If you wish to be an investor and purchase any commodity on the stock market, you have to open a demat account. These accounts, wherein the physical form of securities are converted into electronic documents, are registered with NSDL and CDSL, and, through a depository participant such as a broker, can be used by you in order to trade in the stock market and hold your shares.
Adding a nominee to the Demat account is not mandatory, but advisable. This simple step saves a lot of trouble in cases the primary beneficiary dies.
In India, any account beneficiary can have a maximum of three nominees attached to the same Demat account. In the case of a single nominee, all the securities are transferred to his /her account.
If there are multiple nominees, the beneficiary of the account can decide if the securities in her account have to be distributed on a pro-rata basis. She can also assign a fixed percentage to the individual nominee and can specifically assign securities to individual nominees.
Nominees can be added, amended, or removed by the beneficiary anytime. Adding a nominee is as simple as adding their names in the account opening form submitted to your preferred broker. Nominees can also be added, amended, and deleted later by submitting an Annexure 1A form to your broker.
1. Only an individual holding a beneficiary account either as a single holder or a joint account holder can provide a nominee. Non-individuals such as society, body corporate, partnership firm, Karta of HUF, or a power of attorney holder are not allowed to nominate.
2. In the case of a jointly held beneficiary account, the nomination form has to be signed by all account holders.
3. A minor account holder cannot assign a nominee. However a minor can be assigned as a nominee by an adult beneficiary.
4. If the beneficiary is assigning a minor as a nominee, she has to provide the name and address of the guardian of the minor.
5. The nominee cannot be a trust, society, body corporate, partnership firm, Karta of HUF, or a power of attorney holder. In case of cancellation of nomination by a jointly held account, the nomination form has to be signed by all account holders.
Through dematerialisation of securities - meaning conversion of physical shares into electronic ones - investors can safely store their shares and securities in their Demat account. The process, if one has to imagine, is just like having money in a bank account, albeit no physical piece of paper. Now just as opening a bank account requires a nominee, it is essential to have a Demat account nominee and enjoy the entire benefits of having a Demat account.
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