Demat Account Basics That You Need To Know

Business Finance

Demat account is one of the most convenient ways to hold your shares and securities. To trade in shares or securities, the demat account is the primary requirement. With the introduction of this account, the investors and traders can keep their holdings in electronic form at a single place. The demat account is just like a bank account which holds your money, it holds all your investments like equity, bonds, mutual funds, etc. In this article, you will learn about the basics of demat account.

Firstly, let us start by learning whether stamp duty is applicable on holdings in demat account.

Is Stamp Duty Applicable?

One of the biggest benefits of demat account is that no stamp duty is applicable on transfer of shares or securities that are held in demat account. This not only saves cost but also provides liquidity as instant transfer of securities can be done through the demat account.

Now you must know about where to open a demat account.

Where to Open Demat Account?

Demat account can be opened through a depository participant (DP) who is registered with the depository. In India, there are two depositories that are registered with Securities and Exchange Board of India:  National Securities Depository Limited (NSDL) or Central Depository Services (India) Limited (CDSL).

Since the term depository has been frequently used, let us now learn what is depository.

What is Depository?

In simple language, a depository is the facility provider to the depository participant for holding the shares and securities in electronic format. It enables the transactions in the demat account and holds all the securities like equity, mutual funds, bonds, etc. at a single place.

The demat account cannot be opened directly with the depository. In order, to open an account you must approach the depository participant. It is advisable to approach a depository participant with the copy of the following documents to open a demat account.

Documents Required for Opening Demat Account

  • Identity proof (driving license, passport, Aadhaar card, ration card, PAN card, etc.)
  • Address proof (driving license, passport, Aadhaar card, ration card, PAN card, utility bills, bank statement, passbook, etc.)
  • PAN card
  • Income proof
  • Proof of bank account
  • Maximum of 3 passport size photographs

Let us now learn about how to open a demat account?

How to Open Demat Account?

  • Firstly, visit the depository participant and fill the account opening form.
  • The DP shall then hand you over an agreement copy containing the rules and regulations.
  • The DP will send a member who will carry out an in-person verification of the applicant to confirm that the details submitted are correct.
  • After the application is processed, the DP gives you a client ID and demat account number. Now you can use the demat account to carry out the transactions online.

Let us now learn some of the other basic information about a demat account that you must know.

Other Basic Information

  • As an investor, there is no restriction on the number of demat accounts you can open. You can open another demat account even after you have a demat account with a depository participant.
  • While opening a demat account, you are supposed to pay only the applicable statutory charges. As per SEBI guidelines, there are no account opening charges applicable to the investor.
  • A demat account can be opened in the name of a joint holder. The maximum limit is three account holders with one of them being the main holder and other two, the joint holders of the demat account.

The above mentioned information shall help you in opening a demat account with ease. If you are looking for best demat account services, you may contact Kotak Securities. They are known for their premium services at affordable rates.

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