account is enough to conduct transactions except for some debt instruments.

Demat also helps in reducing many costs that were involved in earlier days. For example, expending on registered AD to send share certificates.

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