- What is SOA and Demat in Simple Terms?
- What is the Difference Between SOA & Demat Account?
- Why Demat is Needed for ETFs?
- Conclusion: Which Path Should You Choose?
When it comes to investing in mutual funds, one of the most basic decisions an investor must make is whether to hold those investments in a Demat account or in a Statement of Account (SOA) format. While this may sound technical, it’s quite easy to understand, and making the right choice can impact your returns, flexibility, and costs.
As per AMFI data, the Indian mutual fund industry has grown significantly, from ₹10.06 trillion in July 2014 to ₹72.2 trillion by May 31, 2025. As more people invest, it's increasingly important to understand how to manage your mutual fund investments effectively.
In this blog, we break down the differences between Demat and SoA formats and help you decide which one suits you best.
What is SOA and Demat in Simple Terms?
Statement of Account (SOA):
- Simple Investment Holding: A Statement of Account (SOA) is an easy way to hold and manage your mutual fund investments directly with the Asset Management Company (AMC).
- Transaction Tracking: The AMC, supported by Registrar and Transfer Agents (RTAs) like CAMS and KFintech, records all transactions, including investments, withdrawals, and dividends.
- Clear Statement: Investors receive a statement, similar to a bank statement, showing the total units owned and their current value.
- Consolidated View: A Consolidated Account Statement (CAS) from depositories like NSDL or CDSL consolidates all SOA-mode mutual fund investments across different AMCs for a unified view.
- User-Friendly Management: The SOA format simplifies tracking and managing mutual fund investments in one place, offering flexibility and ease of access.
For example, Imagine you have a piggy bank in every room in your house. You can add Rs.100 to the piggy bank from any room, and it all gets collected into a master piggy bank, making it easy to manage your savings in one place. You can also withdraw from any of these piggy banks whenever you need which is like SOA, where your mutual fund investments are managed directly by the AMC with flexibility to access your money.
Demat Account:
- Electronic Investment Holding: A Demat account is an electronic account designed to hold your entire investment portfolio including stocks, ETFs, bonds, and mutual funds in one single place.
- Optional for Mutual Funds: For mutual funds, a Demat account is optional and not mandatory, allowing investors to choose how to hold their units.
- Managed by Depositories: Mutual fund units in a Demat account are managed by depositories like NSDL or CDSL in India, ensuring secure storage.
- Centralized Portfolio Tracking: Investors can buy, sell, or transfer investments via a linked trading and bank account, offering a centralized way to manage their entire portfolio.
- Additional Costs and Limitations: Using a Demat account for mutual funds may involve extra charges and less flexibility compared to the Statement of Account (SOA) mode.
And now you can picture having only one piggy bank in one room that is locked in a locker, with the keys held by your dad. This is like a Demat account, where your investments are kept securely in one place, but access and changes depend on the provider who holds the "keys."
What is the Difference Between SOA & Demat Account?
| Feature | Demat Account | Non-Demat (SOA) |
| Account Management | Consolidated view of all investments (stocks, bonds, MFs). | Separate statements from each AMC. |
| Flexibility & Switching | Switching between brokers can be cumbersome and time-consuming. | Easy to switch between platforms, distributors, and apps. |
| Cost | Involves account opening (₹300-₹500 one-time), annual maintenance (₹300-₹400/year), transaction brokerage (₹20/order), and DP charges (₹15.3-₹18.5/sell transaction). | Generally no account opening, maintenance, brokerage, or transaction charges. |
| Transaction Support | Lumpsum and redemption are supported, but SIPs and STPs are often not available through demat platforms. | Full support for SIPs, STPs, SWPs, and switches is offered by modern investment platforms. |
| Pledging for Loans | Pledging is allowed but may need broker or depository approval, and not all lenders accept SOA-held mutual fund units. | Pledging is often more straightforward directly with the RTA. A key advantage is that the loan amount can typically be used for any personal or business purpose. |
| Redemption | Redemptions are processed in units, which can be imprecise. For example, SOA lets you redeem exact ₹10,000 worth of units, regardless of price changes. In a Demat account, redeeming 50 units at ₹90 (down from ₹100) gives ₹4,500 instead of ₹5,000. | Redemptions can be made for a specific rupee amount. For example, in a Demat account, redeeming 50 units at ₹90 (down from ₹100) gives ₹4,500 instead of ₹5,000.
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| Taxation & Records | Basic consolidated demat statement. May not include detailed transaction history needed for tax filing. | Detailed statements of account from AMC/RTA. Ideal for tax reporting and audits. |
| Transmission (Nominee) | Fast process due to consolidated holdings in one place. | Separate paperwork required for each AMC. |
Gifting/Transferring Units
| Smooth off-market transfer process for gifting or transferring units to another person. | Possible without dematerialization, but the process is perceived as more complex.
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| Who It's Best For | The active trader who deals in stocks, ETFs, and mutual funds and wants a single portfolio view. | The dedicated mutual fund investor, especially those using SIPs for long-term goals, who is cost-conscious and values flexibility. |
Why Demat is Needed for ETFs?
If you’re interested in ETFs, funds traded like stocks on exchanges, a Demat account is essential. These investments depend on the electronic systems of NSDL or CDSL for buying and selling. For those focused on long-term mutual fund growth with minimal costs, SOA might be a better fit, especially with platforms that streamline SIPs and STPs. Your choice should reflect whether you prioritise diversification or cost efficiency.
Conclusion: Which Path Should You Choose?
For the cost-conscious, long-term mutual fund investor who values flexibility and direct control over their investments, the non-Demat (SOA) mode is the clear winner. It eliminates unnecessary costs, simplifies the process of switching between platforms, and offers greater precision in redemption. While in the past, SOA investing sometimes lacked the full suite of features, modern digital platforms have bridged this gap, offering robust support for essential tools like SIPs, STPs, and SWPs.
However, if your investment strategy heavily involves trading in ETFs, a Demat account is necessary. It is also a suitable option for investors who prioritise a single, consolidated view of all their financial assets and are willing to bear the associated costs and limitations.
Ultimately, the right choice depends on your individual investment style and goals. By understanding the fundamental differences between Demat and non-Demat accounts, you can make a smarter, more informed decision that aligns with your financial journey.