When it comes to opening a Demat account, people frequently have a few typical inquiries and want more information. In this article, an investor or trader will get most of the answers to their common queries in simple words. So before answering a complex query, let us understand what Demat is with its benefits.
What is a Demat account?
A Demat account holds investors’ and traders’ shares and securities in an electronic format that can be accessed from anywhere at any time, which is also known as a dematerialised account.
What are the top reasons for having a Demat account and what benefits do investors get from having one?
- To get started in the stock market – An online Demat account is an early requirement for share transactions.
- Safety – Demat account offers safety from theft, risk of loss, etc. of the physical share certificates.
- Faster and Smoother settlements – With a demat account, the settlement cycle has been reduced from 14 days to just 2 days.
- Better liquidity – One can easily liquidate i.e. sell, or take a loan against shares, mutual funds etc if he/she is holding these assets in a demat account.
- Greater yields – With Demat account one can hold assets in dematerialised form like Sovereign Gold Bonds which not only give you exposure to gold but an additional return of 2.5%.
- One-stop storage for assets like Equity Shares, Mutual funds, Government bonds, Exchange Trade Funds (ETFs), Bonds, etc.
- Perks – Yes, Demat account provides perks as well. Investors or traders can take bank loans with securities in your Demat account as collateral.
- Transmission – By either opening a joint Demat account or by adding a nominee to the Demat account one can easily transfer the ownership of shares to his/her kith or kin.
How is Demat account different from the trading account?
A trading account is used to buy and sell shares in the stock market, whereas a Demat account stores the shares.
What is a Depository Participant (DP)?
A depository participant (DP) is a financial institution, bank, brokerage house, or similar entity registered with SEBI. Depository Participant (DP) is a link between Investor and Depository – NSDL and CDSL.
What is the procedure for opening a Demat account and how do I do it?
Only the 4 Steps to follow and Your Demat account will get opened.
Select a “Depository Participant”
Choose a trusted and well-known Depository Participant (DP). A DP can be any stockbroker, an authorized bank, or a financial institution. Some DPs are registered with NSDL (National Securities Depository Limited) or some with CDSL (Central Depository Services (India) Limited). Most traders choose DPs that also act as stockbrokers, since they may access both types of services under the same umbrella. You must consider a few aspects when selecting a depository participant, including DPs brokerage charges, Demat account services they provide, and the leverage they are offering.
Ready with all documents
Once you have decided on the depository participant. Start to gather all your documents in one place. Users need to fill out an account opening form and a KYC form.
The list of documents required to open a Demat account are:-
- PAN Card
- Proof of Identity POI (any of these)
- Passport, Aadhaar Card, Driving License
- Proof of Address POA (any of these)
- Ration Card, Passport, Utility Bills, Rental Agreement
- Proof of income (any of these)
- Salary slip, income tax return
- Your latest passport sized two photographs
After collecting user information, DPs will confirm your authenticity of the information provided through IPV, i.e. in-person verification.
Comply with all applicable laws and policies
After submitting all necessary documents and finishing off the verification process, your depository participant will provide you a copy of the rules and regulations in which all the policies, terms, and conditions will be written over it which will help you to know all eligibilities and thresholds while trading from the demat account so make sure you go thoroughly with all their clauses and If you’re having problems understanding some parts of it, it’s a good idea to get professional assistance., so you must know what is written in it before signing the document.
Log in to your account and manage it
Your Depository Participant will hand over credentials to you and you will also receive a mail and SMS notification of account opening. Now with your credentials – email or username, and password, log in to your account, and happily operate your demat account.
Is it possible to open a Demat account without a PAN Card?
A PAN card is required to open a Demat account, according to SEBI laws and regulations. An investor must show the actual PAN card when opening the Demat account, plus need to submit the self-attested PAN card copy to their DP. If an investor opens a Demat account in joint, then each holder needs to submit their PAN card too.
Is it possible to open a Demat account without an Aadhaar Card?
A Demat account is essential if you’re new to the stock market, but if you don’t have an Aadhar card, you’ll have to go to another method. The government plans to evaluate the e-KYC procedure, thus linking Aadhaar to demat, trading, or bank account is currently optional. So, without an Aadhaar card, you can now open an account.
How can I open a demat account for free?
You may open a free demat account in a variety of banks, financial institutions, or brokerage houses. You must, however, seek other charges, which is vital. Broking and processing fees are two examples of these charges. Even if you get a free demat account, you are likely to lose money due to hefty brokerage fees. As a result, before opening an account, one must study all elements. Also, before you register an account, you should do a little more investigation about the stockbroker’s reputation in the industry, its reviews, etc.
What are the annual maintenance charges (AMC) charges in Demat account?
Demat account maintenance charges are also known as folio maintenance charges, which may vary from DP to DP, bank to bank, and stockbrokers. An account holder will have to pay an annual maintenance charge (AMC) to the Depository Participant, just as other charges, some of which are waived.
Can NRI open a Demat account in India?
Yes, even NRI can open Demat account Online by submitting mandatory documents like- the Foreign Account Tax Compliance Act (FATCA) declaration form, Foreign Exchange Management Act (FEMA) declaration form, a copy of the valid passport, and a copy of the PIO/OCI card, a cancelled cheque of the NRO/NRE bank account, Client details, and declaration form, Declaration of P.O. box of your country of residence, overseas address proof, Copy of Indian address proof.
Is it possible to open a joint Demat account in India?
While joint Trading Accounts are not possible, investors can open Demat Accounts jointly or separately. There can be a maximum of three account holders in Demat Accounts, i.e., one primary holder and two joint holders. A minor, on the other hand, cannot open a joint Demat Account.
How do I add a nominee to my Demat account?
The account holder must complete a standard nomination form provided by the DP. A single witness must sign the nomination form. If the account is a joint one, all account holders must sign the nomination form.
What are other Demat account details?
Other Demat account information must be collected, such as the 16-digit Demat account number or CDSL beneficiary ID, Depository Participant (DP) ID, and Power of Attorney (POA) ID.
Opening a Demat account might be a safe option because they are not vulnerable to theft, loss, or damage. Regulatory authorities can now track any fraudulent conduct by brokers or any; therefore, Demat accounts are relatively safe because of strict guidelines.
From the preceding post, you can see how simple it is to open a demat account; it’s the same as opening a bank account or any other account where you must provide KYC and, after validated, credentials are given to the user to access the account. SMC Global Securities Limited offers a one-year Free* Demat account with no maintenance fees. You can open a free demat account with SMC Global even if you don’t have an Aadhar card.