What are the Advantages of Opening a Demat Account?
You require a demat account to buy, hold, and sell shares and other assets. It is an account that operates digitally and is used to hold dematerialized securities, such as exchange-traded funds (ETFs), mutual funds, bonds, and stocks. Let’s go through the main advantages of demat account:
1. Reduced chance of document loss – Physical bonds and shares have a significant risk of document loss. The shares may be lost even if a natural calamity forces you to relocate. Because you may have a permanent digital copy of your share, holding shares online is a much better and safer solution.
2. Avoiding forgeries – The risk of fraud is considerable when dealing with actual shares or bonds. However, managing a paperless demat account gives you complete access to all relevant information and legitimate data, preventing fraud or impersonation.
3. Loan Facility – In addition to utilizing it as a security deposit for your funds, the securities kept in your demat account allow you to access several bank loans. The securities may be pledged as security against a loan from your bank.
4. Cost-Effective – Cost savings is one of the apparent advantages of online purchases. Similarly, opening a Demat account online might spare you from costs like stamp duty and other handling fees required for physical bonds. The sole price associated with a Demat account is a brokerage; however, you will be able to save more money if you use bargain brokers.
5. Time Saver – Using a Demat account takes very little time to purchase and sell shares. As a result, in this scenario, share liquidity is simpler. On the other hand, moving actual shares was a drawn-out procedure. Because the securities are maintained in a dematerialized form, online transactions may be completed quickly.
6. Simple tracking – No physical documents are required when opening a Demat account, which is another perk you may take advantage of. It always makes it easier to keep track of each of them. As a result, you do not need to keep a record manually. Along with each investment’s record, all your paperwork is securely stored.
7. No TDS on Demat Securities – TDS, or Tax Deduction at Source, is one of the problems that taxpayers deal with. Nevertheless, when a Demat account user makes payments from his account, the CBDT—Central Board of Direct Taxes—has given a dispensation from TDS. Your interest payments on bonds and securities are also not subject to TDS deductions. Ensure your stocks are listed on NSE and BSE and saved in the Demat mode to qualify for TDS exemption.
8. Global Investment – The growth of Demat accounts has substantially aided globalization. Foreign investors are offered simple access to the Indian stock market through these accounts, which helps India’s economy.
Online Demat accounts provide several advantages. They prevent Demat Account fraud and forgeries, facilitate more straightforward transactions, provide quicker settlements, let you access loans, and protect your possessions from loss or damage. These benefits of Demat accounts have led to their nearly complete replacement of paper-based trade in India. If you want to invest in stocks, it is best to understand the dangers involved fully and only to create an online Demat account with a reputable broker.