How to Convert Physical Shares into Demat?
5paisa Research Team
Last Updated: 14 Jan, 2025 05:00 PM IST
Want to start your Investment Journey?
Content
- What is Dematerialisation?
- Process of Dematerialisation
- Advantages of converting Physical Shares into Demat form
- How to convert Physical Shares into Demat?
- Conclusion
You must go through a procedure called dematerialisation in order to transform physical shares into demat form. For storage in a Demat account, this entails turning your paper share certificates into an electronic format. The conversion of all physical shares to digital format has long been a demand of the Securities and Exchange Board of India (SEBI). The objectives of this project are to minimise share transfer agent fraud, speed up and simplify the settlement procedure, and present difficulties for shell firms using the electronic mode.
The whip has now been cracked by SEBI. SEBI contends that the capital markets will become more transparent as a result of electronic bookkeeping. It will be simpler for the tax authorities to locate the true beneficiaries and follow up with stockholders. Remember that the government has long been troubled by the lack of transparency. Now is the perfect moment to convert physical shares to demat if you still have them. This is easily accomplished in two to three weeks.
What is Dematerialisation?
The process of turning paper shares and assets into digital ones, known as dematerialisation, makes it simpler and less expensive to acquire, sell, transfer, and monitor investments. Both National Securities Depository Limited (NSDL) and Central Depository Services India Limited (CDSL), which are registered with the Securities and Exchange Board of India (SEBI), hold digital securities. Users must register a Demat account, which serves as an investing digital wallet, in order to dematerialise physical shares.
The conversion procedure is managed by a Depository Participant (DP), who acts as an intermediary. After verifying and nullifying the physical certificates, the depository deposits the digital shares into the Demat account. In addition to completing forms to guarantee the physical certificates are in good condition, users must present documentation attesting to their identification, place of residence, and financial situation. By removing the inconvenience of handling paper certificates and improving the security and effectiveness of investment management, dematerialisation makes life easier for investors.
Process of Dematerialisation
Opening a demat account is the first step towards dematerialisation. The four people involved in this process are listed below.
1. Selecting a DP (Depository Participant): Depository Participants serve as go-betweens for you and the depository, evaluating fees, reputation, and service quality. Demat account services are frequently offered by financial institutions like as banks and broking houses.
2. Completing an application to open an account: The form, which can be viewed online or in person at the DP's office, asks for personal details including name, address, phone number, email, financial situation, and occupation.
3. Providing supporting documentation for validation: Proof of income, such as bank statements, tax returns, or pay stubs.Passports, Aadhar cards, PAN cards, and driver's licenses are examples of identity evidence. Utility bills, ration cards, and rental agreements are examples of proof of address. A bank statement or a cancelled cheque serve as evidence of a current bank account. All documents must be attested by a notary public, bank manager, or gazetted authority.
4. Signing a contract with the DP: It is best to read and comprehend the contract before signing it, since it contains the terms and conditions of the demat account service, such as broking, account maintenance, and transaction costs.
5. Document verification: To guarantee the correctness and authenticity of the information supplied, the DP staff will check all submitted documents and account opening forms.
6. Obtaining your demat account number and ID: The demat department will provide a unique demat account number and ID after document verification. These are essential for online transactions such as the purchase, sale, and transfer of securities.
Advantages of converting Physical Shares into Demat form
Dematerialisation provides a number of advantages beyond the apparent one of being able to trade your shares, including:
1. Safety and Security: There is always a chance of theft and unauthorised access to physical share certificates. These risks are removed when you switch your shares to Demat. To access an account, you also need a password and a registered Demat number.
2. Accessibility: Since all of your sharing data are stored online, you can view them at any time and from any location.
You may get started by getting in touch with your DP now that you understand how to convert physical shares to Demat. Dematerialisation will be completed in two to three weeks and after that it's simple to purchase, sell, or swap shares online.
How to convert Physical Shares into Demat?
