When is the best time to open a Demat Account?

When is the best time to open a Demat Account?

Stock market in the nation had undergone a sea change ever since the demat account got introduced in 1996, contributing to a significant mark with the shift from physical to electronic trading. The nation recognized electronic trading as a quintessential element in the forthcoming finance market of the country. Ever since then, the financial face has entirely changed. On that note, let’s learn about a demat account.

Introducing Demat Account and Its Several Benefits

An online demat account is fundamental for investing in the derivatives and share markets. With such an account, converting mutual funds, ETFs, or exchange-traded funds, bonds & debentures into an electronic form alongside Demat services, and tracking investments from one window is possible. Additionally, it’s seamless to transact and trade with the account as it provides you with complete investment security.

When to have a Demat Account?

Think of the demat account as your bank account, only except the fact that your bank savings account holds the investments. If you own five shares of an XYZ company, your demat account will show it as a credit. When you buy more shares, they get credited to the account. And when you sell shares, the account gets debited with the shares and the demat account of the buyer gets credited with those shares. Here are some uses of a demat account:

Taking a loan against the securities

If your securities in the account hold considerable values, then you might be eligible for taking loan against those securities and avail money in case of emergencies.

Now, what’s the good thing? Simple, even if you pledge your shares in the account merely as collateral, you get to still enjoy all ownership rights for them. You still are able to receive bonuses, rights, and dividends on these shares.

Trading with Margin against Stocks

There are some brokers allowing investors to invest in the financial market through shares of Demat account as the margin funding. These are better referred to as the collateral margin, and it’s the value-added service that a broker provides.

The broker, as a matter of fact, might charge interests on the loan. However, it offers stockholders additional leverage for getting the profit from markets just by using shares from the Demat account.

Enjoying Tax Benefits

That dividend income received by the demat account holder is the tax-exempt one that can benefit them to up to 10 lakh, in case the firm has already paid the DDT or Dividend Distribution Tax concerning the Income Tax Act.

One who invests in the debt & equity funds can receive dividends on the account. Much to the knowledge of account holders, it’s non-taxable with regard to the IT Act.

One Last Call

Building a corpus for several financial goals can be well thought of by trading in the financial market. But unless you prioritize creating a demat account, nothing can be considered as a full-fledged strategy for achieving your financial goals. Now that you have read the various uses of a demat account, when are you deciding on creating one?