How to Transfer Physical Shares into a Demat Account

In this digital age, holding a physical share certificate has become outdated and risky. If you are still in possession of physical shares, transferring your physical shares to a demat account can make your trading experience a lot easier and more efficient. This process is known as dematerialisation, and it not only eliminates the risk of losing your share certificates but also enables much faster transactions. Discover the benefits, process, necessary documents, and key considerations involved in transferring your physical shares to a demat account.

Converting your physical shares into dematerialised form offers several benefits aligned with modern trading practices and regulations:

Compliance with SEBI regulations

The Securities and Exchange Board of India (SEBI) has declared that it is mandatory for most share transactions to be maintained in demat form. Converting physical shares will ensure that you remain compliant with these regulations.

Reduced risk

Physical share certificates carry the risk of being stolen, lost, or even damaged. A demat account eliminates this risk by holding your shares electronically, providing protection against such contingencies.

Faster transactions

Shares in demat form allow for seamless and quick trading and do not require lengthy paperwork. This speeds up the entire process of buying and selling shares, improving your overall trading experience.

Ease of portfolio management

Managing physical shares requires a lot of record-keeping, which can be a tedious task. A demat account streamlines the management of your investments and allows you to monitor and handle your holdings through a single platform.

Cost-effectiveness

Physical shares attract additional costs, such as stamp duty charges. This is not the case for demat transfers, making demat shares a cost-effective alternative when trading or transferring shares.

The process of opening a demat account is simple and straightforward. Follow these steps to open a demat account:

Choose a Depository Participant (DP)

A DP acts as the middleman between you and the depository. Assess the reputation, service quality, and applicable charges. Financial institutions such as banks and brokerage firms provide demat accounts.

Account Opening Form

You will need to fill out the account opening form with mandatory details such as your name, address, mobile number, email ID, occupation, and financial details. This can be done online or at the DP's office.

Document Verification

You will need to submit the following documents at the time of opening your account:

• Income proof, such as the latest salary slips, income tax returns, or banking statements

• Identity proof, such as Aadhaar card, passport, PAN card, or a valid driver’s licence

• Address proof, such as utility bills, rental agreement, ration card, or voter ID

• Proof of active bank account, such as your latest banking statements or a cancelled cheque

 

These documents must be attested by a gazetted officer, bank manager, or by a notary.

Terms and Conditions

This agreement will list all the terms and conditions of the demat account service, including brokerage, account maintenance charges, transaction fees, and any other relevant charges. It is advisable to read and understand this document thoroughly before proceeding.

Document Verification

After submitting all required documents and the account opening form at the DP’s office, a thorough verification will be conducted to ensure the authenticity and accuracy of the information provided. Ensure that all documents are correct, up-to-date, and authentic. Any fraudulent activity could delay the process or result in your application being rejected.

Demat Account ID and Number

Once your documents and application form have been verified, a unique demat account number and ID will be assigned to you by the demat department. These credentials are essential for online transactions such as buying, selling, and transferring securities.

As per the latest SEBI circular on physical share certificates, investors are required to convert their physical shares into digital form. The process for transferring your physical shares to a demat account is straightforward. Here are the steps:

Open a Beneficiary Account with a Depository Participant (DP)

Begin by opening a demat account with a DP, who will act as an intermediary between you and the depository. The DP must be registered with SEBI. You can also open a demat account with your bank, which can serve as a DP.

Fill the Request Form

Once your demat account is opened, you can fill out a dematerialisation request form (DRF) and submit it at the DP’s office. Ensure you carry your physical share certificates and write ‘Surrendered for Dematerialisation’ on each certificate before handing them over.

Submit Documents

Submit the required documents along with the dematerialisation request form and your physical share certificates. Your DP will then send an email or SMS to the Registrar and Transfer (R&T) agent, who is responsible for maintaining records.

Dematerialisation Registration

A dematerialisation registration number will be generated, which will be added to your request form and sent to the R&T agent along with your original share certificates.

Validation Check

The R&T agent will verify the authenticity of the documents submitted.

Name Change

Once the preliminary steps are completed, the process of replacing your name with your DP’s name will begin. The number of shares being dematerialised will be recorded in the Register of Members account.

Acknowledgement

Upon completion, you will receive an acknowledgement from the Registrar of Members stating that the requisite changes have been made. This number will be forwarded to the DP.

Shares Credited

Your dematerialised shares will be credited into your account.

At the time of dematerialising physical share certificates, you will need to submit the following documents:

• Two copies of your dematerialisation request form (DRF) if you have up to four share certificates of the same company

• If you have share certificates in a sequence (e.g., 1501, 1502, 1503…), submitting only two DRF forms is sufficient, even if there are more than four certificates

• If they are not in sequence, two DRF forms and DRF annexures must be submitted

• Separate sets of DRFs and DRF annexures must be provided for each company if you have certificates from multiple companies

• The DRF must be signed, along with signatures in the required sections

• In the case of a joint account, both shareholders must sign

• If there is a change in address, a self-attested old allotment advice and new address proof (along with Aadhaar or passport copy) must be submitted

• Original share certificates must be submitted along with the DRF

• A self-attested photocopy of your PAN card

Trading physical share certificates has several disadvantages compared to securities held in digital form:

• Trading physical share certificates can be time-consuming and involves delivery, which is slow and costly

• Physical shares run the risk of being lost or stolen, resulting in financial losses for investors

• Trading physical shares can be expensive due to the additional cost of printing, transporting, and delivering them

• Transactions involving physical shares can be delayed due to the time required for delivery and verification

• Holding physical shares limits trading flexibility, as it can be difficult to buy or sell shares quickly or in small quantities

When you buy shares using your demat account without the intention of selling them on the same day, they are known as holdings. A demat holding statement provides details of all the shares held by you. This statement is similar to a bank statement and gives a comprehensive breakdown of the assets in your account.

 

Here’s how you can check your demat holdings:

• India has two major depositories: Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL). You can download your holding statement from their respective websites.

• Depending on the depository your demat account is registered with, you can view and download your statement. Use your 14-digit number for NSDL and 16-digit number for CDSL.

• If your demat account is registered with NSDL, you can use their IDeAS services to view your holdings.

• If your demat account is registered with CDSL, you can use their Easi services to view your holdings.

• If you have an online demat account, your broker will provide a trading platform for buying and selling stocks, which can also be used to view your holdings.

Here are some common mistakes to avoid when transferring physical shares into a demat account:

• Ensure that the details you enter on your DRF are accurate and match those on your physical share certificates and in your demat account.

• Ensure that your physical certificates are in good condition, as any damage during submission can delay the process.

• Be aware of the fees that a DP may charge for dematerialisation and confirm these charges beforehand.