Transferring physical shares and securities into electronic form is called “Demat.” Shares must be stored online rather than on paper in Demat Accounts as it protects the shares, lowering the possibility of theft or forgery. It is a quick and easy way to exchange securities. You need both a trading account and a Demat account to trade stocks on the share market.
To open a Demat Account, you may choose a depository participant (DP), a bank, a financial institution, a broker, or another organization approved by SEBI. After deciding on a reliable depository participant (DP), you may study the terms and conditions to comprehend the paperwork needed to start the account opening procedure.
This article will cover all you need to know about eligibility and the list of documents required to open a Demat Account, and more! Let’s start now.
Eligibility to Open a Demat Account
Anyone who is a resident of the respective country is 18 years old or older and has a PAN card is eligible to open a Demat account. When a juvenile is involved, the account must be managed by a parent or guardian until the child becomes 18 years old.
Mutual funds and banks can both open Demat accounts. It is possible to open trading accounts for foreign institutional and portfolio investors.
To register the bank account, you must provide your PAN card, proof of address, and a copy of a canceled cheque. If your mobile phone is linked to your Aadhaar Card, you can open a Demat account online, eliminating the need for paper.
A properly completed account opening form can help ensure your account is opened as soon as possible.
List of Documents to Open a Demat Account
Here is a list of all the documents required to Open a Demat Account:
- Proof of identity
- Proof of address
- Proof of Bank Account
The list of documents required as Proof of Identity (POI) to open a Demat account
- PAN card with a photo (mandatory).
- Aadhaar (Unique Identification Number)
- The claimant should submit one of the following documents:
- Voter identification card
- A valid driving license
- Identity card/document with the applicant’s photograph issued by any of the following:
- the Central/State Government and its Departments
- Statutory/Regulatory Authorities
- Public Sector Undertakings
- Scheduled Commercial Banks
- Public Financial Institutions
- Colleges affiliated with Universities
- Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council, etc., to their Members
- Credit cards/Debit cards are issued by Banks.
The list of documents required as Proof of Address (POA) to open a Demat account
- voter’s card
- driving license
- your ration card
- Government or statutory authority document
- Your current residence’s registered lease or agreement of sale
- An insurance copy
- A copy of your bank account statement or passbook, not more than three months older than the date of application date
- Any utility bill with your address, provided they’re not older than three months from the application date
- Address proof issued by one of the following:
- Bank managers of commercial banks, co-operative banks, or multinational foreign banks
- scheduled commercial banks
- Any gazetted officer
- A notary public
- Legislative Assembly or the Parliament represent
- Any identity card or document containing your address, issued by:
- Central or state government and Statutory or regulatory authorities
- Public Sector Undertakings (PSUs)
- Public financial institutions
- University-affiliated colleges.
List of documents admissible as Proof of Income to open a Demat account
- A photocopy of the acknowledgment slip for the Income Tax Return (ITR) forwarded to the Income Tax Department during income tax filing.
- Proof of Salary in the form of a recent Salary Slip or other relevant document demonstrating income or net worth, such as Form 16
- A Chartered Accountant’s Net Worth Certificate; alternatively, a photocopy of the Annual Accounts duly audited by a qualified Chartered Accountant.
- Current bank account statement reflecting the client’s income history for the previous six months
- A list of all Demat accounts held by an eligible Depository Participant.
- Other documents that substantiate asset ownership through self-declaration, as well as documents supporting the claim
- Personalized check canceled
- Documents used to prove asset ownership.
- Statements of bank account for the previous six months
- Power of Attorney (POA): In addition to the other documents, you will need to sign agreement papers which include the Power of Attorney granted to the broker for the transfer of securities to settle margins, trade settlement, and the transfer of funds from your account. Your bank and Demat account information is included in the POA document. It is critical to note that it must be issued in the name of the brokerage, not the employee.
Exemptions/clarifications to PAN
- Traders in a specific income bracket as defined by Section 139A.
- When opening an online Demat Account, UN agencies or other bodies that are exempt from paying taxes in the country are exempt from the PAN requirement, subject to verification of their status. On verification of your place of residence, this also applies if you are a trader from the state of Sikkim.
- Transactions are carried out on behalf of the federal or state governments, or by officials appointed by Indian courts.
- Even if the beneficiary account is in the name of one or more of the body’s members, the PAN of the respective body must be obtained if you apply for an account as a HUF, association of persons, partnership firm, or unregistered trust. When accounts are opened in the name of a registered trust, corporate body, or minor, the PAN must be obtained.
The following individuals are on the list of authorized witnesses for documents needed to open a Demat account:
- A Notary Public
- A Scheduled Commercial or Cooperative Bank Manager or a Multinational Foreign Bank.
Make sure you have included the name, designation, and office seal that are attached to the copy.
The low risks associated with creating a Demat account are among the main benefits. When you open Demat Account, you get the option of holding all your investments in electronic form which fully eliminates the hazard that physical securities provide in the form of theft, losses, or damages. We hope you find this article helpful.
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