Opening a Demat account is just the beginning. A Demat account offers a range of functions beyond buying and selling shares. Once you’ve understood what a Demat account is and how to open one, it’s essential to know how to make the most of its many features. Here’s a comprehensive guide on the various uses of your Demat account.
1. Dematerialization and Rematerialization of Shares
You can convert physical share certificates into electronic form by submitting a Dematerialization Request Form (DRF) to your Depository Participant (DP).
If the shares are not yet in your name, use a Transfer-cum-Demat (TCD) form.
If needed, you can also convert demat shares back into physical form using a Rematerialization Request Form.
2. Nomination Facility
You can appoint a nominee for your Demat account to ensure smooth transmission of holdings in the event of your demise.
Having a nominee simplifies legal procedures and ensures your investments are passed on without delays.
3. Buying and Selling Shares
The core function of a Demat account is to facilitate trading:
Shares bought through your trading account are automatically credited to your Demat account.
When you sell shares, the relevant quantity is debited from your account.
4. Portfolio Consolidation and Monitoring
A Demat account can hold:
Equities
Mutual funds
Sovereign Gold Bonds (SGBs)
Exchange-Traded Funds (ETFs)
Corporate bonds and more.
Most brokers allow real-time portfolio tracking through integrated online dashboards, giving you a clear view of your net worth.
5. Corporate Actions Made Seamless
Corporate benefits such as bonus shares, stock splits, and rights issues are automatically credited to your Demat account.
Dividends are credited directly to your registered bank account if IFSC details are updated.
No additional paperwork is required to claim these benefits.
6. Applying for IPOs
When applying for Initial Public Offerings (IPOs), you simply need to mention your Demat account number.
If shares are allotted, they are directly credited to your account on the allotment date.
7. Centralized Communication Hub
Any changes such as:
Address
Bank details
Signature
Contact information
can be updated through your DP.
Once updated, these changes are automatically reflected across all companies in which you hold shares.
8. Power of Attorney (POA) for Account Operations
You can authorize someone (e.g., a family member or broker) to operate your Demat account by executing a Power of Attorney (POA).
This is particularly useful if you’re abroad or unable to handle transactions personally.
POA allows buying/selling and managing securities on your behalf.
9. Transfer and Transmission of Shares
Transfer of shares between Demat accounts (e.g., consolidating holdings) can be done via off-market transfers.
No capital gains tax applies to transfers between your accounts.
In case of death, transmission of shares to a legal heir or nominee is handled easily if a nominee is registered.
10. Holding Mutual Funds in Demat Form
You can hold open-ended mutual funds in your Demat account by submitting a Conversion Request Form (CRF) to your DP.
Alternatively, mutual fund units bought on platforms like BSE MF are credited directly to your Demat account.
In Summary:
| Function | Description |
|---|---|
|
Dematerialization/Rematerialization |
Convert physical shares to/from electronic form |
|
Nominee Registration |
Appoint a legal beneficiary for smooth transmission |
|
Trading |
Buy/sell shares via linked trading account |
|
Investment Monitoring |
Track stocks, mutual funds, ETFs, bonds, etc. in one place |
|
Corporate Actions |
Auto-credit of bonus, splits, and dividends |
|
IPO Application |
Receive allotted IPO shares directly in Demat |
|
Centralized Updates |
Update details like address/bank across all holdings via DP |
|
Power of Attorney |
Authorize others to transact on your behalf |
|
Transfer/Transmission |
Move or inherit shares between accounts |
|
Mutual Fund Holding |
Hold mutual funds in electronic format |
