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Dematerialization of Physical Shares

Regulators like SEBI and market infrastructure institutions like NSE, NSDL, BSE & CDSL have been pushing for Physical Share Certificates to be dematerialized to simplify investments and investment-related activities like trading and share transfers.

Dematerialization of physical shares has been an issue for both regulators and investors since the 1990s. There was a sudden rush in the inquiries from our investors and clients about Physical to Demat Conversion when RTA suggested freezing physical shares.

Demat Account simplifies your investment documentation. It requires efforts to maintain the paperwork and investment records. Also, electronic shares save 0.5% of stamp duty.

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    Benefits of having a Demat Account

    Having dematerialization. Let’s Demat account is a smart decision. There are many benefits of dematerialization.. Let’s have a look at some major advantages.

    • Convenience: No need to go to the broker’s place to settle down the transactions, as all these things are online.
    • Safety: Opening a Demat account is the safest way to avoid theft, loss of documents, damage, etc. unlike physical.
    • Nomination facility:Demat account allows you to grant access to a nominee in your absence. Thus, the nominee can take care of all your transactions if you are unable to do it yourself.
    • Loan facility: You can take advantage of a loan facility against the holdings in demat account. You can keep the securities and shares as collateral.
    • Corporate benefits: Demat comes with corporate benefits like interest, dividends, refunds, etc credited to your Demat account.

    Dematerialization Services Support

    Why should you convert from physical to Demat shares? Dematerialization of shares has various benefits, some of which have been elaborated on below:

    • 1. Fewer risks: Physical shares are subject to loss, damage, and theft risks. It is also susceptible to fraud and manipulation by unscrupulous persons. With a Demat account, investors can store all their investments or shares in a safe and secure digital depository.
    • 2. Convenient storage: Keeping tabs on all physical shares and their performance is tedious and time-consuming, especially if the investor holds a large volume of shares. A Demat account empowers the investor to easily access and monitor its holdings and relative performance.
    • 3. Reduced transaction costs: Dealing with physical shares involves additional charges that are difficult to determine in advance. These additional costs may be handling expenses, stamp duty, and similar outlays. Whereas in the Demat account, the only charge payable is the brokerage charge, which is informed in advance.
    • 4. Reduced transaction time: Transacting with physical shares involves sending shares to the company or the registrar to get the shares transferred in the investor’s name. This is a lengthy process, sometimes taking months to get the shares transferred. With a Demat account, all the investor needs is a delivery instruction slip (DIS) to transfer their securities, which occurs almost instantaneously. Additionally, dematerialization mitigates the risk of inefficiencies such as delayed settlements and transactions, thus ensuring swift transactions.
    • 5. No odd lot problems: Before Demat accounts, investors could not buy or sell shares in odd lots. The introduction of Demat accounts has removed such inconvenience, allowing investors to trade in odd lots and even buy or sell a single share.
    • 6. Nomination facility: A Demat account provides nomination facilities to investors as per the process described by the depository. This will allow investors to appoint a nominee to operate their accounts in their absence.
    • 7. Loan collateral: Investors can pledge their Demat accounts’ securities to secure a loan against securities. The shares held, liquidity, and acceptability will help investors procure loans at low-interest rates.
    • 8. Corporate activities: If a company held by the investor declares a dividend, the benefits are automatically credited to the beneficiary’s Demat account. In addition to this, corporate actions like stock splits, bonus issue, or right shares are automatically updated in the Demat account of all the company’s shareholders.
    • 9. No TDS: The Central Board of Direct Taxes (CBDT) has granted dispensation from tax deducted at source (TDS) when Demat accounts make payments. This also means that no TDS is deducted from the interest received by investors on bonds and securities.
    • 10. Easy Accessibility: A Demat account is easily accessible through multiple platforms. This includes devices like smartphones, computers, or any other smart devices.

    FAQ's Demat

    Usually, it takes around 30 days. But in case your process is taking more than 30 days, you can contact your DP. If he is unable to help you, you can send a complaint to an investor complaint cell of CDSL or NSDL.

    For such a transfer, it is required to open another Demat account. Once done, fill and sign the ‘Account Closure Form’ and submit it to your existing DP. In that form fill the details of your new Demat account. Your DP will do a balance transfer and close your old Demat account.

    Yes, there is no restriction on the number of Demat accounts. You can open many Demat accounts.

    No, there is no need to keep any small balance; you can also keep zero balance in your Demat account.

    Yes, it is mandatory to provide your bank details. These bank details are given to the issuer company for crediting any payable amount into your account. Hence, we recommend you provide your active bank account details.

    No, as per the current rules, Demat account can’t be operated as ‘either or survivor’. Hence any changes done in the joint Demat account should be signed by all the joint account holders.

    NSDL has decided eligibility criteria for working as a DP. All the DPs get approved by NSDL after getting a certificate of registration from SEBI. The services offered, service charges, and service  standards rendered may differ among different DPs.

    Yes, for this, you need to fill Rematerialization Request Form (RRF) and submit it to your DP. Once your DP receives the request, you will get share certificates from the R&TA.

    In the Demat account, the ‘Delivery instruction slip’ for all debit transactions, and the ‘Receipt instruction slip’ for every credit transfer are there. Through standing instruction, you can avoid giving a receipt whenever credit is expected in the account.

    Yes, it is possible to dematerialize tax-free bonds even in lock-in conditions. The process is like that of Demat of shares.

    Following are steps involved in the process of recovery of IEPF shares.

    Step 1: Filing to Authority by Claimant.

    Step 2: Submitting the Claim to the Company.

    Step 3: Submission of Claim from the Company to the IEPF Authority.

    Step 4: Refund from IEPF Authority to the Claimant.
    Easiest Step: Connect with the team now for RURASH for  the Recovery of Shares.

    A shareholder can reclaim any such investment from IEPF as the IEPF authority maintains the details of all the accounts.

    If the dividend declared by the company remains unpaid/unclaimed for a period of seven years, the company is required to transfer the same to IEPF. Further, all shares in respect of which dividend has not been paid/claimed for seven consecutive years or more is required to be transferred by the company in the name of IEPF.