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How Demat Account Works in India?
NSDL operates under NSE and CDSL operates under BSE. A depository is similar to a bank where securities are held in an electronic form.
When investors buy shares, their respective broker credits them from the investor’s account accordingly and an investor can view their holdings online or in the holding statement.
When an investor needs to sell shares, he/she needs to give a delivery instruction note in which details of shares sold are filled, to their respective broker. The account is debited and the investor is paid for the shares being sold. In the case of online trading, the account will spontaneously reflect the stocks sold and the amount credited to the account.
Eligibility & Documents Required to Open a Demat Account
There is no minimum age to start investing in the stock market – you do not need to be 18 years of age to hold a demat account. A minor can also hold a demat account, given it is open by the parents or the appointed guardian after submitting their respective documents. Once he/she turns 18 years of age, the depository participant will send an advisory to the individual in order to obtain certain KYC (Know Your Client) documents to open and transfer details to a new account.
PAN Card is the most important document required to open a demat account. You will have to submit a copy of your PAN card along with other KYC documents while opening a demat account. You can choose to open your demat account either online or offline.
In order to be eligible to open a demat account, you will need to submit other documents in addition to you PAN card for identification purposes –
● Aadhar card
● Bank proof – copy of passbook/bank statement
● Signature (same as PAN card)
How to Open Demat Account?
To open a Demat account, you need to follow the steps below:
Choose a Depository Participant (DP) – The first step towards demat account opening is to select a DP, which is a registered agent who can open a Demat account for you. There are many DPs to choose from, including banks, brokers, and financial institutions.
Fill the Account Opening Form – Once you have selected your DP, you will need to fill out the account opening form. You can get this form either from the DP’s office or their website. The form will require you to provide basic personal information, such as your name, address, PAN number, and other details.
Submit Documents – After filling out the form, you will need to submit certain documents to open demat account. These may include your PAN card, Aadhaar card, address proof, and identity proof.
Verification Process – Once you have submitted your documents, your DP will verify them. This process may take a few days, after which your Demat account will be activated.
Sign Agreement – After verification, you will be required to sign an agreement with the DP. The agreement will outline the terms and conditions of the Demat account.
Get Account Details – Once all the formalities are completed, you will receive your Demat account details, including your account number, user ID, and password.
Things to Know Before Opening a Demat Account
Before opening a Demat account, there are several things you should know:
1. What is a Demat account? A Demat account is a digital account that is used to hold and manage securities like stocks, bonds, and mutual funds in an electronic format.
2. Fees and charges – Before opening a Demat account, it is essential to check the fees and charges associated with it. Some common charges include account opening charges, annual maintenance charges, transaction fees, and custodian fees.
3. Documents required – To open a Demat account, you will need to submit some documents, such as your PAN card, Aadhaar card, address proof, and identity proof.
4. Brokerage firm – You will need to choose a brokerage firm to open a Demat account. It is essential to research the brokerage firm and check their reputation, services, and charges before selecting them.
5. Account features before opening a Demat account – It is vital to check the features offered by the brokerage firm. Some essential features include online trading, portfolio tracking, research reports, and customer support.
By keeping these things in mind, you can make an informed decision when opening a Demat account.
Why Open Demat Account with Religare?
Religare is a well-established financial services company in India, providing a wide range of services including Demat account services. Here are some of the benefits of opening a Demat account with Religare:
1. Hassle-free account opening process: Religare offers a simple and hassle-free account opening process for its customers.
2. Low brokerage charges: Religare charges low brokerage charges for its Demat account services, making it a cost-effective option for investors.
3. Access to a wide range of investment options: Religare provides access to a wide range of investment options, including equities, mutual funds, bonds, and more.
4. Advanced trading platforms: Religare offers advanced trading platforms that allow customers to manage their investments and execute trades efficiently.
5. Expert research and analysis: Religare provides expert research and analysis to its customers, helping them make informed investment decisions.
Overall, opening a Free Demat account with Religare can provide you with a convenient and cost-effective way to manage your investments.
Benefits of Opening a Demat Account
There are several benefits of opening a demat account, some of which are:
Easy and Secure:
A demat account allows you to hold your securities in an electronic format, eliminating the need for physical certificates. This makes it easier and more secure to manage your investments.
With a demat account, you can buy and sell securities online, which saves you the hassle of physical transactions and reduces the associated costs.
Access to a wide range of securities:
You can invest in a variety of securities such as equities, mutual funds, bonds, exchange-traded funds (ETFs), and more through a single demat account.
Quick and convenient:
With a demat account, you can buy and sell securities instantly with just a few clicks. This saves you the time and effort of visiting a broker or bank branch.
Unlike physical securities, electronic securities do not require any paperwork. This means you can manage your investments without any physical documentation.
With a demat account, you receive regular updates about your securities, such as corporate actions and dividend payments, directly in your account.
Loan against securities:
You can also use your demat account to avail of loans against your securities. This can be a convenient way to access funds without selling your investments.
Overall, a demat account offers several benefits that make it a convenient and efficient way to manage your investments.
What Is a Demat Account?
A Demat Account is an account that allows investors to hold their shares in an electronic form. The abbreviation of a Demat Account is Dematerialisation Account. To open a free Demat account online, you need to upload few documents. A Demat account number is compulsory to enable electronic settlements of all the trades.
A Demat account is similar to a bank account, where you hold your money and respective transaction entries are done in the bank’s passbook. Similarly, securities are held in electronic form and are debited or credited accordingly from a Demat Account. A Demat account can be opened with zero balance of shares.
Yes, you can open a Demat account yourself by selecting a Depository Participant (DP) and completing the account opening process online, by submitting the required documents and fulfilling the eligibility criteria.
Any individual who is a resident of India and 18 years old or above is eligible for opening a demat & trading account, provided he/she has a PAN card. After verifying your details, your process of opening a demat account begins.
If you are opting for online KYC, your demat account will be activated in less than 24 hours. However, if you opt to open your demat account by submitting physical documents, it will take 2-3 days for your demat account to be active.
No, you don’t have to any charges on your demat account on a monthly basis. However, one has to pay a nominal annual fee or account maintenance charge to the stockbroker in order to keep your account active.
You will have to pay income tax on the gains you have made by selling your shares that you hold in your demat account. Long-term capital gains (LTCG) over Rs 1 lakh on listed equity shares per financial year are taxable at the rate of 10% without the benefit of indexation. STCG covered under section 111A is charged to tax @ 15% (plus surcharge and cess as applicable).
If you treat your income as capital gains, expenses incurred on such transfer are allowed for deduction. Also, long-term gains from equity above Rs 1 lakh annually are taxable, while short term gains are taxed at 15%.