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How to Use a Demat Account ?
Introduced in 1996, Demat accounts have transformed the trading style of investors in the country. It has efficiently eliminated issues like loss, theft, forgery, Vanda trades etc associated with physical share trading. But insufficient knowledge regarding how to use a Demat account, or how to buy shares using a Demat account has been a major roadblock for retail participation in the stock markets.
But today, we are going to address all your queries regarding how to use a Demat account, how to transfer shares using a Demat account and much more. So, let’s get started.
In this article
How to transfer shares using a Demat account?
How to create a pledge of securities in a Demat account?
How to sell shares in a Demat account using e-dis?
How to set up a margin pledge from a Demat account?
How to convert physical share certificates into Demat form?
What are the best practices for using a Demat account?
How to transfer shares from one Demat account to another Demat say Samco Demat account?
You can transfer your shares from one Demat account (existing Demat account) to your new Demat account (Samco Demat account) in 2 ways:
How to create a pledge of securities in my Demat account?
Here are the steps to create a pledge of securities that are held in your Samco Demat account:
Pledgor and Pledgee shall have account in CDSL only
- The pledgee’s Demat account could be in Samco Securities DP or another DP as well.
Pledgor to submit Pledger request form to Depository participant - Samco
- This shall be submitted in duplicate copies
Samco Securities i.e. the Depository participant shall setup a pledge in the Depository system
- A unique PSN i.e. Pledge sequence number shall be generated.
Pledgee to accept the Pledge through it’s DP
- In case the Pledgee has standing instructions to accept pledges, this step shall be skipped
Pledge is created
- Once the pledge is accepted by the pledgee, pledge of the pledgors securities is created in the Depository system.
How to sell shares from Demat account using a e-dis?
With effect from May 2020, in case customers have not submitted a limited purpose power of attorney from their Samco Demat account, they shall be required to generate a pre-trade e-DIS instruction slip to sell shares held in their Demat account. Check out the step by step process on how to sell shares using eDIS system of CDSL.
How to setup a margin pledge from a Demat account?
A margin pledge is different from a normal pledge. A margin pledge is a pledge that is done in favour of your stock broker i.e. Samco Securities Limited for purposes of fulfilling margin obligations of the trading account, mostly for the equity derivatives or currency derivatives segment. This is the type of pledge that is used for getting margin against shares with StockPlus. Here are the steps to create a margin pledge of securities that are held in your Samco Demat account:
Pledgor i.e. customer to initiate a pledge request from the Back office Samco Star
- Customer shall be required to select the quantity and the ISIN/security to be pledged. Only permissible securities shall be available from margin pledging.
Samco Securities i.e. the Depository participant shall initiate setting up a margin pledge in the Depository system
- A unique PSN i.e. Pledge sequence number shall be generated by Samco and send to CDSL and CDSL shall in turn send an link for confirmation on the customer registered email and mobile for confirmation.
Customer to confirm the margin pledge on CDSL’s web page received on email/mobile.
- This confirmation can be done by entering the CDSL TPIN. This works as a dual confirmation of pledge.
Margin Pledge is created
- Once the pledge is accepted by the pledgee, margin pledge of the clients securities is created in the Depository system.
How to convert physical share certificates to Demat form?
The process of converting physical share certificates to Demat form is known as Dematerialisation.
The steps for converting physical share certificates to Demat form are as follows:
As a bonus, let us look at the best practices for using a Demat account.
Best practices for using a Demat account
Separate Demat accounts for Trading and Investment
It is advisable to hold two separate Demat accounts from an income tax point of view - one for trading and the other for long-term investments. This is because otherwise, in certain cases, assessing officers may decide that all transactions are of trading nature and classify the income as business income, which is taxable at higher rates. Segregating the two accounts clears all doubts and will ensure that you can enjoy the benefits of lower capital gains on long-term investments.
Reconcile dividends and other corporate actions for securities in Demat account
Investors should periodically reconcile all corporate actions received in form of dividends, right entitlements, splits, bonus shares, etc and ensure that all the benefits have been correctly enjoyed by them. In case shares are pending for settlement in brokers pool accounts, make sure appropriate credits are given to the trading ledger account in such cases.
Recording off-market transfers correctly from accounting point of view
It is very critical that off market transactions by way of gifts/purchase/sale are recorded correctly in an investors books of accounts. This is to ensure compliance with income tax laws as well as anti-money laundering laws.
In case you have any specific queries pertaining to your Demat account, please raise a support ticket on our helpdesk www.samco.in/support and we shall be happy to help.