How to open Demat Account Online is a very relevant question today. After demonetization, the interest of people in stock market trading has grown significantly.
Initially, there were only a few investment avenues that were thought to be good and safe by the people.
Like for example, Indians always prefer investing their savings in gold and real estate segment. But with a gradual increase in legal compliance in both the traditional investment avenues, people have begun to invest their savings in the stock market.
To invest in the stock market, the basic requirement is to have a Demat account. So let us understand everything about a Demat account.
Why Demat Account?
Why a Demat account is essential is an important question because it’s the first step towards investing in the stock market. To put in another way, an individual cannot trade in shares and securities unless he has a DP-A/C.
Therefore, the primary requirement to start trading or investing in the stock markets is to have a DP account.
Any individual who is holding shares in the form of certificate i.e. physical form also needs for DP-A/C to convert them into electronic form before transacting in them.
Now we shall learn the meaning of Demat account.
What is the Demat Account?
A Demat account is an account where the shares and securities, government securities, mutual funds, electronically traded funds, etc. are held in electronic form. In fact, another term for DP-A/C is a dematerialized account.
It is very similar to a bank account. Like for example, the bank holds an individual’s money in the account. Similarly, a DP-A/C holds the shares and securities in the account. Every purchase and sale of shares gets credit or debit to the DP-A/C. Therefore, it is compulsory for everyone who wishes to trade in shares and securities to proceed D a/ c.
Before looking at the procedure to a DP account. Let us see some of the benefits of a Demat account.
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Benefits of Demat Account
Few of the benefits of Demat account are:
- With a Demat account, the shares get security and privacy of the highest quality.
- The Demat account helps in easy maintenance of the account.
- The facility of electronic settlement in DP-A/C makes the process simpler and faster.
- By having a DP account, an investor can buy and sell any quantity of shares.
- It eliminates the risk of theft or any kind of loss.
- With the help of the Demat account, the shares and debt instruments can be traded in the same account.
- With a Demat account, an investor can invest any amount in any shares at any time.
After understanding the benefits of DP account, it is important to know where an investor can proceed to open his DP-A/C.
Where to Open a DP-A/C?
NSDL and CDSL are two organizations that have the authority to proceed with a Demat account. In fact, they are known as depositories. Still, a retail investor cannot reach either NSDL or CDSL to proceed a DP-A/C directly. Instead, they have to open their DP-A/C via intermediaries, also known as Depository Participants (DPs).
The depository participants are basically the famous stockbrokers or brokerage houses. Furthermore, investors can reach them and proceed with their DP-A/C.
Who are Depository and Depository Participants?
As we read above, there are two depositories in India i.e. NSDL and CDSL. NSDL was set up in 1996 and CDSL in 1999. In fact, they have the authority to maintain the shares and securities in the electronic form.
They also look after the process of de-materialization. Furthermore, as per the statistics, these two depositories have dematerialized more than 2000 crores of physical shares into electronic form. On the other hand, the organizations in the financial services sector, the banking sector are eligible to become the depository participants.
Still, they can become DPs only after they get clearance from Depository and Securities and Exchange Board of India (SEBI). Few examples of depository participants are HDFC, Sharekhan, Angel Broking, ICICI Direct, etc.
Now moving ahead, let us have a look at the procedure of Demat account.
Procedure to Demat Account Online:
The following procedure will help an individual in successfully opening a Demat account.
- Firstly, visit the depository participant or its website with whom you want to proceed the DP-A/C. The depository participant can be a broker, bank or any agent who acts as a link between the depository and the investor.
- Next, you need to fill the Demat account procedure form. The following documents must be compulsorily attached with the DP account procedure form.
-> PAN card.
-> Any identity proof like Passport, Aadhar Card, Driving license, Voter ID card, etc.
-> Any residence proof like Aadhar card, Voter ID card, Ration card, etc.
-> Passport size photo with self-attestation
If you need a corporate Demat account, following additional documents are compulsory for submission
-> Photograph, proof of identity, proof of address, PAN number, and DIN number of the directors
-> Balance sheet copies for the last two financial years
-> Copy of the shareholding controls
-> List of authorized signatories
-> Copy of the resolution for investment in securities
-> Copies of Certificate of Incorporation, MOA, and AOA
3. In the next step, the investor and the depository participant shall enter into an agreement. The agreement will bind them by certain rules and regulations. The depository participant will give a copy of the agreement to the investor.
