Demat Account opening: All you need to know

Are you someone who is quite fascinated by the world of the stock market? Have you decided to start making some investments in shares or mutual funds or even other products like gold ETFs? One of the first steps you need to take before you can start trading in the stock market is to open a Demat account with a stockbroker. Now, what is this Demat account, and how should you approach the process of opening a Demat account? Let us find out in this article.

Understanding the Reasons to Open a Demat Account

A Demat account (or dematerialisation account) is one where you hold your shares and securities (either bought or converted from physical to electronic form) in electronic format. It holds certificates of a variety of financial instruments such as mutual funds, equities, government securities & bonds, ETFs, etc. in one place.

This account allows you to maintain your shares in electronic format, along with comfortable and anytime access to them and serves as a one-stop solution for several investment products. Thus, you can save time and cost involved in managing paperwork for managing paper shares.

Points to Remember for Opening a Demat Account

Now that you have understood the importance of Demat account opening, let us focus on how you can go about opening one.

1.Eligibility

A resident of India who can provide his proof of identity, proof of address, and proof of income can open one or more Demat accounts as well as assign a nominee for the account / s. An NRI too can open such an account; however, that would come under the rules of FEMA. Annual maintenance charges, along with some one-time fee, may be applicable for opening a Demat account.

2.Process

You can get your Demat account opened online by simply filling out the account opening form with your broker and submitting the necessary address proofs and ID proofs. After verification of your documents and linkage to your bank account, you can get a Demat account opened along with a trading account (to carry out actual buy and sell off shares or derivatives like Futures and Options).

3.Documents Required for Opening Demat Account

The following are the required documents for Demat account: 

  • Proof of Identity 

Permissible materials here would be driving license, PAN card, passport, voter id, Aadhar card, or any ID card with relevant photo (as issued by either public sector undertakings, or by central / state government, or by regulatory/statutory authorities, or by scheduled commercial banks, or by public financial institutions, or by colleges affiliated to universities, etc.), and so on.

  • Proof of Address

Permissible documents here would be ration card, passport, voter id, registered lease/sale agreement of residence, driving license, residence maintenance bill, most recent utility bills for electricity/gas/landline telephone, most recently updated bank account statement/passbook, self-declaration by Supreme court or High Court judges for residential address, an ID card with photo (as issued by authorities specified for Proof of Identity above), and so on.

  • Proof of Income (mainly for derivatives trading)

Permissible documents here would be a photocopy of Income Tax Return (ITR) submitted, Form 16 document, most recent salary slip, net worth certificate (certified by CA), current bank account statement (showing earnings of last six months), and so on. 

  • Proof of Bank Account

Photocopy of bank account statements (for last 3 to 6 months), Cancelled cheque, and so on.

  • PAN Card
  • Passport-sized photographs (1 to 3)

Final Word

It is essential to open the account online so that you can easily manage your investments in equities, mutual funds, F&O, Gold ETFs, bonds, and many other instruments. The process to open a Demat account is quite straight-forward once you have all the Demat account opening documents ready. If you haven’t opened one yet, it is the right time to do so!

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