1. Open a beneficiary account with a Depository Participant (DP): Opening a demat account with a DP is the first step. A DP acts as a go-between for you and the depositor. The DP must have a SEBI registration. Even your bank may allow you to open a demat account, which can serve as a DP. Verify that the names on the physical share certificates and in the demat account correspond.
2. Complete the form for the request: After opening a demat account, complete a dematerialisation request form. While completing the paperwork, bring your physical shares with you and turn them in to your DP. Remember to note on each share certificate that it has been surrendered for dematerialisation.
3. Submit documents: Your DP will notify the Registrar and Transfer (R&T) agent via email or SMS when you have sent all the necessary paperwork. The responsibility for keeping your records has been placed on the R&T agents.
4. Dematerialisation registration: A number will be generated for dematerialisation registration. Along with your original share certificates, this will be included in your dematerialisation request form and forwarded to the T&R agent.
5. Validity check: The T&R representative will verify that the documents you presented are authentic.
6. Name change: The procedure to use your DP's name in place of yours starts right now. Additionally, the Register of Members' account will record the quantity of shares being dematerialised. The information about the shareholders is kept in the Register of Members.
7. Acknowledgement: After this procedure is finished, the Register of Members generates an acknowledgement stating that the necessary modifications have been done. Your DP will be notified of the number.
8. Credited shares: Your dematerialised shares will be credited to your demat account.
Conclusion
A lot of individuals think that the procedure of converting physical shares into demat is difficult. However, that is untrue. The procedure is easy enough to finish in two to three weeks. Investors would benefit from greater convenience after the shares are dematerialised. Shares may then be bought and sold in a matter of seconds. Additionally, the demat form protects the shares against physical harm.
More About Demat Account
- How to Check Your Demat Account Status
- What is Demat Debit and Pledge Instruction(DDPI)?
- How to Find Demat Account Number from PAN
- How to fill a Dematerialisation Request Form
- How to Convert Physical Shares into Demat?
- What Is DP ID In The Demat Account
- What Is Dematerialization of Shares?
- What Is a Demat Account Holding Statement?
- Low Brokerage Charges in India
- Best Demat Account for Beginners in India
- Do we need a Demat Account for Mutual Funds?
- Aims and Objectives of Demat Account
- What is BO ID?
- What is a bonus share?
- How to Close Your Demat Account Online
- How to Open Demat Account Without Aadhaar Card
- Open Demat Account Without A PAN Card - A Complete Guide
- Myths & Facts about Demat Account
- What is Collateral Amount in Demat Account?
- What Are DP Charges?
- How to Link Aadhaar Number With Demat Account?
- How to Convert Demat to BSDA?
- Dos and Don'ts of Demat Account
- Difference between NSDL and CDSL
- Advantages and Disadvantages of Opening a Demat Account
- Loan Against Demat Shares- 5 Things to know
- What is NSDL Demat Account?
- NRI Demat Account Opening Process
- What is a Basic Service Demat Account?
- How to Transfer Money from Demat Account to Bank Account
- How to Find Demat Account Number?
- How to Buy Shares through Demat Account?
- How many Demat Accounts one can have?
- Demat Account Charges Explained
- Eligibility to Open a Demat Account
- How to Transfer Shares from One Demat Account to Another?
- Types of Demat Account in India
- Dematerialisation & Rematerialisation: Meaning and Process
- Difference between Demat and Trading Account
- How to add nominee in Demat Account - A Guide
- How To Use Demat Account? - An Overview
- Benefits of a Demat Account
- Documents Required to Open a Demat Account
- How to Open Demat Account Online?
- What is Demat Account? Read More
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.
Frequently Asked Questions
SEBI has made it compulsory to convert physical shares to demat by following the dematerialisation process.
Physical forms of shares are the certificates held by investors for the stocks they purchased before SEBI made it compulsory to open demat accounts.
You can dematerialise your share certificates by opening a demat account with 5paisa and submitting a dematerialisation request form. You must surrender your physical share certificates for the credit of shares into your demat account.
To redeem a paper stock certificate, you must follow the dematerialisation process, converting physical shares to demat.