Invest Wisely with a Demat Account: Benefits, Features, Charges, and Types

Table of Contents

What is Demat Account and How it Works?

Have you come across people who still hold physical share certificates that their parents or grandparents purchased and now their heirs struggle to get them transferred or sold? There was a time when investing in stock markets meant visiting a broker and filling in lengthy physical forms.

Buying and selling shares involved exchanging physical share certificates, long transit time and physical safekeep.The market regulator SEBI, over the years, has introduced many initiatives and reforms to make it simpler and easier for anyone to invest in stock markets. Introducing a demat account is one of them.

A demat account or dematerialised account is an electronic account that holds financial securities of different kinds e.g. shares, bonds, debentures, mutual funds etc.

It is mandatory to have a demat account to transact in shares, bonds and other securities traded in stock markets. When you buy a security it is credited to your demat account and when you sell, the security is debited from your account.

You can open a demat account with a SEBI registered broker, bank or financial institution. A demat account is opened with a trading account which enables you to buy or sell shares online. A demat account is also in converting your securities from physical form into electronic mode.

Rematerialising is also facilitated through demat accounts via depository participants.

Advantages of Opening a Demat Account

A demat account offers many benefits to investors, let’s have a look.

Convenience: You can open a demat account online or with simple documentation within a day or two. With a demat account, you can monitor your securities online. There is no need to visit your broker or check any physical statement to monitor your holdings, at the click of a button you can buy or sell securities.

Cost Saving: Since demat account opening and transaction process is online, there are no handling or transit charges involved, hence demat account is cost effective compared to the time when the stock investment and transaction process was offline. Many brokers offer zero account opening fee for demat accounts.

Safety: With physical shares investors faced theft and safety risk. The physical shares are prone to wear and tear, loss, damage, theft etc, a demat account holds securities safe for several years without any risk. Demat accounts are regulated by SEBI and respective depositories, giving investors complete peace of mind.

Single Repository: You can hold different types of securities e.g. shares, bonds, mutual funds, ETFs, IPO subscriptions etc in a single demat account. This makes record keeping and tracking the portfolio easy anytime anywhere.

Speed: Transactions in online mode are swift, the settlements are real time and there is no delay in credit or debit of securities in your demat account. Demat enables fast and seamless transactions in stock markets.

Anytime Access: You can be anywhere in the world and you can check your holdings, portfolio value or transact with your demat and trading account. There is no need to contact your broker or physically visit any office to manage your portfolio.

Most Common Terms Used in a Demat Account:

Depository: A depository is a body or entity that holds or safe keeps securities. In financial markets, depositories maintain record of securities in electronic form, they also facilitate transfer of securities.

In India, there are two depositories under SEBI’s regulation - NSDL (National Securities and Depository and CDSL (Central Depository Services Limited). When you open an account your demat is maintained with one of the two depositories.

Depository Participant: Depository Participants are intermediaries between investors and depositories. These are participants registered with SEBI, i.e. banks, financial institutions, and brokers authorized to offer demat and trading services to investors

Unique ID: When you open a demat account, a unique ID is allotted to you. It contains 16 digits, the first eight digits are the DP id and last eight are unique client id allotted to your account.

Trading Account: A demat account is meant to hold your financial securities whereas a trading account enables you to transact in these securities. Depository participants offer linked demat and trading accounts for end to end transactions in securities.

Generally brokers offering trading accounts are registered with one or both depositories, thus offering trading and demat accounts.

3-in-1 Trading Account: A 3-in-1 trading account is an account with demat account, trading account and bank account linked together for quick transfer of funds, buy/sell and transfer of securities in demat account.

Features of Demat Account

Access to Multiple Products: You can invest in multiple products like stocks, bonds, mutual funds, ETFs, gold bonds etc. using a single demat account, there is no need to open different accounts for different investment products.

Direct Dividend Credits: Dividends and bonus shares on your existing holdings are directly credited to your bank account and demat account respectively.

Margin Trading Facility: Some brokers offer margin trading facility in your demat account and trading account. In simple terms, you place a fraction of funds as margin and broker allocates a loan in proportion to the margin. You have access to a higher amount to trade with at attractive interest rates. Rupeezy offers Margin Trading Facility at one of the best rates.

IPO Subscription: You can apply to IPOs within a few clicks using your demat and trading account. No need to fill in any application form, the process is quick and convenient with direct fund transfer and allocation.

