Whether you’re a beginner or an expert investor, at some point in your trading journey, you will have come across the term Demat account. In today’s world, having a Demat account is extremely important if you want to enjoy a hassle-free and seamless buying and trading experience.
So, what is a Demat account?
Demat meaning Dematerialisation is the process by which you can convert your physical share certificates into electronic balances. A Demat account allows you to hold shares and other financial securities in electronic form. It also allows you to trade in the stock market, at your ease and convenience.
Before we get into the details of a Demat account, let’s understand how a Demat account works.
How does a Demat account work?
A Demat account works like any other bank account.t It converts your physical shares into electronic form, making them a lot easier to store and easily accessible from anywhere in the world. If you want to get into the world of the stock market, the first step would be to open a Demat account with a Depository Participant (DP).
In India, there are mainly two Demat service providers – the Central Depository Service Limited (CDSL) and the National Securities Depository Services Limited (NSDL)
When you buy a share from either the NSE (National Stock Exchange) or the BSE (Bombay Stock Exchange), after your share has been cleared for transfer, it gets credited to your Demat account managed by on the two DPs.
Features of a Demat Account
- Secure Transfers – Before the existence of Demat accounts, shares would have to be sent to the company or the registrar to be transferred in the investor’s name. This time-consuming process meant that it would be months before the whole deal was a done affair. A Demat account allows you to transfer shares immediately with no waiting time.
- Faster processes – The process of converting physical shares to electronic form has become quick and hassle-free since a Demat account came into being. Similarly, electronic securities can also be converted to physical form, if required, in no time at all
- Speed E-Facility – As per National Securities Depository Limited (NSDL), you can send instruction slips electronically instead of having to submit physical slips to the DP. This minimises the waiting time and makes the whole process seamless and quick
- Corporate benefits – When you hold a Demat account, all the profits from your investments are automatically deposited into your Demat account. If the company you’ve invested in is offering dividends, returns or interest to their investors, these benefits become available to you as Demat account holders
Benefits of a Demat Account
- Low risk – When you eliminate the need for physical certificates and save all your shares in the electronic form, the risk of theft, loss or damage is reduced.
- Easily accessible – A single Demat account is your key to buying and selling shares in the stock market without any wait, hassle or inconvenience. Also, since the account is a digital account, you can access it from anywhere in the world
- Reduced costs – With physical certificates out of the picture, you can reduce all charges related to stamp duty, registration, handling, etc.
- Instant transactions – When shares were bought and sold in the physical form, the entire transaction could take up days at an end. With a Demat account, the time is much shorter. All you have to open a Demat account and you’re all set to begin your transactions.
- Single account for all – With a Demat account, you can easily keep track of all your investments through a single account. It also enables you to track your portfolio any time quickly, so you can make real-time decisions to suit your risk profile and profit expectations. Demat accounts allow investors to make smart decisions about their buying and selling decisions.
Documents needed to open a Demat Account
With the features and benefits listed for your knowledge, next, we explore the topic of the documents required to open a Demat account.
- Documents admissible as Proof of identity
- PAN Card with a valid photograph
- UID – Unique Identification Number (Passport, Aadhar, Voter ID, Driving license)
- Any ID card with a legitimate photo issued by certified regulatory authorities or government bodies.
- Documents admissible as Proof of Address
Submit any one of these as proof
- Passport/Voter ID/Ration Card/Registered Lease or Sale Agreement of Residence/Driving License/Flat Maintenance bill/Insurance Copy.
- Utility bills – These include landline, electricity/gas bill not more than three months old.
- Bank Passbook not older than three months.
- Self-declaration of your new address given by judges of a High Court or the Supreme Court
- An address proof issued by bank managers, gazetted officers, public notaries, members of legislative assemblies, or the parliament.
- An identity card with your address that is issued by certified authorities.
- Address proof that is given in the name of the spouse
- Documents admissible as Proof of income
Submit any one of these
- A photocopy of the acknowledgement slip of your recent income tax return.
- Net worth or annual account statement certified by your C.A.
- Latest Salary Slip or Form 16.
- A statement of Demat Account holdings with an eligible Depository Participant.
- Latest bank statement showing six months’ income history.
- Any documents that prove ownership of assets through self-declaration.
How to open a Demat account?
Now you know what a demat account is, you can go ahead and open one with us in a few simple steps. Follow the steps below to create your very own Angel One Demat Account
Step 1: Select a Depository Participant (DP) with whom you want to open the account. A beneficial owner (BO ) account will be opened with the depository.
Step 2: You will have to fill an account opening form. Ensure that you submit all your details along with supporting documentation copies of proof of address, proof of identity, proof of income etc. A PAN card is compulsory to open a Demat account.
Step 3: Next, you will receive a copy of the rules and regulations and the necessary charges you will have to pay the DP. A representative of the DP will conduct an in-person verification to confirm the validity of all the details and documents provided by the investor.
Step 4 – Once documents are approved, your Demat account is operational. You can begin trading with this account right away
You can open your Demat account online with Angel One in just a few minutes. The process is quick and hassle-free.
Charges associated with opening a Demat account
It is important to note that opening a Demat account comes with its fair share of costs like an annual maintenance fee, transaction fee or commission for every transaction carried out by the DP. Also, if you wish to dematerialise your shares, a fee may be charged for that too. Below is a summary of the charges associated with your Demat account
- Account opening fees – DPs charge a nominal fee for opening Demat accounts. However, if you open a Demat account with Angel One, you do not have to pay any account opening fees. The only fees that you will be charged to your account involve stamp duty, GST and other statutory levies by SEBI.
- Annual Maintenance fees – Depending on which type of brokerage firm you open your Demat account with, you might have to pay some amount towards the maintenance of your Demat account.
- Transaction Fees – Transaction fees or brokerage charges are charged to the Demat account holder for every transaction completed by the DP. Some broking firms can charge a percentage of the total value of the transaction; other firms may charge a flat fee per transaction.
Before selecting the DP, you want to create your Demat account with, ensure that you factor in all the charges that are levied to your Demat account.
Thanks to the Demat account, share market transactions have become more accessible than ever. If you too have thought about opening a Demat account but haven’t done it yet, now is the time. Visit Angel One right away to experience a whole new way of buying, selling and trading.