4. After signing the agreement, verification of the documents is done. In fact, this process takes around 10-15 days. After a successful verification, the online Demat account number is given to the investor. Now, all the transactions in relation to shares and securities shall be done via the DP-A/C. The DP-A/C is also known as BO ID i.e. beneficiary owner’s identification number.
5. Once the opening of DP-A/C is complete, the investor can keep a track of transactions and its holdings in the portfolio. The account of the investor gets automatic updates whenever any transaction takes place.
After learning the procedure to open a DP-A/C, let us have a look at the charges on the DP account.
Charges on DP-A/C
When an investor opens a Demat account, he should also be aware of the charges of the DP-A/C. Below is the list of few charges on the DP-A/C.
Charges on a/c opening:
This is a one-time charge that is put while opening a DP account for the first time. However, these days many brokers are offering DP account opening for free.
Charges on the maintenance of DP-A/C:
These charges differ from broker to broker. The account maintenance charges are on an annual basis. The charges range from Rs. 300 to Rs. 700 annually.
The brokerage charges are the charges of buying or selling of shares. Again, these charges vary from broker to broker. The brokerage cost components involve service tax, brokerage, stamp duty, GST, security transaction tax and different types of cess.
Apart from the above charges, often there are other charges. Still, the other charges are in relation to the services that the broker provides to the DP-A/C holder. Few of such services include:
If the investor is still holding some shares in physical form, he must convert them into digital form i.e. dematerialize them. This can be done by paying a nominal fee to the broker. The physical shares shall be credited to the DP-A/C of the holder.
Transfer of Shares
Transfer of shares involves transferring shares from one DP account to another DP account. This can be done by following a simple procedure and paying off some nominal charges for the same.
After understanding the basics about a DP-A/C online and charges on the DP account, let us know some other basic details about the Demat account.
DP-A/C Can An Individual Proceed?
There is no specific limit for opening a Demat account. An individual can proceed as many Demat accounts he wants using his PAN number with different brokers. Still, in most cases, the depository participants have a threshold limit for the D -A/C. Therefore, an individual needs to check with the depository participant before opening multiple Demat accounts.
Next important question on DP account is whether the DP account can exist in the form of a joint account.
Can DP-A/C be Proceed in Form of Joint A/c?
The answer to the question is yes. An individual can proceed a DP-A/C with his/her spouse. In addition, there can be a maximum of three holders in a single DP-A/C. Still, there would be one main account holder and the other two persons would be joint holders. Furthermore, a minor cannot be a joint holder.
Another important question is that, if minor cannot be a joint holder in DP account, can a Demat account proceed in his name.
Can DP-A/C be in The Name of Minor?
Even though a minor cannot be a joint holder in the Demat account, yet opening an account in his name is possible. In that case, the guardian shall maintain the DP-A/C of the minor i.e. minor’s father. Still, if the minor does not have a father, the mother can act as a guardian. The court shall appoint a guardian if the minor does not have either a father or mother. The guardian shall operate the DP-A/C of the minor until he becomes a major.
Top 5 Best Demat Accounts in India
Below is the list of few of the Top Stock Broker in India.
- IIFL Online
India Infoline is one of the top brokers in India. The Demat account can proceed at nominal rate and services are good.
- ICICI Direct
ICICI Direct Demat account is one of the first picks among the investors. It is among the top brokers in India because of the trust of retail investors and incredible services.
- Angel Broking
Angel Broking is another popular brokerage house in India. They have a PAN India presence and have a number of sub-brokers.
- SBI Securities
SBI is one of the leading banks in India. The bank provides online Demat services via SBI Securities. The wide reach and availability of branch at every corner of India make it the first choice among retailers.
Zerodha is one of the most popular online trading platforms for trading in shares and securities. Furthermore, the discount brokerage charges make it the most attractive online Demat account.
The above are few of the top demat accounts in India. There are many other brokerage houses and banks like Sharekhan, HDFC Bank, Axis Bank, etc. which are popular for providing seamless services and retailer scan open a Demat account there.
Where Do We Stand?
Opening a Demat account is the first step of trading in the stock market. But to be a successful trader, one must gain complete knowledge about the stock market. Things like what are the types of stock market trading, strategies of trading, when to enter and exit a stock position, etc. It is important to learn all of these and the learning must be a continuous process. At Trading Fuel, we impart stock market education through our expert blogs and articles.
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