More on Demat Account
Are you still keeping your bought shares in physical form? If yes, then there are higher chances of fraud and theft of shares. To cope with this, the new and advanced process of dematerialization comes into frames that give you the provision to open the Demat account.
A demat account is basically an electronic account where all your shares are stored in a dematerialized format.
With it, you would be able to reap the benefit of digital trading and in holding shares in a more secure form.
In all, to get into the trade somewhere, it becomes essential to have a Demat account. You can start looking for the right broker who offers you exclusive services.
In general, all the stockbrokers are listed in the stock exchange (NSE or BSE). To start investing in the stock market, learn how to open the NSE account.
Also Read: How to open a BSE Account?
Here in this document, we will give you detailed information of the meaning,
Demat Account Meaning
As already discussed, a Demat account is an account that secures or holds your shares in an electronic form.
Once you buy shares, you can place the request for the dematerialization process, i.e., to convert your physical shares into the electronic form.
So, when you place a buy trade in the exchange, in lieu of the monetary amount you pay, you get shares credited to your account in an electronic form.
Once you sell these shares, the corresponding number of stocks is deducted from the same account.
Apart from shares, you can store other investment products such as ETFs (Exchange Traded Funds), Mutual Funds, Government securities, Bonds, etc.
Different stockbrokers levy different charges for Demat Account, opening as well as maintenance charges.
Where Account opening cost is going to cost you once, annual maintenance charges or AMC is a recurring cost that needs to be paid on a yearly basis.
Although there are few brokers, that allow you to open the FREE Demat account like Groww Demat Account, Angel Broking Free Demat Account, IIFL Free Demat account, etc.
These accounts are basically provided through either of the two regulated depositories CDSL or NSDL.
Different stockbrokers or depository participants have memberships with either one or both of the above-mentioned depositories.
To find the stockbroker to open the Demat account, here are some of the things that you should consider:
As a beginner, you need to keep an eye on multiple things before you decide to open an account with a particular stockbroker.
- Understand the broker type – whether it is a full-service stockbroker, a bank-based stockbroker, or a discount stockbroker.
- You must check all kinds of charges that will be levied on your account, be it account opening charges, AMC, brokerage, minimum initial deposit, etc.
- The range of offered trading segments, including IPO, Equity, Commodity Trading, Currency Trading, etc. Although, this preference varies from one trader to another.
- How easy or difficult is the account opening process
- Does the broker have an offline presence?
- How is the performance of the different trading platforms offered by the stockbroker?
- What is the quality and accuracy of the research and tips provided?
- What is the level of customer support?
- Background of the stockbroker, complaint percentage on different exchanges, etc.
Demat Account Introduction
Transform the way you secure your shares, now you can hold them in an electronic form. In simpler terms, a Demat Account is like the locker in your bank account, where you can hold your shares in a secure way.
Here, you can hold your shares in an electronic form, thus offering more security and safety to shares you bought.
Here are some of the basics related to a Demat account that you must be aware of. Some of those are listed below:
- A Demat Account is linked to your PAN Card.
- You can open any number of Demat Accounts with different stockbrokers, although there are pros and cons to this action depending on your trading style.
- There is always a unique identification number linked to your Account that basically differentiates you from other investors in the stock market.
- Not every stockbroker has a provision for the Demat account directly. At the backend, such stockbrokers have partnerships with other depository participants that actually open your Demat account.
- Shares can be transferred from one Demat account to another.
- There is no requirement of opening your Demat account with a minimum number of shares or even keep a minimum shares balance in your account.
To learn about the Demat account basics, learn the process of dematerialization.
Dematerialization is basically a process of converting physical shares into an electronic format. The term “Demat” account actually is a shortened version of the “Dematerialized” account where the shares can be accessed through an online medium.
Furthermore, it is not only the storing of those shares that are done in an electronic format but even the buying and selling of these shares happens online.
It is like depositing your hard cash physical money into your bank account and accessing it online for your shopping, flight ticket booking, and so on.
