A Demat Account: What It Is, What It Does, And How To Open One

By Author: Mickel Smith
Total Articles: 6
Comment this article

To invest in actual equity shares, there is a long process, a lot of paperwork, and a great danger of receiving phony claims. An open trading account is essential to keep things simple and organized throughout the process. To keep shares and securities digital, traders utilize a Demat account. Dematerialization is the process of converting your share certificates from physical to electronic form to make them easier to access. Demat Account numbers are required for electronic settlement of deals.

It is comparable to a bank account where you deposit money with the bank and keep track of your debit and credit balances in a bank passbook. Similarly, any purchases or sales of shares will be reflected in your Demat Account as credits or debits, accordingly when you open trading and demat accounts. Various investments, such as equity shares, ETFs, mutual funds, bonds, and government securities, may be held in it. You can create a Demat Account even if you don't own any stock, and you can keep your account balance at zero.
Do Demat Accounts have any additional features?

Now, let’s have a look at the advantages ...
... of Demat and trading accounts.

Shares are transferred

An investor's shareholdings may be transferred using a Demat Account. You may use a Delivery Instruction Slip (DIS) if you want to trade stocks. To ensure a seamless transaction, fill out this sheet with all pertinent information.

Borrowing capacity

You may be able to get a bank loan based on the securities you have in your Demat Account. Using these assets as security for a loan from your bank is an option.

Decomposition and recomposition

Converting securities into multiple formats is simplified if you have a Demat Account. To dematerialise your shares, you may direct your depository participant (DP) to do the appropriate actions. Alternatively, you may request that the electronic securities be returned to their original physical form.

To open a Demat account, what documentation is required?

You may think of a Demat account is similar to a bank account, except that it holds stocks rather than cash. Creating a Demat account and the needed documentation is the same across companies. Verify that any document with an expiration date is still valid before submitting it to open trading account online.

Proof of a Paycheck

●Copy of the Income Tax Return Acknowledgement Slip (ITR) provided during tax filing are required by demat account providers of India.

●A Chartered Accountant verified a copy of the company's yearly financial statement.

●Form 16 or the most recent pay stub.

●A list of the assets held in a Depository Participant's Demat Account.

●The most recent bank account statement includes a six-month revenue history.

●Self-declaration paperwork proving the ownership of assets.

Identity Documentation

●Possession of a legitimate picture on a PAN card

●Aadhaar card, voter ID card, driver's licence, and passport are all examples of government-issued photo identification.

●Card with an applicant's photo issued by Central and State Governments, Statutory/Regulatory Authorities; Public Sector Undertakings; Scheduled Commercial Banks; Public Financial Institutions; University Affiliated Colleges; Professional Bodies; Credit/Debit cards issued by Banks; and other forms of identification.

Assertion of Residence

●Passport/Voters Identity Card/Ration Card/Registered Lease Agreement of Residence/Driving License/Flat Maintenance bill/Insurance Copy.

●There are three months old utility bills, such as a landline phone bill or an electricity/gas bill.

●Using a bank passbook that is no older than three months.

●Judges of the High Court and the Supreme Court declare their new addresses.

●When a bank manager, a member of the Legislative Assembly, or a Member of Parliament, issues a letter stating that the person's address has been verified, the letter is considered official.

●The spouse's name appears on the address proof.
To open a Demat Account, what are the steps?

Follow these simple steps to start a Demat Account:

●A passport-sized picture and photocopies of the needed identification papers must be included in the account opening form. Unless you are exempted, you must have a PAN card. The original documents should be brought with you to verify your identity.

●An official copy of all of the rules and regulations, as well as any fees you'll be required to pay, will be sent to you by the DP.

●A DP representative will call you to verify the information you provided on the account opening form during an In-Person Verification.

●The DP will provide you with an account number or customer ID after processing your application. Demat Account online access will need this data.

●Demat account holders are expected to pay yearly fees for the upkeep of their accounts. Additional transaction fees would apply if you used the Demat Account to purchase or sell securities. The DP may charge you an additional fee for dematerialising your shares if they are in physical form.

●Even if you don't own any stock, you may establish a Demat Account. In addition, there is no need to keep a certain amount in the account.