All You Need to Know About Demat Accounts in India

A demat account, short for “dematerialized account,” is an electronic account that holds investor securities in digital format. In India, demat accounts were introduced in 1996 to make securities transactions more efficient and reduce physical share transfer time and effort. Here’s everything you need to know about demat accounts in India and how to open a demat account.

Why Do You Need a Demat Account?

A demat account is mandatory for trading and investing in shares and other securities in India. It eliminates the need for physical share certificates and facilitates the easy transfer of shares from one account to another. It also allows investors to hold their securities in a safe and secure digital format, and you can open a trading account online. 

How to Open a Demat Account?

Now for the question, how to make demat account, you need to approach a depository participant (DP), which can be a bank, a brokerage firm, or a financial institution registered with the Securities and Exchange Board of India (SEBI). You can choose a DP based on factors such as account opening charges, annual maintenance charges, transaction charges, and other value-added services provided by them.

The account opening process involves filling up an account opening form and submitting Know Your Customer (KYC) documents such as a PAN card, AADHAAR card, address proof, and a passport-sized photograph. After submitting the application and documents, the DP verifies the details and opens a demat account or open trading account online.

How to Operate a Demat Account?

Once you have set up a demat account, you can start trading and investing in shares and other securities. You can buy and sell securities through your broker, who debits or credits your demat account accordingly. You can also receive corporate benefits such as dividends and bonus shares directly in your demat account.

The demat account also allows you to view your holdings, transactions, and other details online, making it easier to track your investments. You can also pledge your demat account securities as collateral for loans.

Fees

To open a trading account online or opening a demat account, involves various fees. These fees and charges include account opening charges, annual maintenance charges, transaction charges, and other value-added services charges. The charges vary depending on the DP and the type of account you choose.

Account opening charges: This is a one-time fee charged by the DP for opening your demat account. It can range from Rs 100 to Rs 1,000, depending on the DP.

Annual maintenance charges (AMC): This is an annual fee charged by the DP for maintaining your demat account. It can range from Rs 300 to Rs 1,000, depending on the DP and the type of account you choose. How do you open a depository account?

Transaction charges: This is a fee charged by the DP for every transaction carried out in your demat account. It can range from Rs 15 to Rs 25 per transaction, depending on the DP.

Value-added services charges: DPs may also charge additional fees for value-added services such as SMS alerts, online trading, and other features. You can do the same thing when you open an online trading account.