The Indian stock market has developed to provide new-age investors with greater features and simplicity of trading.
When the Indian stock market used the open outcry system, investors had to physically be present at the stock exchanges to buy and sell shares.
According to the Securities and Exchange Board of India (SEBI), all physical shares must be converted to digital form.
From 2019, only shares in the electronic format will be able to be sold or exchanged at stock markets under the directive of market regulator Securities and Exchange Board of India (SEBI).
It only means you can’t sell or transfer your shares, not that you can’t hold them in physical form.
The procedure is crucial for dematerializing share certificates and enabling ongoing investment.
You must register a Demat account and submit a dematerialization request to transform your physical stock certificates into an electronic format before you can trade them.
You can use this article as a reference to learn everything there is to know about Demat accounts and how to convert physical shares to Demat India.
Dematerialization, a procedure that transforms physical shares into electronic form, has been mandated by SEBI and requires that actual share certificates be transformed into virtual shares.
Your physical shares and securities will be converted into digital or electronic form through dematerialization.
The primary goals are to make the buying, selling, and transferring shares easier and more cost- and error-free.
A depository participant (DP) is a representative of the depository who acts as your point of contact with the depository to maintain and manage your Demat account. Instead of physical certificates, all your securities are kept in electronic format.
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Why is dematerialization needed?
Keeping track of all the paper documentation might be challenging at times. Additionally, the volume of paperwork that is growing daily makes it possible to overlook a crucial document.
It maylead to the collapse of the Indian Stock Market and any firms connected to it.
The policy that SEBI announced requiring investors to convert every physical share certificate into electronic form is the main reason investors are looking for information on how to convert physical shares to Demat online.
Increased flexibility brought about by dematerialization improves access for small investors. Electronically and online, all sharing records are kept.
As a result, you can use the internet to access dematerialized shares practically anytime and almost anywhere.
Procedure to convert physical shares into Demat
By following the easy steps listed below, owners of physical share certificates can rapidly have their shares transformed into dematerialized form.
You won’t be able to convert any physical shares of a corporation that aren’t actively traded into a Demat form.
Only shares of businesses that are currently trading on exchanges may have their shares converted into Demat form.
Opening a Demat account
Opening a Demat account is easy and entirely paperless, thanks to an online platform supported by cutting-edge technology.
By submitting KYC documents, such as residence and identity proof (PAN card, Aadhar card, passport, etc.), and a photo and account opening form, you can open a Demat account with any depository participant.
This stockbroker acts as the intermediary between an investor and a depository.
Sign a contract and a list of fees with the DP or bank. The obligations and rights of both the account user and the DP will be outlined in this agreement.
As you need a Demat account to keep your share(s), this is the most crucial first step to converting share certificates into dematerialized form.
Raise a request for dematerialization of shares
Once you’ve opened a Demat account, you must submit a request to transform your physical common shares into the dematerialized format.
For shares of various corporations, use different formats. Additionally, don’t forget to scribble “Surrendered for Dematerialization” on each physical share certificate to deface each paper share. You will receive an acceptance slip for the shares you have given up.
Your DP would deliver the dematerialization request to the Registrar and Share Transfer Agent designated by the concerned company (RTA).
Your physical shares would be converted into dematerialized form and transferred to your account within two to three weeks, subject to the successful verification of the DRF form submitted and authentication of your share certificates. You will receive an electronic request at that time.
Dispose of physical shares certificate
Upon verification, your physical shares are destroyed once the request has been authorized, and you will receive the dematerialized shares in your Demat account.
You no longer need to keep the physical share certificates safe; you can now destroy them.
You can now realize the value of your Demat shares by selling or transferring them.
Documents required to convert physical shares certificate to demat
Opening a Demat account and submitting the request to dematerialize share certificates are both steps in converting a physical share certificate to a Demat one.
Below are the essential documents that will require at the time of dematerialization-
- Duly filled Dematerialization Request Form. For shares of various firms, you must be sure to utilize distinct forms
- Your driver’s license, passport, landline phone bill, energy bill, apartment maintenance bill (if applicable), copy of insurance, gas bill, and other documents serving as proof of residence is acceptable
- The original copy of the stock certificates you possess. The information on the share certificates must be visible and in good shape
- Identity documents featuring photos, such as your driver’s license, PAN card, voter ID card, and Aadhaar card
- In the physical share certificates, each paper share must be marked “Surrendered for Dematerialization.” Get an acknowledgment slip for the shares you are surrendering, don’t forget
Cost of converting physical shares
Investors need to ask about upfront transaction fees because they vary from broker to broker.
Physical share conversion can run anywhere from Rs 150 to Rs 400 per share certificate, and the entire procedure can be carried out with internet platforms.
The conversion procedure is required to be finished within 21 days, although certain businesses may need more time.
Your broker’s fees are the first cost sub-head you need to consider. Banks and brokerage firms often charge an annual maintenance fee between Rs 200 and Rs 850.
Amit Gupta is the creator of FreeDematAccount.in, a website that specializes in Demat accounts and provides assistance to all its users in navigating through complicated decisions. After completing his high school certification, Amit spent half a decade learning about Demat accounts from brokerages. Before forming FreeDematAccount.in, Amit worked for a Demat account brokerage.