While you are not paying the third party with physical cash, you are certainly crediting money in electronic format to their respective accounts.
Yes, like a bank account, you can get the shares back into a “materialized” or physical format again (from a Demat account), but the process in case of shares materialization is way more cumbersome than getting the money out of an ATM.
Here is a detailed video on some of the basic queries around a Demat account:
Aims and Objectives of a Demat Account
The objectives dematerialization of shares is pretty straightforward in nature. Here are those listed below:
- This account must hold all the shares in an electronic or dematerialized format.
- Holding shares in an electronic form eliminates the risk of misplacement, damage, theft, and another forgery.
- An investor may choose to hold not just shares but also mutual funds, ETFs, Government bonds, securities.
- Provide an easy online mechanism to view, transfer, sell, or buy different investment products through a single account.
- Along with this, you can update your address and other details in a seamless manner in lesser time.
- Last but not least, opening an account adds convenience in terms of minimizing the paperwork and other cumbersome processes like buying and pasting shares market stamps, etc.
A lot about the objectives and reasons to open a Demat account has been mentioned here and in the sections above.
Types of Demat Account
There are different Demat Account Types that you can look forward to, depending on your trading preferences and investment classes you look to put your money into.
Here is the list of types of Demat account:
- Regular Demat Account
- Repatriable Demat Account
- Non-Repatriable Demat Account
Below is the detailed description of each type of Demat account.
1. Regular Demat Account
This type of account is for traders of Indian origin. The facilities for this type of account are provided by depositories like NSDL or CDSL through different intermediaries like Depository Participants or Stockbrokers.
In this type of account, the charges vary as per the volume of stocks held on the account. In simple terms, having a regular Demat account makes the overall process simple and straight as it minimizes the risk of any fraudulent activities.
Apart from this, it streamlines the process of buying and selling shares.
There are many more benefits as you can easily transfer shares and open multiple accounts with the same name.
2. Repatriable Demat Account
If you are NRI and want to invest in the Indian share market, then here is the provision for you.
You can get started by opening the Repatriable Demat account. Opening it, helps you to transfer funds in foreign countries.
For the effective functioning of this account, you just have to link it with your NRE account. Also, you can open it with joint holders.
But after opening it, as an NRI, you have followed the rules of the Foreign Exchange Management Act (FEMA).
To open the Repatriable Demat Account, NRI has to submit a copy of passport, PAN card, Visa, overseas address proof, passport size photograph, and FEMA declaration along with the cancelled cheque.
3. Non-Repatriable Demat Account
Non-Repatriable Demat account is too for the Non-Resident Indians. The only difference in the non-repatriable and repatriable accounts is that the former does not give the provision to transfer funds abroad.
If you already have a Demat account before gaining the status of NRI, then you can convert your existing one into the NRO category without any hassle of opening a new account.
In this case, the shares you bought are directly transferred to the new NRO holding account.
How to Open a Demat Account?
With the growing advent of technology, it has now become easier to open a Demat account. Before opening an account, you must know about the SEBI guidelines for Demat Account completely.
You can now have a Demat account via both offline and online processes.
For the online process, you just need a laptop or desktop and a good internet connection.
But before moving ahead with the opening process, the foremost step is to find a reliable stockbroker who offers you the best services.
Demat Account Opening Offline
Here are some quick steps on how you can open an account for yourself:
- You will be provided with an account opening form from your stockbroker.
- You can also download the form from the stockbroker website.
- Print the form and enter the basic details such as name, address, contact information, requisite signatures.
- The executive of the stockbroker you have chosen will be providing you with Demat account agreements, information on payments, and charges to be paid, power of attorney document.
- You are advised to read, verify, and sign these documents before providing it to the broker.
- Apart from this, you are required to pay account opening fees that differ from broker to broker.
*However, there are many brokers offering free Demat accounts like IIFL, Motilal Oswal, Angel Broking, etc.
