Question

What are aims dematerialize account

Answer 1

In India, shares and securities are held electronically in a dematerialized (or Demat) (/dimæt/;) account, instead of the investor taking physical possession of certificates. A Demat account is opened by the investor while registering with an investment broker (or sub-broker). The Dematerialized account number is quoted for all transactions to enable electronic settlements of trades to take place. Every shareholder will have a Dematerialized account for the purpose of transacting.
Advantages of demat

The bonus/right shares allotted to the investor will be immediately credited into his account.There is no risk due to loss on account of fire, theft or mutilation. Transaction costs are usually lower than that in the physical segment.

A demat account also helps avoid problems typically associated with physical share certificates.

For example: delivery failures caused by signature mismatch, postal delays and loss of certificate during transit. Further, it eliminates the risks associated with forgery and due to damaged stock certificates.

Demat account holders also avoid stamp duty (as against 0.5 per cent payable on physical shares) and filling up of transfer deeds.

The biggest advantage of having demat account is that you don't have to pay for stamp since these are electronically stored which reduces the transaction cost.

Motive of Demat System

India adopted the Demat System for electronic storing, wherein shares and securities are represented and maintained electronically, thus eliminating the troubles associated with paper shares. After the introduction of the depository system by the Depository Act of 1996, the process for sales, purchases and transfers of shares became significantly easier and most of the risks associated with paper certificates were mitigated.

Demat benefits

Demat account for shares and securities with Business purpose

The benefits of demat are as follows:

Easy and convenient way to hold securities

Immediate transfer of securities

No stamp duty on transfer of securities

Safer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are mostly eliminated)

Reduced paperwork for transfer of securities

Reduced transaction cost

hope it helped you