Utilize a Demat Account: Make the Best Investment Decision

Categories: Investment

A Demataccount is a form of account in which the investor holds shares directly withthe depository. It is an excellent alternative for individuals who want tolower their credit risk. They are free to redeem them at any time without thebank or broker's authorization.

1) ZeroCredit Risk

Depositoriessuch as SBI, NSDL, etc. keep all assets held in demat account in a safe manner on behalf of account holders,hence there is no credit risk for Demat account holders. This asset iselectronically exchanged on stock markets. Consequently, there is no risk ofcertificate theft, nor is it necessary to maintain actual share certificates athome. In addition, if a shareholder loses their share certificate, thedepositories will replace it for free within 48 hours.

2) 24 X7 Trading

Thosewith a Demat account may trade their securities at any time, day or night. Thetrading of shares in demat accounts is not restricted to market hours, as isthe case with traditional bank accounts. The brokers need just update thedepository at the conclusion of each trading session to reflect the most recentinvestor position. Thus, open transactions will be cleared automatically for afresh trading session, and leftover positions will be shown by banks ordepository participants on the next business day. Additionally, there are notrading hours restrictions for Demat account users. In contrast to mutualfunds, they have entire control over their assets, and an exit load is assessedanytime a unit is sold within particular time periods.

3)There is no fee for holding shares.

Anotheradvantage of Demat accounts is that there are no exit fees or penalties forkeeping shares. Mutual fund firms do not require investors to keep their unitsfor a certain amount of time before selling them. The main consideration is toemploy the Delivery vs. Payment (DvP) method when transferring shares so thatmutual funds do not produce an invoice for their preferred transfer. Simplyinclude the 'DvP' instruction with the depository participants when generatingthe transfer request.

4)Exemptions for the Wealth Tax and the Long-Term Capital Gain

Thewealth tax does not apply to ownership mutual funds since the securities heldinside the account really aren't subject to the total taxable income.Similarly, EOMFs are free from LTCG tax on capital gains up to Rs 1 lakh forinvestors who are not corporations. Also, if one has invested in EOMF via aDemat account, he is free from paying STT on LTCG resulting from the transferof units in Demat accounts up to Rs 1 lakh.

5)Investing with the Systematic Investment Plan

Investorsmay invest consistently in EOMFs via a systematic investment plan, eliminatingthe need to pay a flat sum each month to purchase mutual fund units. They mayinstead deposit any amount, no matter how little, once or twice every monthusing the SIP process.

6) Easeof Securities Transfer

In onlya few minutes, one may transfer securities from one demat account to another.All information linked to securities is maintained electronically on thedepository's computer systems, making this feasible. Therefore, they willcreate a transfer request quickly. In addition, there are no legal formalitiessuch as document stamping and signatures, as is the case with actual sharecertificates.

Thesewere some significant benefits of a demat account. 5paisa offersthe service of demat account so one can easily enjoy the benefits of demataccount with them.