If you have ever decided to start stock trading or searched for information about it, you must have heard about the Demat account.
Investing money into the share market, and buying stocks, and other securities is a different thing. But, after buying those, where they are going to stay?
You need a safe place for that. But, there are lots of things to know about the demat account.
In this article, we will cover everything about demat accounts. The topics that will be discussed in that article are,
- What are demat accounts?
- Demat account types.
- Benefits and features of demat accounts.
- How you can grab a demat account for yourself?
- Top demat accounts in India.
So, let’s start the article with the,
What is a demat account?
A demat account or dematerialized account is a kind of account to hold your stocks and shares, mutual funds, bonds, and other securities in a digital form. A major difference between a bank account and a demat account is, you cannot open it on your own. With the required documents, you can go to your preferred bank and open your account.
But, to open a demat account you need NSDL and CSDL.
NSDL stands for National Securities Depositories Limited.
On the other hand, CSDL means Central Securities Depositories Limited.
These are actually banks, and other financial firms or organizations. To open an account you have to go to them. However, They will add you just as a participant.
In the past, the demat system was not available. If someone bought shares in a company, they would receive papers. The same thing would happen with selling the shares. Now, each time you buy or sell a share, the procedure is exact.
But later, when the demat accounts come into place, there is no need for any paper. Whether you buy a share or sell, all the records are kept on your demat account in digital form.
Depending on the purposes and their usage, there are three types of demat accounts.
Types of demat accounts:
In India, there are three types of demat accounts,
- Regular demat account.
- Repatriable demat account.
- Non-repatriable demat account.
Regular demat account:
The regular demat account is for Indian residents who want to buy or sell shares and looking towards simplicity, most investors go for this regular demat account. National Securities Depository Limited and Central Depository Services Limited issue these regular demat accounts with stockbrokers and depository participants.
Repatriable demat account:
The Repatriable demat account is for NRI people who don’t live in India. For many reasons, many Indians don’t live in India but still they are interested in the Indian share market. With this demat account, they can transfer their funds to several countries around the globe. However, if an NRI wants to open a repatriable demat account, the person must adhere to the rules of the Foreign Exchange Management Act(FEMA).
Now the rest,
Non-repatriable demat account:
The non-repatriable demat account is quite similar to the repatriable demat account.
Non-repatriable demat accounts are also called NRO demat accounts. With these accounts, people cannot transfer their funds to their resident country. Users cannot convert their earnings to foreign currencies at all. To open this type of demat account a linked NRO or Non-resident ordinary savings bank account is required.
Depending on your requirement and the criteria you fulfill, you can have a demat account for yourself.
Now let’s look at the,
Benefits of a demat account.
Here are some benefits of demat accounts.
It’s easier to safeguard your shares:
Since demat accounts are being used, there is no worry about losing or theft of the physical share certificates. All of your shares, bonds, and other securities are safe in a digital form which you do not need to think about placing in a safe and secure place either.
Easy-share selling and buying:
Demat accounts have made it easy to buy or sell and share. Previously when the whole task was done on paper, it was quite time-consuming and full of hassle. Now, demat accounts have made it very easy.
Less fraudulent activities:
When you go with the paper base share purchase or selling, chances are high of fraud. But not with the paperless demat system. All the data related to selling or purchasing are stored in digital format.
Easy loan access:
On your demat account, all of your shares, bonds, and other securities are stored. You can use them as loan guarantees to banks and other financial institutes.
Fewer charges:
Demat accounts have fewer charges than the conventional charges you pay. As demat accounts are electronic, you have less amount of charges. For example, you need to pay fewer stamp duties and other handling charges. Other handling charges. With most demat accounts, there is only one charge, that is, the brokerage charge.
NO TDS at all:
TDS or Tax deducted At Source is a type of tax payable to some specific type of payment made to a person. The good thing with a demat account is, you do not need to pay TDS on the securities placed on your demat accounts. Moreover, you do not need to pay the TDS when you earn interest from the securities of your demat account. However, demat account holders need to keep their securities in demat mode to avoid the TDS charges.
Makes it easier for foreign investors to invest:
Demat accounts are extremely helpful to attract foreign investments. With these demat accounts, investors from other countries can buy shares in the Indian market which is a direct investment in the Indian economy.
These are the benefits of demat accounts and we are sure most people are not aware of them at all. But, as it is inevitable to have one in order to invest money into the share market, you may want to know how to even open a demat account for yourself.
How to open a demat account?
To open your demat account typically requires the below-mentioned documents.
- Your Passport size Photo.
- Your Identity proof(such as AADHAR CARD, Voter ID, Driving Licence, and Passport).
- PAN card.
- Bank statement.
- Income Tax Returns.
- Residential proof.
However, as the use of the internet is growing so fast, you can open a demat account online too. You can either open it with any brokerage firm or with some bank.
If you go for a fully online process, you may need to fulfill the e-KYC process.
As mentioned earlier, you can open your bank either with your preferred bank or brokerage firms, you need to look at many things before you open your demat account.
