Demat Account vs Statement of Accounts

As per Association of Mutual Funds in India (AMFI) data, the Mutual Fund Industry's Asset Under Management (AUM) has grown from ₹ 27.05 trillion as of November 30, 2019, to ₹68.08 trillion as of November 30, 2024, a more than twofold increase in five years. As the mutual fund industry grows, every investor must know how to efficiently hold mutual fund units. Investors can hold mutual fund units in two main ways: a statement of account (SOA) with an asset management company (AMC) or a demat account with depositories such as Central Depository Services Ltd (CDSL) or National Securities Depositories Ltd (NSDL).

In this blog, we will discuss the key differences between a Demat Account vs Statement of Accounts, and explore the demat account benefits vs SOA., etc.

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What is a Statement of Account (SOA)?

A statement of Account (SOA) is a traditional, paper-based document shared by a mutual fund house with its investors periodically (e.g., quarterly or annually). It is sent in physical or electronic form and includes details such as the investor's name, folio number, transaction history, unit holdings, NAV (Net Asset Value), and overall valuation of investments.

In SOA you manage your investment just like a bank account. You are allowed to withdraw mutual funds units by specifying the exact amount in rupees that you want to withdraw. For instance, if you want to withdraw ₹10,000 worth of units and the current value of each unit is ₹100, you would redeem 100 units.

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What is a Demat account?

A demat account, or Dematerialized Account, allows investors to electronically store mutual funds, shares, ETFs, etc. It is managed by depositories (CDSL or NSDL) rather than AMC.It facilitates seamless online transactions, including buying and selling of mutual fund units. It provides convenient access to statements and transaction history at any time while ensuring enhanced security by eliminating the risks of physical loss or damage of certificates.

In demat you can buy or sell MF units in terms of quantity (units) rather than rupee amounts. For e.g.if you want to purchase or sell mutual funds, you would specify the number of units, such as 10 units of a particular fund, instead of stating an amount like ₹5,000.

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Comparison of Demat vs Statement of Accounts

Debt Mutual Fund Information

S.No.	Particulars	Demat Account	Statement of Account
1	Issuance	Demats are managed by Depository Participants like CDSL or NSDL	The Statement of Account is issued by the respective Asset Management Company.
2	Format	Electronically stored	Traditional and paper-based document.
3	Fees and other charges	It has an Account opening charge, Annual maintenance charge, Transaction fees, etc.	Usually free with no annual maintenance charge
4	Type of Assets	It can hold mutual funds, shares, bonds, ETFs, etc.	It holds only mutual funds.
5	Ease of Access	It is more accessible as investors can electronically access it anytime from anywhere.	It is shared via post to the registered address, or downloaded from the AMC’s website.
6	Transactions	It is easily carried out online.	It requires manual handling of transactions. Can be done online.
7	Redemption	Units have to be sold as a whole.	Investors can redeem units by specifying the amount in rupees.
8	Loan Facility	Loan amount against mutual fund units can only be utilized to buy more securities.	Loan amount can be utilized for any purpose.
9	Nomination Facility	All the assets in the demat account will be covered with a single nomination.	Nomination has to be done separately for every AMC.
10	Suitability	It is more suitable for active investors/traders.	Ideal for long-term investors.

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Conclusion

After understanding the difference between a Demat account and a Statement of Account (SOA), it becomes clear that both options offer unique advantages depending on an investor's needs. The choice between the two largely depends on an investor's specific requirements, investment approach, and preference for managing their portfolio. A demat account can be a better option for those involved in more frequent trading or seeking a centralized record of all securities. On the other hand, SOA may be suitable for NRIs who don’t have to worry about PIS and Non-PIS accounts, and can directly invest in mutual funds.

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Frequently Asked Questions (FAQs): Demat Account vs Statement of Accounts

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What is the difference between a Demat Account and Statement of Accounts?

A Demat account is an electronic platform for holding and managing securities like stocks and mutual funds in digital format. In contrast, a Statement of Account (SOA) is a document provided by the AMC or RTA that details transactions and holdings for mutual funds in folio format.

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Is a Statement of Accounts necessary if I have a Demat Account?

You don't typically need a Statement of Account (SOA) if you already have a Demat account, as all mutual fund details are accessible through the Demat platform. However, an SOA may be more convenient and detailed for tax filing or specific purposes.

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Are there fees for maintaining a Statement of Accounts in Demat?

No, there are generally no fees for maintaining a Statement of Account (SOA) in a mutual fund, as it is provided free of charge by the Asset Management Company (AMC) or Registrar and Transfer Agents (RTAs) like CAMS or KFintech.

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Can Demat statements replace traditional SOAs?

Demat statements are more convenient than traditional SOAs for portfolio tracking and consolidated management. However, since both serve different purposes, demat statements for holdings and SOAs for detailed transaction and tax records, it is unlikely that demat statements will entirely replace traditional SOAs.

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What details are included in a Demat account SOA?

A Demat account SOA includes personal details, folio number, transaction history, unit holdings, NAV, etc.

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How often are Demat SOAs issued?

It depends on the depository participants and your trading activity. Generally, Demat SOAs are issued monthly in case of transactions (purchases, sales, or corporate actions) and quarterly in case there are no transactions as per Securities and Exchange Board of India (SEBI) guidelines.

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Is a Demat SOA suitable for tax reporting?

A demat SOA can be partially suitable for tax reporting but may not always provide the complete details required for accurate tax filing. You may need to supplement a demat SOA with documents like a Consolidated Account Statement (CAS), Brokerage statements, Dividend certificates, etc., for accurate tax reporting.

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Can NRIs open a Demat account in India?

Yes, Non-Resident Indians (NRIs) are allowed to open demat accounts in India. The Reserve Bank of India (RBI) permits NRIs to invest in the Indian stock market through the Portfolio Investment Scheme (PIS) route.

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