- You will be required to pay an account opening fee, which is a one time cost. Furthermore, there will be an annual maintenance charge that is levied on your account. Make sure to check these details before going ahead with the account opening.
- Once the documents are validated by the broker, there will be a parallel in-person verification done either through a physical meeting or via an online call by Whatsapp or Skype.
- After all the above documents and processes are taken care of, you will be assigned a unique Demat account number by your stockbroker that will work as an identifier for your account.
- For the records of the stockbroker, you will be assigned a client ID too.
- You will also be provided with the login credentials of different trading platforms such as a mobile trading app, terminal software, etc., which you will need in order to place your trades in the stock market.
Demat Account Opening Online
As already discussed, you can open the Demat Account online as well by following the steps discussed below:
- For this visit, the stockbroker website and click on the button “Open a Demat Account.”
- The new window opens where you will be asked to enter your basic details like name, mobile number, etc.
- Once you are done with this, you can proceed further to enter more details like PAN Card details, Aadhaar Card number.
- Following this, you have to upload scanned copies of all the documents required to open a Demat account.
- Select the segment in which you want to trade and submit the account opening fees.
- On completion of the verification step, you will get the account details like login ID and password in your registered email address.
Demat Account Opening Without Aadhar Card
Now comes another method or say the solution to the problem where one can open a demat account even without Aadhar Card.
Well, it might sound strange to many but it is correct.
You can now open a demat account by switching to eMudhra e-sign instead of the NSDL e-sign process.
Once you are done with the basic steps of account opening, just log in to eMudhra and select the option ‘My Mobile Number is not Linked with Aadhar Card’.
Following this, you need to record a video presenting yourself with a Government-issued identity card and a brief detail of yourself.
On verification, the account opens in a few minutes.
Documents Required for Demat Account
However, the account opening charges and opening process may slightly vary from broker to broker, but the documents required to open the Demat account are the same.
Here are the important documents that you must keep ready before requesting to open a Demat account.
For the personal information verification, you have to submit the documents enlisted below:
- PAN Card
- Voter ID Card
- Aadhaar Card
For the address proof here is the list of documents;
- Voter ID Card
- Driving License
- Aadhaar Card
- Ration Card
- Utility Bill (Electricity Bill, Telephone Bill)
Apart from the basic documents, you have to submit the details of the bank that you want to link with the Demat or trading account.
For this, here is the checklist of important documents:
- Cancelled Cheque
- Account Statement
- Scanned image of the front and last page of Passbook
Apart from this, if you are interested in trading in the derivatives segment that you have to submit additional documents of Income Proof. This includes:
- Account Statement
- Income Tax Report
- Salary slips of the last three months.
Lastly, you have to submit at least three copies of passport size photographs.
Along with these documents, you will need to fill in the account opening form as well as sign the Power of Attorney (POA).
Make sure you keep a copy of all the forms you sign along with dispatching it to the broker.
The broker must share this copy with you as a part of its professional responsibility.
You will need to show the original documents to the executive of the broker for validation and then provide signed copies of these documents.
Demat Account Charges
After you are done with the documentation process and make a decision to open a Demat account, the next important step is to know about the fees and charges related to account opening.
Apart from opening charges, there are many additional charges like custodian charges, Annual Maintenance charges, transaction charges, Dematerialization and Rematerialization charges.
Demat Account Opening Charges
Although there are many brokers who are still charging fees for the Demat account opening, you can still avail of the benefit of a free Demat account.
Also, many brokers give you the offer to reap the leverage of a lifetime free Demat account.
In general, the fees for opening a Demat account ranges between ₹700-₹900. Apart from this, it involves other charges like stamp duty, GST, etc.
Demat Account AMC Charges
Demat account annual charges are the ones that people remain more concerned about. These are the charges that you have to pay the annual charges to the depository participant for services and maintenance of the account.
These charges are charged in advance and are generally nil for the first year.
From the second year onwards, the investor has to pay the amount that usually ranges from ₹300-₹900 per annum.
