Demat accounts, interestingly, have been quite popular in recent years. The rise in the number of Demat account users is mostly due to a substantial change in Indians’ savings patterns from traditional fixed deposits to new options such as equities and shares.
Many people are fascinated by news about the stock market’s growth or decline. Opening a Demat Account is the first step towards taking the plunge. It’s a word that gets thrown about a lot in the world of trading and investment. When it comes to investing in equities shares, having a Demat account is essential.
What is a Demat Account, and how does it work?
The term “demat account” refers to a dematerialisation account. A Demat Account is a type of account that allows you to keep stock market shares as well as other assets such as IPOs, bonds, government securities, mutual fund units, and exchange traded funds (ETFs). A Demat Account ensures the protection of all such financial investments while also making their administration and upkeep easier.
The following is a list of key papers that must be submitted in order to start a Demat account.
- Valid photo ID evidence, such as an Aadhaar card, a PAN card, a voter ID card, or a driver’s licence.
2. Proof of address or residency, such as a registered lease agreement, driver’s licence, passport, landline phone bill, electricity bill, apartment maintenance bill (if applicable), copy of insurance, gas bill, and so on.
3. A bank passbook or account statement that will serve as verification of your bank account (not older than 3 months from the date of receipt of documents).
4. Your most recent pay stubs or your income tax return (mandatory for currency and derivatives segment). This will serve as evidence of your earnings. Although, salary slips are optional as a lot of brokers don’t ask for the same.
STEPS TO OPEN DEMAT ACCOUNT
- Select a depository participant (Broker) who meets your demands and specifications. DP services are available in India through banks, stockbrokers, and internet investment platforms. For example: Zerodha, Upstrox, Sharekhan, Angel Broking and so on.
- Go to the DP’s official website and fill out the Demat account application. Assign a nominee to your account as well.
- After completing the form, complete the information on Know Your Customer (KYC) regulations.
- Scan and submit the KYC papers, which include identification evidence, address proof, bank account statement, and proof of income. Self-declaration will be used to establish asset ownership.
- After successfully submitting your paperwork together with the relevant papers, you will be asked to complete the ‘In-Person Verification’ or IPV process. This step is required and is conducted both offline and online. For offline verification, the investor must be physically present at their office and online is done via video call.
- After that, you must sign a contract with the DP. Both the DP and the investor have obligations and rights under this agreement.
- The request for a Demat account will be authorised when the DP has thoroughly checked the paperwork and other completed forms.
- Finally, you (the investor) will be given a Beneficial Owner Identification Number (BO ID) that may be used to access your Demat account online.
Notes to keep in mind:
- The DP’s website will provide you with a summary of fees and charges for maintaining your account. This allows the investor to compare the charges of different DPs.
- It is critical to link the Demat account with the trading account, as a trading account is required for stock market trading. Your broker’s app will do both for you.