How to Dematerialize Your Physical Share Certificates?

Last Updated: 2 Jul 2025

The Indian stock market has evolved to offer better features and ease of trading to new-age investors. There was a time when the Indian share market followed the open outcry system where if investors wanted to buy and sell shares, they had to be physically present at the stock exchanges. The buying and selling were done based on physical share certificates that marked the shares’ ownership. However, the process became outdated with the introduction of online trading and technology-backed trading platforms.

Now, as per the regulations laid out by the Securities and Exchange Board of India (SEBI), you can only trade and invest in shares that are in the dematerialized (Demat) format. This step was taken primarily to ease the process of buying, selling, and transferring the shares of a company. However, the shift has created a critical question where investors who still hold physical share certificates look for a way on how to convert physical shares to Demat. The process is important to dematerialize share certificates and allow for continuing investing. This blog will help you as a guide to understanding all about the Demat account and the steps to convert physical shares to Demat India.

What is a Demat Account?

In 1996, the Securities and Exchange Board of India (SEBI) introduced Demat accounts in the country, and it revolutionised investing by making it a digital process. One of the most important factors introduced by SEBI was a Demat account.

‘Demat’ refers to dematerialization, a process by which physical securities are converted into electronic format. Therefore, a trader can use a Demat account to hold, transfer, and transact securities without the hassles of dealing with physical securities. As a result, trading has become a safer, quicker, and much more efficient method of storing securities and executing trades.

What is the Dematerialization Process?

Before the introduction of digital trading, people held physical share certificates. However, SEBI has made it mandatory that physical share certificates should be converted to virtual shares through the process of dematerialization which converts your physical shares into electronic form. This consists of four primary parties: depository, issuer, beneficial owner, and depository participant.

A depository participant (DP) is an agent of the depository through which you maintain and operate your Demat account; the DP provides the interface between you and the depository. Just as banking services can be availed through a branch, depository services can be availed through a DP. Any financial service provider, including financial institutions, banks, state financial corporations, stockbrokers, NBFC, etc., complying with SEBI’s norms can register and function as a DP.

Your investments in shares and debentures can be held electronically or dematerialized in a depository. A depository is an entity that holds securities (shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors. National Securities Depository Ltd (NSDL) and Central Depository Services (India) Ltd (CDSL) are the depositories that are licensed to operate in India and are registered with SEBI (Securities and Exchange Board of India). Dematerialization is comparable to keeping your money in a bank account. In Demat form, your physical share certificates are replaced by electronic book entries; purchases of shares are reflected as credits in your Demat account, and sales are reflected as debits.

Before you learn how to convert physical shares into Demat online, here are some rules of the dematerialization process:

• In the process of dematerialization, a company revises its Article of Association through a special resolution in the general meeting, allowing it to issue shares in electronic form.
• Private companies, then, have to register with both NSDL and CDSL. The depositories have their own set of criteria for registration, and the issuer has to comply with them.
• Post-registration, the depositories provide a unique ISIN for each of the shares. An ISIN is a 12-digit code used to identify different securities such as shares, bonds, etc.
• The companies get access to depository services only through an intermediary. If the issuer wants to transfer the dematerialized shares, it has to arrange for Demat connectivity from depositories.

Why Dematerialization? Advantages of Dematerialized Shares

The main motive behind investors searching how to convert physical shares to Demat online is the policy where SEBI has announced that investors must convert every physical share certificate into electronic form. SEBI’s direction is not based on assumptions but on valid research that this process accompanies numerous benefits over the holding of physical share certificates. Once an investor knows how to convert physical shares to Demat, it will provide the following benefits:

• Safety: Dematerialization eliminates the chances of shares being lost, forged or misplaced, increasing the safety of the holding. They are stored in secure depositories, which has made theft a thing of the past.
• Convenience:Thanks to the electronic nature of dematerialized shares, the problems related to their storage and maintenance have been eliminated. You won’t have to deal with lost or damaged certificates anymore.
• Accessibility: All the records of shares are stored electronically and online. This allows you to access dematerialized shares from almost anywhere and anytime using the internet.
• Cost-efficiency: Electronic trading doesn’t require cumbersome paperwork, which reduces a lot of expenses.
• Flexibility: Dematerialization led to increased flexibility and therefore improved access for small investors. Now, one can buy/sell even a single share without any restriction on the numbers.