Multi Device Access: You can easily operate your demat and trading account using multi device interface e.g. a laptop or smartphone app anytime. DPs offer secure online access with the latest technology using password, OTP or biometric access.

Things You Should Know Before Opening a Demat Account

Who is eligible to open a demat account?

Let us see the eligibility for demat account in different categories

Individual

Resident Individual
NRIs
Minors (with parents or guardian)

Non - Individual

Companies/Corporates
Trusts
Banks
Mutual Funds
Partnership Firms
Limited Liability Partnership
Societies

Demat Account Age Limit

There is no specific age limit to open a demat account in India. Even a minor (less than 18 years of age) can open a demat account.

Similar to a bank account, a demat account for a minor is opened by parents or appointed guardians and investment transactions can be done in the minor's demat account.

At 18 years of age, once the minor turns adult, the account is converted into a regular demat account after submitting required documents to the depository. Therefore, there is no demat account age limit restriction in India.

PAN Card

It is mandatory to possess a PAN card to open a demat account as part of KYC (Know Your Customer) process.

A copy of the PAN card and other documents needs to be submitted to your broker while opening a demat account.

Technology now enables the KYC process to be completed digitally through Aadhar verification. Open demat account with Rupeezy with quick e-kyc and paperless account opening.

What documents are required to open a demat account?

Other than mandatory PAN card copy, some more documents are required to verify the identity and address proof of the applicant. Here’s a list:

Proof of Identity

Driving License, voter ID card, adhaar card, PAN card, passport utility bills or other ID card carrying applicant’s photo issued by government/regulatory body/relevant authority can be submitted as identity proof.

Proof of Address

Passport, voter id card, ration card, driver’s license, bank statement not older than 3 months, utility bills and other such relevant documents are acceptable as address proof.

Proof of Income

Proof of income validates the source of funds you are placing for investments via your demat account.

You can provide your latest salary slip, Form 16, bank statement, ITR copy or Income Tax submission acknowledgement.

Types of charges when opening an Demat account

When you open a demat account, you incur various charges for the services being provided by broker, depository and other entities. Let’s take a look at various charges you may come across with a demat account:

Demat Account Opening Charges: DPs levy a nominal account opening charge these days and some brokers offer a zero account opening charge for demat accounts to encourage new users to open a demat account.

Rupeezy offers a demat account with completely digital account opening process and zero account opening fee. Open a demat account today.

Demat Account Custodian Fee: Some DPs charge a custodian fee which is a one time fee paid DPs need to pay to NSDL or CDSL, while some DPs waive it for their customers.

Demat Account Transaction Charges: Also known as brokerage charges, DPs charge you a fee for facilitating transactions through the account. It can be a flat fee or per transaction fee depending on DP’s charges structure.

Account Maintenance Charges: As the name suggests, demat AMC charges are the fee charged by DP to maintain your account. It varies from one DP to another. It can be an annual maintenance charge or monthly, as per DP charge structure.

Factors to consider when choosing a broker to open a demat account

AMC Charges: AMC charges vary from broker to broker. Some brokers offer free demat accounts, while others charge a monthly or annual fee.
Brokerage Charges: Brokerage charges are the fees that you pay to the broker for each trade that you make. Brokerage charges also vary from broker to broker.
Customer Service: It is important to go with a broker that offers good customer service. You should be able to get in touch with a customer service representative if you have any questions or problems, especially when you are a new investor.
Trading Platform: The trading platform is the software that you use to trade stocks. It is important to choose a broker with a trading platform that you are comfortable with.
These days brokerage platforms use advanced technology to enable features and applications that help you make smart trading decisions like options strategy builder, pre-defined options strategies, basket order, MTF at attractive interest rates etc.

Once you have considered these factors, you can start comparing different brokers to find the one that is right for you.

Conclusion

Anyone can open a demat account, it is a simple process with minimal formalities. There is no demat account age limit, even a minor can hold a demat and invest with parents or legal guardians.

There are statutory documents required to be submitted e.g. PAN card copy, identity and address proof, income document and passport size photograph. Online broking platforms now offer e-kyc and completely paperless demat account opening process. Open demat account online with zero account opening fee.

FAQs

What are the types of demat accounts?

Demat accounts can be opened in the name of individuals, companies, trusts, societies, banks, mutual funds etc. Individuals can open demat accounts in single or joint names. Demat can be opened by NRIs and minors as well.