Things to look at before you go for your demat account:
Demat account means, you are going to invest your money, and financial organizations and banks are eager to serve you on this.
And no wonder there are lots of options available in India if you want to open your demat account. Let’s see the points you should check before you want to open your account. Opening a demat account is a simple and hassle-free process, but there are some things you should check before you choose a service provider.
Here are some of them,
Charges for your account:
There are several fees needed for your demat accounts such as account opening charges and brokerage commissions on the selling and purchase of the shares. Annual charges for maintaining your account. Many companies offer free demat accounts while others charge. Brokerage commission is also a matter of consideration.
Ease of account opening:
Another thing that you might want to check is the process. Different banks or brokerage agencies have their own account opening process. So, before you apply, make sure about their process. For example, if you join a fully online platform, you can proceed with e-KYC where you only need to check where you only need to complete the video KYC process. That takes comparatively less time than usual.
Services and features:
You should also check the services and features offered by the service provider, such as online access, mobile app, customer support, research reports, alerts, etc. You should choose a service provider that offers the services and features that you need and value.
Reputation and reliability:
You should also check the reputation and reliability of the service provider, such as their track record, customer reviews, ratings, awards, etc. You should choose a service provider that has a good reputation and is trustworthy and reliable.
Compatibility and convenience:
You should also check the compatibility and convenience of the service provider, such as their network of branches, partners, brokers, etc. You should choose a service provider that is compatible with your preferred broker or trading platform and is convenient for you to access and use.
These are some of the things you should check before opening a demat account. By doing so, you can ensure that you get the best value for your money and enjoy a smooth and hassle-free investing experience.
If you are planning to invest in the stock market, you will need a demat account to hold your shares and securities electronically. A demat account is like a bank account that stores your money, except that it stores your stocks.
In India, there are numerous platforms where you can have a demat account for yourself. Below they are as mentioned,
Top Demat accounts in India that you can open in 2023:
Zerodha Demat Account:
Zerodha is one of the most popular and trusted online brokers in India, with over 5 million customers. Zerodha offers a low-cost and user-friendly demat account that charges zero brokerage for equity delivery trades and a flat fee of Rs. 20 per order for intraday and F&O trades. Zerodha also provides a sleek and powerful trading platform called Kite, which has advanced features like charts, indicators, alerts, and order types. Zerodha also offers various educational and research resources, such as Zerodha Varsity, Zerodha Streak, and Zerodha Smallcase.
Upstox Demat Account:
Upstox is another leading online broker in India, with over 4 million customers. Upstox also offers a low-cost and easy-to-use demat account that charges zero brokerage for equity delivery trades and a flat fee of Rs. 20 per order for intraday and F&O trades. Upstox also provides a fast and intuitive trading platform called Upstox Pro, which has features like charts, watchlists, scanners, and order types. Upstox also offers various value-added services, such as Upstox MF, Upstox IPO, and Upstox Gold.
Angel Broking Demat Account:
Angel Broking is one of the oldest and largest full-service brokers in India, with over 1 million customers. Angel Broking offers a flexible and convenient demat account that charges zero brokerage for equity delivery trades and a flat fee of Rs. 20 per order for intraday and F&O trades. Angel Broking also provides a robust and comprehensive trading platform called Angel Broking App, which has features like charts, news, research reports, and recommendations. Angel Broking also offers various premium services, such as Angel ARQ Prime, Angel BEE, and Angel SpeedPro.
ICICI Direct Demat Account:
ICICI Direct is one of the most reputed and reliable full-service brokers in India, with over 9 million customers. ICICI Direct offers a secure and hassle-free demat account that charges brokerage based on the plan you choose, ranging from 0.55% to 0.03% for equity delivery trades and from Rs. 95 to Rs. 20 per order for intraday and F&O trades. ICICI Direct also provides a sophisticated and versatile trading platform called ICICI Trade Racer, which has features like charts, alerts, research reports, and tips. ICICI Direct also offers various exclusive services, such as ICICI Direct Prime, ICICI Direct Neo, and ICICI Direct Insta MF.
HDFC Securities Demat Account:
HDFC Securities is one of the most trusted and respected full-service brokers in India, with over 2 million customers. HDFC Securities offers a safe and convenient demat account that charges brokerage based on the plan you choose, ranging from 0.50% to 0.05% for equity delivery trades and from Rs. 25 to Rs. 10 per order for intraday and F&O trades. HDFC Securities also provides a user-friendly and feature-rich trading platform called HDFC Securities Mobile Trading App, which has features like charts, news, research reports, and recommendations. HDFC Securities also offers various value-added services, such as HDFC Securities ProTerminal, HDFC Securities Smallcase, and HDFC Securities IPO Smart.
Many people have a confusion about the demat account. Are they mandatory too for mutual fund investments? The answer is not at all. You do not need any demat account for your mutual fund investments. Even though mutual funds are directly linked to the share market, their value goes up and down as the share performs. But, you can just open a mutual fund for yourself with your bank account.
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