physical shares into demat shares

When companies are issuing shares today, they issue the shares in demat mode only. But, what about old share certificates; what to do with them? These share certificates have to be dematerialized. If you are sitting on a bunch of physical share certificates, these are the 8 steps that you need to follow to convert your physical shares into demat shares…

  1. Before you open a demat account you need to know that there is a special facility offered by SEBI wherein up to 500 shares of holdings can be sold through the special window in physical form itself. That means, you do not have to worry about opening a demat account at all. But we advise you to open a demat account and start using it for your trading. So the next step to dematerializing your physical shares is to open beneficiary owner (BO) account with a DP.
  2. Approach any registered depository participant (DP) to open your Beneficiary Account either in NSDL or CDSL. Ideally, let your broker and your DP be the same entity as that will facilitate transactions with greater simplicity. Once your account is opened you’re your BO account number is allocated to you, you are ready to dematerialize your physical shares.
  3. To dematerialize your physical shares you have to submit the dematerialization request form (DRF) (in triplicate) to your DP duly filled in and signed by all the shareholders, along with share certificate(s) and necessary documents. In case of joint holders of shares, all the signatories will have to sign on the DRF for it to be valid.
  4. Ensure that the names and order of names as per certificate(s) matches with the names and order of the names as per the DP account. This is very important. If you are holding physical certificates jointly in the name of Jack and Jill then the demat account should also be in the same order of names for the certificates to be dematerialized. Individually held shares cannot be dematerialized into a joint account and jointly held shares cannot be dematerialized into a single account. In case you have physical shares in joint names and the demat account in joint names, then you can open a demat account in joint names and once it is opened you can do an off-market transfer to the individual account.
  5. The DP will first satisfy itself that the application and the documents submitted are entirely satisfactory. Once the application for demat is satisfactory, you can obtain an acknowledgement from the DP. This is a very important acknowledgement document and you must keep this copy in a separate file and ideally you can also scan it and keep it in your cloud storage for future reference. Also take photocopies of the share certificates and note down the folio numbers and distinctive numbers separately before submitting the physical shares.
  6. On receipt of DRF, the DP will generate a dematerialization request number (DRN), which is electronically transmitted to the Company or the share transfer agent through the concerned Depository. AT the same time, the DP will send the physical certificate(s) with the original DRF to the Company or STA for verification and confirmation. This process takes around 10-15 days for completing the loop.
  7. The Company or STA, on receipt of DRF and share certificate(s) will process the request. If the DRF is found to be in order, i.e. verified signature and certificate(s), then it will automatically and electronically confirm the request. The DRF may get rejected for various reasons like signature mismatch, mutilated certificates, duplicate certificates etc. In case of objections, you can approach your DP to help you through the process.
  8. Your DP on receipt of such confirmation, will credit your DP account with the shares that are so dematerialized. From that point onwards, you will hold the shares in the dematerialised form with your depository participant. The moment the shares are credited to your account, the process of dematerialization of physical shares is complete.

A few additional items to remember

  • The date of dematerialization will not impact your capital gains in anyways. The date of purchase will still be the date of physical purchase only. So you do not have to worry about LTCG being STCG or anything like that.
  • Irrespective of whether the demat gets done or not, your corporate actions like bonuses, splits, dividends will all continue as it is without any change.

The entire process can take close to a month but you first need to check that the shares are transferred into your name. The transfer-cum-demat (TCD) facility is no longer applicable now.

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