Must Knows

All About Demat account

[] 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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What is Dematerialisation?

Dematerialisation or Demat is the process of converting physical shares to electronic and storing them.

What is Rematerialisation?

Rematerialisation is the process of converting electronic shares into physical share certificates.

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Category: Must Knows

Debora Berti

Università degli Studi di Firenze, IT

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