The Process to Convert Your Physical Shares into Demat Form

Learning how to convert a physical share to a Demat online requires following the dematerialization process developed by the Securities and Exchange Board of India. The first step in the two-step process is to open a Demat account.

Once you open a Demat account, you will have to put in a request to convert your physical share certificates into the dematerialized format. You can follow the steps mentioned below to raise a dematerialization request with your DP:

Step 1: Contact your DP for a Dematerialization Request Form (DRF).
Step 2: Fill out the DRF with all the required details and put your signature. Submit the duly filled form along with your physical share certificates to your DP. It is important to mention ‘Surrendered for Dematerialization’ on each physical share certificate.
Step 3: Your DP will process your request after receiving the DRF along with the surrendered physical share certificates.
Step 4: Further on, your DP would send the dematerialization request to the concerned company’s appointed Registrar and Share Transfer Agent (RTA).
Step 5: Once the dematerialization request is approved, your physical share certificates get destroyed, and your Demat account gets credited with the relevant number of shares.

Documents Required to Convert Physical Share Certificate to Demat

Holding the physical share certificates makes you the part-owner of the company that has issued the shares in the first place. However, the process of converting a physical share certificate to Demat requires some documents to be submitted for opening the Demat account and then raising the request to dematerialize share certificates. Here are the documents you would require to convert physical shares to Demat India:

• Proof of identity with a photo such as your Aadhaar card, PAN card, voter ID card, driving licence, etc.
• Provide evidence of your residence, such as registered lease agreements, driver’s licence, passports, landline telephone bills, electricity bills, apartment maintenance bills (if applicable), copy insurance, gas bills, etc.
• Your bank’s passbook or account statement will serve as your proof of bank account (must be no more than three months old).
• Your bank’s passbook or account statement will serve as your proof of bank account (must be no more than three months old).
• The original copy of the physical share certificates that you hold. The share certificates must be in good condition with the information visible.
• Duly filled Dematerialization Request Form. You must ensure that you use separate forms for shares of different companies. For example, if you have 5 shares of XYZ company and 5 shares of PQR company, two separate forms will be filled for both the companies.
• Each paper share in the physical share certificates must be defaced by mentioning ‘Surrendered for Dematerialisation’. Remember to get an acknowledgement slip for the surrendered shares.

Once you have submitted all the documents to convert physical shares to Demat, the physical certificates become void and are destroyed by the respective companies and new electronic shares are issued. These shares start to reflect in your Demat account, and you can trade by selling or buying more of the shares at your convenience.

If you have any copy of the physical share certificates, you should remember that you can not quote it to mark your ownership over the shares. Any trading practice involving the previously held physical share certificates will be deemed illegal from hereon. The only claim you will have over the shares will be through the transactions carried out in your Demat account. Hence, you must secure your Demat account and remember your Demat account number.

Final Word

While the process of dematerialization may seem to be lengthy, it requires minimal user intervention. This entire process of conversion of physical share certificates into Demat format is likely to take around 2 to 3 weeks. Once your Demat account gets credited, you are free to either sell or transfer your shares at your convenience.

Frequently Asked Questions

Is it compulsory to Demat physical shares?

Yes, SEBI has made it mandatory to dematerialize share certificates and convert them into electronic format only after they are converted into electronic format.

What are the physical form shares?

Physical form shares are the ones that are held by the shareholders physically in the paper format. All information about the trade is written on a piece of paper known as a physical share certificate, marking the ownership of the shareholder.

Can I dematerialize my share certificate?

Yes, you can dematerialize your share certificate by opening a Demat account and raising a request for dematerialization of shares with your stockbroker. The detailed process is listed above.

How do I redeem a paper stock certificate?

You can redeem your paper stock certificate by opening a Demat account and converting your paper stock certificate into an electronic format. You can visit the IIFL Capital Services website or download the IIFL Markets App from the app store to get started.