All You Need to Know About DEMAT & Trading Accounts

by Aron Vaxen
13 June 20246 min read
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All You Need to Know About DEMAT & Trading AccountsAll You Need to Know About DEMAT & Trading Accounts
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Are you looking to invest in the stock market? Are you wondering what is a demat account and how is it any different from a trading account? New investors often get bogged down with stock market jargons.

Though in common terms, demat vs trading account terms sound  interchangeable, they are not the same. In this blog, let us understand what is the difference between  a demat account and trading account. 

What is a Demat Account?

  • A demat account is an electronic account to hold financial securities of different kinds e.g. shares, bonds, debentures, mutual funds etc. 
  • When you buy a security it is credited to your demat account and when you sell, the security is debited to your account. 
  • You can open a standalone demat account with a custodian e.g. a bank even if they do not offer brokerage facilities.
  • A demat account also helps in dematerialising financial securities in physical form to digital holding. Rematerialising is also facilitated through demat account via depository participant..

What is a Trading Account?

  • A trading account is an online account which enables you to place orders, buy, sell or transfer securities. 
  • A trading account functions as a 3-in-1 account. It is linked to demat and a bank account.
  • A trading account facilitates the entire transaction e.g. in a ‘Buy’ order, fund is transferred from linked bank account, order is placed and executed and the security is delivered in demat account. 

What is the Difference between Demat and Trading Account?

Here’s a brief demat vs. trading account comparison:

Demat Account
Trading Account
Meant for safekeeping of your securities in electronic form.
Meant to facilitate transactions in securities through an online platform.
Eliminates the need to hold physical shares or financial securities.

It is 100% fraud proof, secure and regulated.
Eliminates the need to place orders physically to an exchange or broker through a convenient, secure, online platform.
You can open and hold a demat account without opening a trading account for holding and dematerialising your securities.
You cannot have a standalone trading account, a linked demat account is a must for a trading account.
A demat account can be opened with a custodian e.g. banks or a registered stock broker 
A trading account can be opened with a registered broker or financial institution that offers brokerage facilities.
You incur demat account opening charges and annual maintenance fees for a demat account.

Over and above, there is a custodian fee and transaction fee applicable.
You incur an account opening fee for opening a trading account and brokerage fee charged per transaction. 
You cannot transfer money in a demat account but only securities.
You can transfer funds in or out of your trading account via the linked bank account seamlessly to settle trades.
You can view your demat holdings online and check your demat account report for all transactions.
You can view various reports like ledger, trade history, funds transactions, DP transactions, Profit & Loss summary, contract note for every trade, payout reports, client master etc to monitor activities and charges in your trading account.

How to Open a Demat and Trading Account?

You can open a demat account in a jiffy these days without even filling a physical form. Online trading platforms help you open a completely paperless demat and trading account within a day.

You need to sign up, upload digital copies of your identity documents like Adhaar, PAN, address proof and a canceled cheque.

SEBI has facilitated online account opening through e-authentication. You need to submit income proof to activate F&O trading.

You can also visit the branch office of a SEBI registered broker/sub-broker, fill a form, submit documents and open an account. 

Select a broker that offers good services at reasonable charges. Many online platforms offer trading facilities in multiple segments and offer discounts and special offers on various services. 

Rupeezy offers online demat and trading account with zero demat account opening charge. Visit rupeezy.in to know more. 

Open a demat account with Rupeezy

  • Go to Open a Demat Account & fill in your details.
  • Upload your PAN, Aadhaar copy and cancelled cheque copy
  • Complete e-verification process.
  • Sign agreement and documents digitally.
  • Submit your application.
  • Upon activation, log into your account with the User id and password. 
  • Start investing and trading.

Did you know?

Rupeezy offers

  • Zero demat account opening charge
  • Zero brokerage on equity intraday trading
  • MTF PayLater Facility @ one of the best interest rates in the industry
  • Advanced trading features like Basket Order, e-IPO, Reports & Analytics, Options Chain, Trade through charts, TradingView TV Terminal, Options strategy builder at zero cost!

Conclusion

The key difference between demat account and trading account is, they serve different purposes. Both are required for investors looking to invest in stock market seamlessly from the comfort of their homes.

Most brokers offer a 3-in-1 demat-trading-bank account for quick and easy fund transfer, order placement and delivery of shares. 

So what are you waiting for? Open a trading account today and start your trading journey.

FAQs

Can we trade without a demat account?

No, you cannot trade in securities without a demat account. A demat account is mandatory in India for buying or selling shares. 

Can I have a different demat and trading account?

You can open multiple demat and trading accounts with different brokers. Even with the same broker it is possible to open demat accounts in different holding patterns in joint holding.

It is operationally difficult to have a demat account with a different DP and open a trading account with another broker.

It is a lot more convenient to have your demat and trading account with one broker for operational ease and quick transactions.

What is the purpose of a trading account?

A trading account enables you to buy or sell securities online. Trading account is linked to a demat account and bank account.

Funds are transferred in and out instantly though linked bank account. Upon settlement of transaction as per cycle, the shares are credited or debited to demat account. 

Can I close my trading account and keep my demat account?

Yes, you can have a standalone demat account to simply hold your securities or dematerialise them without a trading account.

However, it is always convenient to have a linked training account for smooth transactions digitally.

Who can apply for a demat and trading account?

Any individual above 18 years of age and who is a resident of India can open a demat and trading account. Even minors can open a demat account with an appointed guardian as per SEBI rules.

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