There are many DPs who charge quarterly fees, and another one-time charge amount to offer a lifetime free Demat account.
Demat Account Transaction Charges
Next comes the transaction charges that you have to pay each time the securities move in and out from your Demat Account. These charges also vary from broker to broker.
In general, most stockbroker charges ₹1.5 for each share of your trade.
Demat Account with Lowest Brokerage Charges
Apart from the common charges associated with the Demat account, the person must look for the broker offering the best services at the least brokerage charges.
So which broker is the one offering the best services at the lowest brokerage fees?
Here it is important to note that when it comes to the brokerage charges, then one should not only focus on the brokerage charges.
Check for the whole fee structure that includes account opening, AMC charges, etc.
Also, it is good to focus on the service delivery and technology robustness, i.e., the trading platforms, mobile app, along with offline presence.
Look for the hidden cost and all the details related to it before opening an account with any of the brokers.
Demat Account Login
On opening a Demat account, the broker sends the confirmation email to your registered mail.
It contains the login credentials, i.e., the client ID and password.
You can log in to the account using these credentials and can reset your password accordingly after logging in.
When you reset your password, there are things that you must consider, like the number of characters, using or avoiding numeric digits or special characters.
Follow the right process and update the password in a couple of seconds.
Here it is important to mark that your password is strong and uncommon.
You can also update your password from time to time using the trading platforms or other provisions offered to you by your DP.
Demat Account Number
Every Demat account has a unique identification number. It is a 16 digit code that is assigned to the investor by its Depository Participant.
It is also known as Beneficiary owner ID or BO ID.
When you open a Demat account, the depository (CDSL or NSDL) offers a welcome letter to the user that contains account information, including a Demat account number.
Both the depositories differ a little in the way of format of Demat number. Like in the case of CDSL, the Demat number is actually a 16 digit number while the NSDL offers a Demat number starting with IN followed by a 14 digits unique code.
Apart from the Demat number, there is another number related to the Demat account, DP Id. It is actually a depository participant identification that differs from the 16 digit code discussed above.
It is the number allocated to Depository Participants by CDSL and NSDL.
The Demat number is then created with the combination of DP ID and customer ID.
Of the 16 digits in the Demat number, the first eight-digit depict the DP Id, while the last eight digits are the customer ID of the account holder.
For example, You have a CDSL Demat Account, having a Demat number 0101010102020202.
Here the first eight digits, i.e., 01010101 is the DP ID while 0202020202 is the customer id.
Know the CDSL Demat Account Opening Online procedure.
How to Use a Demat Account?
No wonder, with a Demat account, you would be able to gain a hassle-free experience of buying, selling, and holding shares.
Along with this, it reduces the overall paperwork, transaction time, and cost of transferring shares.
To get started with the process, find the stockbroker that offers the best services.
As you open the account, the broker provides you with the client ID and password that helps you to access your account.
Now along with the Demat account, you also need a trading account. The trading account is the one that reflects all the transaction history of shares.
In general, every share you buy or sell takes T+2 days to get credited or debited from your account.
You can further streamline the whole process, with the process of share allocation. Share allocation is the process that allows investors to link a Demat Account with a trading account, thus enabling them to view the Demat holdings.
For the better management of your account, there are several things that you must take care of.
Here, first and foremost, make sure that you read the terms and conditions mentioned in the account opening form.
It may sound boring but give it an hour or so while you read every little detail that is put in there.
There might be some terms that you do not understand and find against your trading preferences.
It will be better if you clear out those confusions with the executive of the broker in order to avoid any bigger mistakes later.
Furthermore, there will also be a POA (Power of Attorney) document that will come with different clauses.
Now, some of these clauses are pretty generic in nature, while few of them may have repercussions.
Thus, again make sure you read out the whole document and sign only in those areas that you feel comfortable with.
Few brokers have the tendency to play with the language written in the POA, and then the trader or investor might feel cheated later.
