All About Demat account

[ecis2016.org] While trading online, a Demat account is used to hold shares and securities in Dematerialised/electronic format. In this article, you would know all about a Demat account.

What is Demat?

Demat or Dematerialised format is a way in which your physical shares and securities are converted and stored in an electronic way. The biggest advantage of having a Demat account is transparency. So, there is no risk of malpractice. While trading online, you just need a Demat number and there is no need for huge paperwork.

You are reading: All About Demat account

Shares can be purchased or sold from your Demat account and these will be maintained in the form of credit and debit. Using a Demat account, you can trade in a variety of financial instruments like mutual funds, equity shares, government securities, bonds, exchange traded funds, etc. Note, while opening a Demat account, it is not compulsory to own a share.

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Demat: Documents required for applying for an account

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A list of documents needed for opening a Demat account is mentioned below.

Income proof

For a Demat account, one of the following documents should be submitted.

• Income Tax Return (ITR) acknowledgement slip copy that is submitted while filing ITRs.
• Net worth certificate.
• Form 16 or salary slip of the present month.
• Bank account statements for the last six months.
• Asset ownership documents. Note, this should be done through self-declaration.
• Demat account holdings statements with eligible depository participants.

Identity proof

For a Demat account, one of the following documents should be submitted.

• PAN card
• Aadhaar card
• Driving license
• Passport
• Voter ID
• Government identity cards issued by state/central government and its departments, PSU, university affiliated colleges, professional bodies like Bar Council, ICAI, ICWAI, ICSI, credit/ debit cards

Address proof

For a Demat account, one of the following documents should be submitted.

• Address proof in spouse’s name
• Driving license
• Flat maintenance bill
• Insurance copy
• Passport
• Passbook not older than three months
• Registered rental document or residence sale agreement
• Ration card
• Utility bills not older than three months (electricity, gas, telephone bills)
• Voter ID card
• Address proof issued by bank managers of scheduled commercial banks/ scheduled co-operative bank/ foreign banks/gazetted officer/ notary public, member of legislative assembly, member of parliament.
• Address authorised by judges of the high court or Supreme Court.
• Government identity card issued by state/central government and its departments, PSU, university affiliated colleges, professional bodies like Bar Council, ICAI, ICWAI, ICSI.

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Demat account: How to open it?

• First, zero in the depository participant you want the Demat account to be opened with. You will be updated with terms and conditions and charges to be applied.
• For holding a Demat account, you will be asked to pay an annual maintenance fee. Also, you will be charged for any transaction done through the Demat account (buying/selling). Also note, if you possess shares in physical form, you may have to pay a certain fee for Dematerialisation of the shares.
• Next, fill a Demat account opening form and support it with all required documents. Keep the original documents handy as they may be needed for verification purposes. There will be an in-person verification where a depository participant personnel will verify your documents.
• Your Demat account will be opened as soon as the application form is processed. Once your Demat account is opened, you will be given a Demat account number, also known as a client ID. With these credentials you can access your Demat account online.

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Demat account: Benefits

In addition to transactions – buying and selling – Demat accounts have other associated benefits.

• Loans: You can avail of various loans by using the securities in the Demat account as collateral.
• Share transfer: Using the Demat account, an investor can transfer shares by using the Delivery Instruction Slip (DIS).
• Conversion of shares to online/physical form: Your depository participant can convert physical shares to electronic shares and vice-versa. This process is called Dematerialisation and Rematerialisation, respectively.
• Various mediums to use Demat account: As Demat is available in electronic form, you can use the Demat account on various mediums like smartphones, tablets, desktops, laptops, etc.
• Freezing accounts: If you have a Demat account of many facilities, you can freeze your account so that there is no transaction in the form of credit/debit from the account. However, note that to avail this facility, one should have certain securities in their Demat accounts.
• E-facility: The National Securities Depository Limited (NSDL) allows a Demat account holder to send electronic instruction slips to the depository participants, making the transactions faster.

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