What is Demat Account? How to open demat account? Do you also want to know the answers to these questions? So, in today’s article, we will give you detailed information about demat account.
What is Demat Account?
Demat Account An account that helps traders and investors to buy, sell and hold financial securities and shares in electronic format. In simple words, demat account is used to buy and sell shares. You cannot buy or sell shares without a demat account. If you have invested in any company, then a demat account is required to hold those shares.
This account is exactly like a bank account. The only difference is that money is kept in the bank and can be withdrawn physically. Wherein financial securities are kept in the demat account. Here all financial securities and shares are held in electronic form. That is, the shares cannot be withdrawn physically from the demat account. They can be transferred only from one demat account to another demat account.
Demat accounts in India are maintained by two depositories. It has two depository organizations –
1. Central Depository Services Limited and
2. National Securities Depository Limited
Such accounts are also called dematerialized accounts. This is the full form of Demat. Internet password and transaction password will be required to access your dematerialized account.
What are the types of Demat Account?
Demat account is divided into three parts. It is of three types –
1. Regular Demat Account – Regular Demat Account
2. Repatriable Demat Account – Repatriable Demat Account
3. Non-Repatriable Demat Account – Non Repatriable Demat Account
Let us now know about them in detail.
1. Regular Demat Account
Regular Demat Account is used by an Indian citizen or resident of India. This demat account allows you to trade from anywhere in India.
2. Repatriable Demat Account
Repatriable Demat Account is used by foreign nationals (non-resident Indians). Through this, anyone who is not an Indian resident can easily trade on the Indian Stock Exchange. Funds can be transferred abroad through repatriable demat account.
3. Non Repatriable Demat Account
Non Repatriable Demat Account is also used by NRIs (Non-Resident Indians). The only difference is that funds cannot be transferred abroad through this. This means that through this trading can be done on the Indian Stock Exchange only by staying in India.
Who can open Demat Account?
Only the persons mentioned below are eligible to open demat account in India.
2. Hindu Undivided Family
3. Domestic Companies
4. NRI (Non Resident Of India)
5. Clearing Members
What are the documents required to open Demat Account?
Only that necessary document has been told to open the Demat Account. available to a common citizen.
The following documents are required to open a demat account:
1. Documents Required for Identity Proof
It is necessary to have one of these documents for identity proof.
Voter ID card
2. Documents Required for Address Proof
It is necessary to have one of these documents for address proof.
Voters Identity Card
Telephone Bill (landline only and not older than 3 months)
Electricity bill (not more than 3 months old)
Gas bill (not more than 3 months old)
Bank Statement (not more than 3 months old)
3. Documents Required for Income Proof
This is necessary for trading in derivatives. If you do not want to trade in derivatives then it is not necessary. There should be one of these documents.
Salary slip or any such document which proves the income
Bank Statement (not more than 6 months old and also show income history)
4. Documents Required for Bank Account Proof
Cancel Check or
Bank Statement (not more than 6 months old and should show your income history)
5. Pan Card
It is necessary to have a PAN card. Demat account cannot be opened without PAN card.
How to open Demat Account?
To open Demat Account, mentioned below. Follow the steps:
1. First of all, the broker’s website has to be opened. Brokers like Zerodha, Angel Broking, Upstox etc.
2. After this, you will get the option to open the account in front of you, click on it. That is, the account opening form.
3. Now fill your personal details such as name, email id, phone number, etc. Also fill the Pan Card number.
4. Enter your bank details.
5. Now upload the documents required for address proof and identity proof.
6. Upload a video clip for Person Verification.
7. Now e-sign has to be done. Aadhar card will be required for this. Keep in mind that the Aadhar card should be attached to the phone number. Because OTP will be sent for e-signing in it.
What are the benefits of Demat Account?
Following are the advantages of Demat Account:-
1. Due to Demat Account, paper work has been reduced in transferring securities from today.
2. Demat account is more secure as compared to paper-shares. This mostly eliminates the risks associated with paper shares such as the possibility of counterfeit securities, delays, theft or poor delivery, etc.
3. There is a reduction in the cost of transactions due to Demat Account.
4. Earlier it used to take several months to transfer the shares. But today it takes only a few minutes to transfer shares from demat account to another demat account.
5. Shares arising out of Bonus, Splits, Consolidation etc. are automatically transferred to the Demat account. That is, now it has become an automatic process.
6. Traders can trade from anywhere. Also many investments can be made. You can even trade or invest from your home.
7. Today it is taking less time to open an account in the stock exchange for trading.
What are the disadvantages of Demat Account?
If Demat Account has advantages then it also has some disadvantages. Let us know what are the disadvantages of demat account.
1. The cost of opening and operating a Demat Account is a bit high. This includes various types of charges such as account opening charges, transaction charges, custodian charges and annual maintenance charges.
2. Some brokers are also involved who are dishonest with the traders. So today it is a bit difficult to choose a good, honest and reliable broker.
3. If you do not have any kind of knowledge and invest under the supervision of a broker, then you may be cheated or misappropriated of money.
4. There is no provision for closure of demat account having non-liquid shares. The investor has to pay the charges involved.