Before we going forward How to open Demat account first we understand what is Demat account?
A Demat account is an abbreviated form of a dematerialized account. This is a type of account in which the investor or the account holder holds shares, securities, mutual funds, securities in electronic format after purchase. It is an easy and safe way of trading on the stock market.
In the days before 1996, traders shouted for the purchase and sale of shares in the form of hard copies of share. This is a lengthy process that delays the settlement of the transaction by buyers and sellers from both parties.
In a simple word, we can say that the Demat account is like a bank account, only the main difference is bank account is used for cash and credit transactions, while in the Demat account used for stock and securities trading purposes.
In India, there are two depositaries who manage the Demat account.
a. National Securities Depository Ltd. (NSDL)
b. Central Depository Services Ltd. (CDSL)
What is the use of a Demat Account?
The Demat account is the first step to start investing money in the stock market, without a dematerialized account, you cannot process the transaction.
It simplifies the process of trading and storing shares, debentures, bonds, and securities in electronic form.
After the introduction of the dematerialized account in 1996, it is much simpler to trade without errors, such as loss of stock documents or taken by third parties.
The other Importance of using a Demat account is:
- It is safe and time-saving and easy to operate at your own level.
- Can Hold multiple types of share investment document in one account and initiate trading
- You can access your account from anywhere
- No risk of theft and error of document.
- Accountholder has an option to avail loan benefits against securities deposited in Demat account.
- An investor does not require to pay stamp duty for transfer of securities and share.
Benefits of Demat account
After the digitization of the stock market, there is a massive growth in trading. There are multiple benefits of having dematerialized account, here we have listed below
Security – there is no chance of loss and theft or misplace of certificates. Because earlier we need to carry with us in physical form which is very difficult to handle multiple company stock share.
Hassle-free trading – having a dematerialized account you can hold multiple share and investment certificates of different companies and freeze it for a time period. Without a Demat Account, these transactions are not possible.
Odd-Lots – it’s a big challenge to settle the deal with share sold in lots. The only share is sold or bought in a fixed lot. But after the advent of the Demat account, Investors can buy any number of shares in electric form.
Easy Accessible – investors can easily access their accounts from anywhere to buy & sell through mobile or laptop as per their convenience.
Minimal cost – Earlier There are many charges are paid for transfer and handling of physical certificates. But In Demat account case investor has not to pay any extra handling or stamp duty charge.
Corporate benefits – Direct benefits of dividends and profits in the Demat account offered by the companies.
One account for all – investors can simply manage all securities, bond, share, equities in single Demat Account no use of maintaining multiple accounts for each share.
Nomination – There is also a provision to add nominee in your account who receives the securities after death. This is applicable only for individual and joint holding account.
Demat account opening procedure
To open a Demat account there is some document preparation we need to be furnished. The process of opening of account is the same for all the bank, broker, and sub-broker. Along with the Demat account, you must have a saving bank account to link with Demat and trading account for the transaction.
Documents required for opening Demat Account
Proof of identification
- Pan card
- Any Government valid id card like, voter card, Aadhar card, passport, driving license
- Any valid state or central government authorized identity card.
- Copy of Bank passbook holder details
Proof of Address
- Driving Licence, Ration card, Rent agreement, insurance copy, Passport
- State or central government valid identity card with photograph
- Utility bill like- electricity bill, landline telephone bill, not more than 3 months old.
Proof Of Income
- Salary slip or form 16
- Bank account statement of 6 months
- Income tax return copy
- Annual audited account from a chartered accountant.
- Statement of Demat account holding in Depository participants.
Steps involved in How to Open Demat Account
1. First, choose the Depository participant(DP) who fill the form and initiate the process of account opening. You can directly approach the bank who offer Share trading services For Example- ICICI bank, HDFC bank, or can find the list of depository participant list from NSDL (National Securities Depository Limited)and CDSL(Central Depository Services Limited) websites.
2. Fill the account opening form with all the right details and attached the passport size photograph along with the pan card, residence proof, Id Proof, and KYC. Also, carry all your original documents for verification concern and One canceled cheque of your bank for correct details of bank IFSC code account number and address.
3. In the third step, You will have enter into an agreement that describes the all necessary details of the rights, account maintenance charges that you have to pay, and the authority of Investors and Depository participants. Read all the necessary documentation before entering into an agreement.
4. After the complete verification of details, you will assign by your account number through DP which is called a beneficial owner identification number(BOIN) for an online account.
5. After the successful completion of the account opening process, you are liable to pay the annual maintenance fee for maintaining the account. Also, the transaction charged will be paid to DP for buying and selling of shares in Demat account.
Demat account charges
- An investor needs to pay a one-time account opening charge to the Depository participant. Some of the repositories did not charge for the new account opening.
- There is annual maintenance which is paid by the investor to DP for account maintenance.
- Transaction fee on buy or sell of share.
- Transfer of share charge from one account to another.
- Dematerialization and rematerialization of your securities. It is applicable only for physical share.
Frequently Asked Questions
1. Is Demat account free?
The account opening charges depend on the depository participant, some are offered it free of cost and some are added some nominal charge.
2. How long does it take to open a Demat account?
It generally takes upto 2-3 days in case of offline for the fully functioning of the account and online it takes upto 1-2 hours depending on your DP.
3. Can I open multiple Demat accounts?
Yes, you can open multiple accounts with the same name in one DP or in multiple Depository Participants.
4. Do I have to maintain a minimum balance in Demat accounts?
No, there is not a mandatory to maintain the minimum balance in your account. You can operate with Zero balance.
5. Can I invest money in the share market without a Demat Account?
No, you cannot start investing in the stock market without the Demat account. You must have a Demat account, trading account, and one saving account in any bank for the smooth functioning of online trading.
6. What is dematerialization?
Dematerialization is a process of converting physical share and securities into electronic form.
7. Can I change the address in Demat Account?
Yes, you can update your address detail in the account. You need to be submitted all the required address detail.