What are the charges for opening a DEMAT account? Is it free?

When you open a demat account, there are certain charges incurred as below:

Demat Account Opening Charges: Some DPs levy a nominal account opening charge while some offer a zero account opening charge to attract new investors.

Rupeezy offers a demat account with completely digital account opening process and zero account opening fee. Open free demat account today.

Demat Account Custodian Fee: This is a one time fee that DPs pay to NSDL or CDSL. Some DPs waive off the custodian fee for their customers.

Demat Account Transaction Charges: DPs charge brokerage fees for facilitating transactions through the account. This can be a flat fee, or per transaction fee, depending on DP’s fee structure.

Account Maintenance Charges: DP charge Demat AMC to maintain your account. It varies from one DP to another. It can be an annual fee or monthly, as per DP charge structure.

Can NRIs open a demat account?

Yes, NRIs can open a demat account. SEBI has specific guidelines for NRI demat account opening.

Is nomination facility available in a demat account?

Yes, nomination facility is available in a demat account. It is mandatory to add a nominee in demat accounts or explicitly opt out. Only individual accounts have nomination option. It is advisable to add nominee to demat account for easy transfer of holdings in case of demat holder’s demise.

Can I open multiple demat accounts?

Yes, you can open multiple demat accounts with different DPs. With a single DP you can open only one demat account as primary holder.

Can demat account be opened jointly?

Yes, demat account can be opened in joint names.

Is demat account compulsory to apply to an IPO in India?

Yes, demat account is compulsary to apply to an IPO in India.

Can I hold mutual funds in a demat account?

Yes, you can hold mutual funds in a demat account.

Can we withdraw money from a demat account?

No, a demat account only holds securities, it is not a bank account and does not hold funds.

What are the fees and charges for opening an account with Rupeezy?

Rupeezy offers

Zero demat account opening charge
Competitive brokerage structure
Zero brokerage on equity intraday trading
MTF PayLater Facility at 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!

What is the time taken to open a demat account online?

An online demat account can be opened within a day, provided all documents are provided before 5.30 pm. Open a demat account online.

What do you mean by dematerialization?

The process of converting physical securities into demat form is known as dematerization.

What is the difference between demat and trading account?

A demat account is meant to hold securities whereas a trading account enables buying and selling of securities. You can open a demat and trading account to invest, buy and sell stocks and other securities online.

Do I have to pay for using the platforms?

Yes, there are charges levied for account opening, maintenance and transactions. You need to pay brokerage charges as per brokerage fee structure. These charges vary from one DP to another depending on their charge structure. It is important that as an investor you understand the charges before opening an account with any DP.

How to open a demat and trading account?

You can open an online 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.

How to Open a demat account with Rupeezy?

Go to Open a Demat Account & fill in your details.
Upload your PAN, Aadhaar copy
Add your Bank Details.
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.

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Which Demat account is best in India?

There are many entities that offer demat accounts in India. These are banks, traditional brokers, online platforms etc. Before choosing a platform, consider the fixed charges like AMC, recurring charges like brokerage, platform features, platform feedback and ratings, interface etc.

These days online platforms offer advanced trading features like Basket Order, Options Strategy Builder, Trading Directly from Charts etc. Rupeezy offers a free demat account, paperless account opening and advanced trading features at zero cost.

What are AMC Charges with Rupeezy?

AMC, short for Demat Account Maintenance Charges, are the fees that you pay to your Depository Participant (DP) or brokerage firm to maintain your Demat account. These charges cater to the operational costs incurred by the DP in maintaining your account and providing you services throughout the year.

The fee varies from one DP to another. Rupeezy charges a nominal MMC or Monthly Maintenance Charge of Rs 25 per month.

Are AMC charges compulsory?

Yes, AMC charges are typically compulsory for all Demat account holders. These fees cover the costs incurred by the DP or broker in maintaining your Demat account and providing services.

Does Rupeezy offer free AMC in Demat Accounts?

Some brokerage firms offer zero AMC for demat accounts as part of their promotional campaigns to attract new customers. These offers can come with certain conditions, like a minimum number of transactions or maintaining a particular account balance.

So while it is possible to have an AMC-free Demat account, be sure to understand the terms and conditions before you sign up. Rupeezy charges a nominal Monthly Maintenance Charge (MMC) of Rs 25 per month. Check Rupeezy’s detailed charge structure.