In the era of Digital India, why not save our information in digital form? In this article, we’re going to make a discussion on a smart option in this luxurious world—a Demat account, its meaning, charges, benefits, and how to open a Demat account.
A luxurious life demands money. In a world of the rat race, the more you work, the more you earn, and the better lifestyle you live. In earlier days, the stock market trading included loads of paperwork. This was getting on the nerves of patience. But in today’s digital world, you can buy luxury more smartly, not hard-working. You can invest in shares, sitting on your sofa, gazing at the phone screen. Smart, Isn’t it?
A Demat Account or, in short, it’s called dematerialized account. You can use it to manage financial securities in electronic form. It allows its investors to hold their shares in an electronic form. It is a modern form of paper-free certification. As betterment for trading in physical share certificates, the Demat account holds good.
The present world is online-based. Most of the work is over in phones/laptops with a high-speed internet connection. Thus, it becomes easier for you to trade from any part of the world. Especially when your trade shares stored in an electric form, can anyone steal? Of course, the thief won’t try to steal your electrical data, right. (Okay, you can giggle at my poor sarcasm).
If you have your Aadhar or PAN card; Forget those hassle inducing paperwork and open your Demat account with few clicks.
The Demat account holds the stocks in dematerialized form. The stocks get transformed from physical form to electronic form. It multiplies the accessibility rate. Apart from shares, it also holds your bonds, mutual funds, gold bonds, etc. with a unique ISIN number.
Don’t worry, get your phone charged and teacup. The simple words in this article about the Demat account will leave you a pro when you reach its end.
What Do You Mean By Demat Account?
Demat account is like a form that keeps your data securely in electronic form. That makes it more concrete and secure. The main purpose you would give a thought of opening a Demat account is making trade easy and secure. It’s used to hold dematerialized shares. These get converted from physical to electronic form. This makes trade much easier for online users as well as theft free.
It holds all your shares, government securities, exchange-traded funds, etc. in one place. That makes it more secure for online transactions and storage.
There are various ways in which you can easily open a Demat account. Like all other bank accounts, it can be in joint/single/many names.
Charges Of Demat Account
Gone are those days when you used to run to the company’s registrar for stamp work, paperwork. Again with the threat of theft, there was an extra cost and so much more. The Demat account takes care of everything with a click.
Yet, there are no free meals available (unless its election time). So, you’ve to pay certain mandatory charges for its smooth operation. Here’s a list-
i. Opening Charge
These are either nominal or free. You can get it done by some banks. They follow a 3 in 1 rule. Here you’ve to open three accounts at a time. Savings account, Demat account, and trading account, at once.
ii. Custodian Charge
During the paperwork days, you had to keep those share certificates well laminated. Yet, the Demat account has lessened your worry about keeping certificates safe. The storage in electrical form makes it impossible to steal. Thus, it is safer. But, you’re charged some amount for this on an annual basis.
iii. Maintenance Charge
Some maintenance charges get levied on an annual basis. Yet, they’re conditional. If your Demat account has an amount of Rs. 50,000 or less, it won’t charge you a penny. But if it is more than Rs. 50,000-2 lakh, it charges about Rs. 100-750. It also depends on the number of transactions you make. Some DPs charge quarterly while some on an annual basis or a lifetime fee of over Rs. 2,000 and above. If your value of the transaction is over Rs. 2 lakh, the annual maintenance fee goes up to Rs. 2000 or above.
iv. Transaction Charge
It depends on the type levied by your DP. It can be monthly or the number of transactions you make. Such charges vary. Yet, on average, you might get charged around Rs. 1,500 for each share you trade.
Benefits Of Demat Account
1. Less Paperwork
The era of physical certificates and loads of paperwork existed earlier. Then, trading of properties was possible only in specified quantities. In the Demat account, all your investments are held in electronic form. This reduces a significant part of the documentation. With the decrease in the number of trees, we must reduce the paperwork. Doing something when it is more ecological and cheap is satisfactory. Isn’t it?
2. Safe And Secure
The safety and security increase manifold when your data’s stored in digital form. There are hoards of security issues in physical securities. Risks can end up damaging your stealing your hard-earned shares. However, you can easily deal with it by subscribing to the Demat account. It provides you with an option to hold your shares in an electronic form. Thus, opening a Demat account ceases all your risks.
