The Indian share market witnessed a historic change in 1996 with the introduction of demat accounts. Before this revolutionary shift, investors had to maintain physical certificates when they bought or sold shares. This was not just cumbersome but also risky. However, the scenario completely changes with online demat accounts. These demat accounts can be simply understood as digital accounts to hold all your securities, like ETFs, bonds, and more in one place. This made trading and investing much easier, more convenient, and more accessible. 

According to recent findings, the total number of Demat accounts in India saw an increase of 4.4 million in just a month. This rapid growth has pushed the number of demat accounts as high as 175 million as of September 2024.

The number of Demat accounts is constantly rising because of several factors, including digitization, growing awareness about the share market app, and rising willingness to invest and make the most of the growing economy.

What All You Can Do with Your Demat Account?

If you’re reading this, chances are you already know that having a demat account is a must for starting your journey in the share market. It also helps you hone down your securities in digital form. Further, it facilitates trading and makes your investments more secure. 

In addition to these. Here are a few more practical uses of having a demat account.¹

• Bag Tax-free Income

According to section 10(34) of the Income Tax Act, you may enjoy a tax exemption of up to ₹10 lakh on the dividend earnings of your demat account, given the company must have paid the Dividend Distribution Tax. In addition to this, if you’re investing in equities or debt MFs, then also your dividend earnings are non-taxable according to section 10(35) of the Income Tax Act. 

• Avail of a Loan Using Your Securities 

You might not be aware of this, but you can also avail a loan on your securities stored in a demat account. The best part about using your securities as your collateral is that you do not lose their ownership rights. This means you still get rights, dividends, and bonuses on these shares of yours. 

• Margin Funding on Your Shares

With the assistance of a broker, you may also use the share market app in your demat account as margin funds. It depends on your broker to provide this additional service, and they may also charge a specific interest on the loan. However, you get to use your existing shares to earn profits from trending market opportunities.

Key Advantages of a Demat Account 

As mentioned, having a demat account online offers a variety of benefits. Here are some of them.¹

• Enhanced Accessibility 

A Demat account gives you the accessibility to monitor your portfolio and market movements at any time you want. Thus, you get enhanced control over your investments.

• Better Liquidity 

With physical certificates, it was a bit challenging to sell or buy shares exactly when you needed to. However, a demat account eliminates this hassle. You can easily buy stocks from the share market app or sell your stocks in just a few steps, making the most of market opportunities.

• Safe and Secure

By having a demat account, you also reduce the risk of physical theft, fraud, and damage to your securities, which was otherwise common with physical investment and trading. Now you enjoy safe, organized, and easy storage. 

• Fast Services

One of the best parts about having a demat account is enjoying the perks of quick services. Be it receiving dividends or investing in an IPO, everything is simple and quick when you have a Demat account. 

Bottom Line

The several benefits and potential of the demat accounts are one reason why more and more individuals are opening a demat account. Additionally, better awareness and worldwide trends to save have also encouraged individuals to invest, trade, and explore opportunities using their demat accounts. Low transaction charges, enhanced liquidity, faster services, and other features like these are attracting even young and tech-savvy people to follow a disciplined investing approach. The rise in demat accounts is just a showcase of this positive change in people’s investing decisions and lifestyles.