Now that you understand what a Demat account is and its benefits let’s dive into the process of opening one.
Documents Required for Opening a Demat Account
Before you open a Demat account, you’ll need to gather the following documents:
- PAN card – this is mandatory for opening a Demat account.
- Identity proof – Aadhaar card, Passport, Voter ID card, Driving license, or any other government-issued ID card.
- Address proof – Aadhaar card, Passport, Voter ID card, Driving license, or any other government-issued ID card with an address.
- Passport-size photographs – you’ll need two passport-sized photographs.
- Cancelled cheque – this is needed to verify your bank details.
Choose a Depository Participant (DP) and Account Type
After you have gathered all the necessary documents, the next step is to choose a depository participant (DP) – An entity that holds your securities in electronic form.
There are two depositories in India where you can open a Demat account – NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited).
Once you have chosen a depository participant, you’ll need to choose the type of demat account you want to open. There are two types of Demat accounts; a Regular Demat Account and a Basic Services Demat Account (BSDA).
If you’re a first-time investor, we recommend opening a Regular Demat Account as it allows you to trade a wide range of securities. However, if you have a small portfolio, you can opt for a BSDA account.
Note that BSDA accounts have lower maintenance fees than Regular Demat accounts, but they have restrictions on the value of securities held in them. Additionally, for individuals whose account holds a value of up to two lakh rupees, the annual maintenance charge will be zero.
Filling and Submitting the Account Opening Form
Once you have chosen your DP and the type of account you want to open, you’ll need to fill out the account opening form. You can get the account opening form from the DP’s website or visit their office and request a form.
When filling out the account opening form, ensure that you fill in all the details correctly to avoid delays or rejections.
After filling out the form, attach all the required documents, including your PAN card, identity proof, address proof, and a canceled cheque. Submit them to the DP.
They will then verify your documents, and once they are satisfied, they will provide you with your Demat account details and login credentials.
Frequently Asked Questions about Demat Accounts.
While a demat account holds your securities in electronic format, a trading account is where you can buy and sell them. To invest in the stock market, you will need both a best demat account and a trading account.
Is it mandatory to have a bank account for a Demat Account?
Yes, you need a bank account to open a demat account. The bank account is linked to your Demat account so that dividends and other payouts from securities can be credited to it.
Can a single demat account hold multiple securities?
Yes, a single Demat account can hold multiple securities like stocks, bonds, ETFs, and mutual funds. This makes it easy to manage and track all your investments in one place.
Opening a Demat account is a simple and straightforward process that can be done online. Having a Demat account ensures the safety and convenience of your securities, making it easy to buy and sell shares in the stock market. We hope this step-by-step guide has helped you understand how to open a Demat account, and we wish you all the best in your investment journey.