A Demat account is an essential investment tool for anyone looking to trade in India. It allows investors to hold and manage their securities, such as stocks and bonds, in an electronic format. Opening a Demat account is a simple process that can be done online or offline. This blog post will provide you with everything you need to know about how to open a Demat account, including what documents you need and the steps involved in demat account benefits.
Why You Should Open a Demat Account.
What is a Demat account?
A Demat account is an account that holds your securities in an electronic format. It is short for “dematerialized account.” A Demat account is similar to a bank account, but instead of holding money, it holds investments like stocks and bonds.
There are many benefits of having a Demat account. Perhaps the most obvious benefit is that it is much easier to buy and sell securities when they are in an electronic format. You can also hold multiple types of securities in a Demat account, which can make managing your investments simpler. For example, you can hold both stocks and bonds in the same account.
Another key benefit of a Demat account is that it helps to avoid problems with paper certificates, such as lost or stolen certificates. When you hold securities in a Demat account, they are stored electronically at the Depository Participant (DP), which reduces the risk of fraud or error.
Dematerialization also makes it easier to transfer securities between buyers and sellers. In the past, investors had to physically deliver paper certificates to each other when they wanted to trade stocks or bonds. This was often a time-consuming and complicated process. With a Demat account, the DP does the work of transferring the securities electronically between buyers and sellers, which makes trading much simpler and faster.
The benefits of a Demat account
As we mentioned before, there are many benefits of having a Demat account. In addition to being more convenient and safe than holding physical securities, Demat accounts also offer some important advantages when it comes to taxes SIP Calculator.
For example, if you sell shares that you held for less than 12 months, you will have to pay short-term capital gains tax on your profits. However, if you hold those same shares in a Demat account, you will not have to pay any capital gains tax until you withdraw those shares from your Demat account – even if you sell them within 12 months.
Similarly, if you invest in equity mutual funds through a regular broker (not through an investment platform like ETMONEY), you will have to pay capital gains tax every time you redeem your units (sell your shares). However, if you invest in equity mutual funds through a dematerialized platform like ETMONEY Investment Platform, your units will be held in a dematerialized form (iDem) and no capital gains tax will be levied on redemptions till withdrawal from the platform.*
Another benefit of investing via dematerialization is that it eliminates stamp duty charges that are applicable to physical transactions. So overall, investor saves close to 2% upfront cost by investing via dematerialization .*