Having a demat account is the foremost step towards stock market investing. Demat account or dematerialisation account holds your securities in an electronic format. While earlier, demat account opening was a cumbersome task, today, you can do it online. Online demat account opening is fast, easy and convenient. Sebi introduced the demat system in India in 1996. Read on to know the various aspects of a demat account and its various types.
What is a Demat Account?
Simply put, a demat account is an account that stores all your securities in an electronic format. It acts like a safety vault for your securities, including stocks, mutual funds, bonds, etc. When you purchase securities, they are credited to your demat account. On the other hand, when you sell securities, they are debited from your account. It works similar to a bank account.
Using the best trading platform for demat purpose provides users with intuitive tools, real-time data, and robust security to facilitate efficient and informed trading decisions.
Different Types of Demat Account
Now that you know the meaning of a demat account, let’s look at the different types of demat accounts available in India. The various kinds of demat accounts available in India are:
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Regular Demat Account
Indian citizens seeking to invest in the Indian stock market can open a regular demat account. These accounts are provided by the NSDL and CDSL with the help of intermediaries like stockbrokers. The primary aim of this type of demat account is to simplify trading and facilitate transactions.
Charges for a regular demat account vary across brokers, per their terms and conditions. Along with demat account opening online charges, you need to pay annual maintenance charges for a regular demat account. To open a demat account, provide:
- Your address and identity proof
- PAN card
- Photograph
- Proof of income
Upon submission and successful verification, you will receive your demat account details over email. The details will contain your demat login details and demat account number.
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Basic Service Demat Account (BSDA)
SEBI introduced a basic services demat account in 2012. This account mainly caters to the needs of small investors with portfolios less than ₹ 2 lakhs. Unlike a regular demat account, a BSDA account has no maintenance charges.
However, note that if the value of your investments crosses ₹ 2 lakhs, your BSDA account gets automatically converted to a regular demat account. If you don’t trade frequently, you can opt for a BSDA. BSDA makes it easy for smaller investors to participate in stock markets. You need to fulfil certain criteria to open a BSDA account:
- You should be the sole account owner
- You shouldn’t have any other demat account
- You can hold only one demat account under the BSDA category
- In the case of a joint account, you shouldn’t be the first holder
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Repatriable Demat Account
Along with Indians, several non-resident Indians (NRIs) also invest in Indian stock markets. If you are an NRI willing to invest in the stock markets, you need a repatriable demat account.
Like a regular demat account, a repatriable demat account has your securities stored in an electronic format and helps you make quick transactions and transfer shares. If you want to open a repatriable demat account, there are certain things you need to keep in mind:
- You need to comply with regulations laid out by the Foreign Exchange Management Act (FEMA)
- You need to link your non-resident external (NRE) account with your demat account.
To open a repatriable demat account, you need to provide a copy of your PAN card, passport along with visa and a cancelled cheque leaf of your NRE account. These documents must be attested by the Indian embassy of the country where you stay.
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Non-repatriable Demat Account
A non-repatriable demat account also facilitates stock market transactions for NRIs. It works similarly to a repatriable demat account, with a slight difference. A non-repatriable demat account doesn’t allow you to transfer funds outside India. If you want to open a non-repatriable demat account, you need to link it to a non-resident ordinary (NRO) account.
Demat Account Benefits
Here are the benefits of a demat account investment:
- Helps store your securities electronically, thus making them easier to track
- Facilitates buying and selling securities
- Eliminates chances of fraud, theft and loss associated with physical certificates
- Makes it easy to track and manage portfolios
- Facilitates transfer of corporate benefits like dividends and bonus shares
Which Demat Account is the Best?
Choosing the right demat account is a culmination of several factors. These include:
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If you are an Indian national, you can choose either a regular demat account or a BSDA account. You can opt for a BSDA account if you don’t trade frequently. On the other hand, if you are an NRI, you can choose either a repatriable account or a non-repatriable account.
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Competitive Charges
Irrespective of the type of demat account you choose, you must opt for services from a broker offering the most competitive rates. Check the annual maintenance charges, charges for fund transfer, buying, and selling, among others.
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Service Quality
Check the broker’s quality of service. Read online reviews and opt for the type from the one offering quality service.
Conclusion
You need a demat account for regular trading, intraday trading, or options trading. It’s your gateway to stock market investing and could be the first stepping stone to success. You can get a demat account opened offline or through a broker’s demat app.
A demat account from HDFC SKY allows investments in stocks across company verticals. Open a demat account today and invest in the stock that matches your goals and risk tolerance.
Frequently Asked Questions
What is the Main Function of a Demat Account?
Its primary function is to hold all your securities at one place and store them electronically.
What is the Difference Between Demat and Trading Accounts?
While a demat account stores your securities, a trading account helps you buy and sell them.
How Much Amount Can You Invest Using a Normal Demat Account?
There is no limit. You can invest any amount you like using a normal demat account.
Where Will I Get the Demat Summary?
The demat summary is available from the demat holding statement, which provides a summary of securities held in your demat account. Also You can access your demat summary through your mobile trading app.
