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How Are Demat And Trading Account Related?

By Author: Neha Sharma
Total Articles: 135

Demat account is the type of account that allows investors to deposit and hold their shares in an electronic form. Such an account transforms the physical shares into the electronic format, a process more commonly known as dematerializing.

Trading account, on the other hand, is used to sell or buy shares in the stock market. When different companies list their shares in the market, the trading account allows you to trade the same on an electronic platform.

If you are looking to invest in shares, then you must have a clear idea on the concept of trading and demat account and the relation between the two.

Features of demat account

• No charges are applicable for opening a demat account
• All the transactions are linked with AMC (Annual Maintenance Charges) from the second year onwards
• Waiver on the AMC for the first year
• No taxes are levied on documents like receipts, cheques, licenses etc. on the transfer of securities held in the demat format
• Auto credit of public issues/bonus/rights in the demat account through Electronic Clearing Service
Features of trading account
• Seamless transfer of shares and funds in the linked Savings and Demat account
• No need for bank transfer, cheques, or application forms for each transaction
• Option to invest in multiple investment schemes like Derivatives, Equity, Bonds etc. as per your need and risk appetite
• Allows you to invest at any time, from any place using the internet and mobile trading apps
• Allows you to carry out purchase and sale transaction in a seamless manner in bonds, mutual funds, and equity shares under one platform

How are the two accounts related?

Demat and trading account are closely related. Trading accounts work the same way as your current bank account, while the demat account works similar to your savings account.

Trading account links your demat account with the bank account. It withdraws your shares from the demat account and sells it in the stock market. Both the accounts are crucial if you wish to trade in the share market. As an investor, you are using the trading account to purchase the shares of a company, and you are keeping it stored in an electronic form using the demat account. In this case, the money that is debited from your bank account is credited to the demat account.

Similarly, when you are looking to sell your shares through the trading account, the money is debited from the demat account and is credited to the bank account once the shares are sold.

Therefore, in order to be able to trade in the stock market, having both demat and trading account is imperative.

Author bio:
Neha Sharma is a finance student who loves to write in her free time. She has spent considerable time researching about Demat and trading account. Through her work, she explains how they are co-related

Total Views: 26Word Count: 459See All articles From Author

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