For instance, a broker may put in a clause of providing no DIS slips to the trader, while few may take it to the level where the trader will not be able to operate his or her account at all.
The complete account will be under the operations of the broker itself.
Thus, to avoid any such instances, it’s better to be safe and sorry.
Read the complete document for your own good, sign on the areas you understand and are in agreement with and make clarifications on the aspects of the POA that you don’t understand before signing.
Check out this detailed video highlighting the use of a Demat account and related POA clauses:
Can I have Two Demat Account?
Till now, you might have gained an understanding of the Demat account and its importance. But still many must be wondering can I have multiple demat account?
Well! the answer to this question is a big YES!
There are no restrictions on the number of Demat accounts. But before moving ahead it is good to check for the things to open multiple Demat accounts.
Opening multiple Demat accounts is completely legal, but with the condition that you cannot have multiple Demat accounts with the same depository participant.
For each Demat account, you have to pay separate AMC charges even if your Demat account is currently not in use.
If you open multiple Demat accounts, then make sure you use them regularly, because the unused account gets frozen when not used for a long period of time.
Keep checking the monetary balance and transactions of each Demat account.
Benefits of Demat Account
By storing your shares in an electronic form you can completely go online for doing trade. This takes away a lot of hassles from your investments in the stock market.
Here are some of its top benefits:
- Your life becomes easy when the shares you bought are saved in an electronic format.
- Securities can be transferred easily and quickly.
- Easy to maintain your securities, bonds, ETFs in dematerialized form
- It does not involve any kind of paperwork for maintenance, buying, or selling of these shares stored in your Demat account.
- Transfer of securities requires no stamp duty, along with savings in the transaction charges as well.
- It does not involve any risk of theft, robbery, or any wrongdoing to your shares i
- Transfer facility is much easier in case of the death of an original account holder.
- The closing of a Demat account is relatively easier as well.
Disadvantages of Demat Account
Looking at the whole picture is important, and that is why here we are going to discuss some of the concerns that you might face (and probably don’t understand as of now) while using a Demat account:
- While you can open a bank account without a PAN Card, it is a mandate when it comes to a Demat account.
- You need to understand how to make the best use of trading platforms on either a mobile phone or a laptop/desktop. Putting an order through call and trade facility is time taking and impacts the final profit you take away.
- Investors and traders must understand specific terms and conditions laid out by the broker and not blindly sign on to anything that is asked of them.
- Few stockbrokers always look for loopholes in the system and play to their Demat Account features against their clients. Thus, be wary of the fact that you go with a prominent or a recommended stockbroker.
So this is all about the Demat Account. To avail, the exclusive trading experience chooses the right broker with whom you can open your account.
Consider all the important steps and charges associated with opening an account and the offline presence of the broker along with the online.
It is good to take the wise decision and choose the broker that offers a Demat account and charges the least brokerage for trading in different segments.
Demat Account Frequently Asked Questions
1. How to check the Demat Account online?
With the growing advent of technology, it has now become easier to check the Demat account online. So, if you have an account, then you can check for your trading and transaction details by logging in the account using the credentials provided to you.
2. Can I know my Demat account number by PAN number?
Yes, you can know the Demat account number and other details using your PAN card number. For this, just contact your broker and ask for the details recovery by submitting your PAN card details.
3. How to know Demat Account details?
Demat account details are sent to you once your account is opened successfully with the broker. You will receive an email containing account information like Demat number, password, and login-id.
4. Are my client ID and Demat account number the same?
The Demat account number is the 16 digit number (the combination of DP ID of the broker and client ID of the user).
The client id is the last 8-digit number of the 16 digits that are assigned to you.
5. How to close the Demat account?
When it comes to closing a Demat account, you have to go offline. For this, you have to download the form from the website, filling it, and transferring all the shares from the Demat account to another active Demat account.
Other than this, make sure that you clear all the dues and debt with your broker before closing your account.
Furthermore, if you are interested in opening an account?
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Simply Superb Post.
Thanks for sharing