3. Reduced Cost
The physical work included more of extra costs. These include paperwork, certification, stamp duty, handling charges. Added to this, trading in physical entities involves higher transaction costs. By subscribing to the Demat account, you can eradicate such disputes.
4. Reduced Time
Due to the introduction of digital storage, the time gets reduced. With this reduced time, you can make more investments. It aims at a shorter duration work with greater efficiency. You can easily get ample time to make your cheesecake.
5. Instant Transactions
Well, the physical transactions are always tedious than electronic form. Isn’t it?
Imagine you made a line in the bank to withdraw a certain amount. At the same time, you heard your son transferred it within seconds online. Who’s smarter?
Demat accounts are an epitome of simple, hassle-free, and profitable.
6. Easy Tracking
In the Demat account, you can track your investments through a single account.
The usage of the electronic form is completely optional for you. You can hold securities either in a physical entity or an electrical form. Still, the monitoring of physical entities is tenacious than electronic form. The dematerialized counterparts are much easier. Even the buying and selling of physical entities are less workable. You would be more willing to transact in dematerialized entities than physical form. Moreover, the agents dealing with physical share is much less than digital form.
Steps To Unlatch A Demat Account?
You need three accounts to invest in the stock market in India-
- Savings bank account
- Trading account
- Demat account
All the national banks in India offer the option of providing a 3 in 1 account. You can open all the 3 accounts at a time. You can make seamless transactions with the help of these.
When coming to the Demat account, opening it is quite easy. All you need to have is a strong internet connection and select the right DP. Make sure you don’t make any delay in filling the opening form.
How To Open A Demat Account
Here is the Clear & Complete Procedure to open the Demat Account
Time needed 2 minutes
1. Select The Depository Participant
The first important thing is to select a depository participant. So, select the depository participant you want to open the Demat account with. You might get this service from most brokerages and financial institutions. The list of DPs you might get is CSDL and NSDL.
2. Fill Up The Account Opening Form
In the second step, you’ve to fill up the account opening form. Submit all honest responses. For documentation purposes, you’ve to keep certain things. (We’re going to discuss this later). Another requisite is a passport size photo for identification purposes. Make sure you have all your original documents handy with you.
3. Agree To Terms And Conditions
In the next step, you’ve to go through certain rules and regulations. After going through them, you must agree to the terms of the agreement to proceed. Make sure you sternly go through these before you proceed.
4. Carry Out The In-Person Verification
Next is the process of In-person verification. You’ll get contacted by a staff of DP (or depository participant). This is a formal verification to ensure the validity of the information provided in the form.
5. Get Demat Account Number And A Client ID:
Let the application access processing. Then you will get provided with a Demat account number and a client ID. Demat account number, also known as a beneficial owner identification number, is used to access your Demat account.
Next, after getting an agreement copy, plan your charges. It’s beneficial for future reference. Your purchases will get credited to this account. Selling of the securities debited from this account.
6. Pay The Account Maintenance Fees
There are some extra payment charges that you need to pay. Charges like the annual maintenance fee, the transaction, and the conversion fee are requisite.
The annual maintenance fee is used for the maintenance of your Demat account. On the other side, the transaction fee gets levied as a security purpose from your account. You need to pay the fees every month.
However, it differs from different service providers. Some DPs may charge you a flat fee while others pin the fee to the transaction amount. It’s subjected to a small amount. These fees also vary depending on where it is a buying or selling trade.
Apart from that, a conversion fee is also charged to you. It’s used for the conversion of physical form to the electronic form or vice-versa.
Point to note: You can open a Demat account with zero shares. You can also maintain it without any small balance criteria. You can have multiple Demat accounts. Make sure your bank account number, phone number, or address is well updated. In case you forget, there’ll be a problem since these get used for you to receive direct credit of refunds, dividends, etc.
Important Points About Demat Account
- You might get notified about revise in charges with 30 days’ notice.
- If you close your account between a year, the annual maintenance charges will get levied. It gets levied after every quarter.
- You won’t get charged for closing your Demat account.
- There’s no small number of shares for you to keep in your Demat account.
- If you’re not satisfied with your current DP, you can change him. This includes no extra charge.
- If you’re opening an account for a minor, the guardian should operate it.
- You cannot change or delete the account holder’s name. In case of needful change, you’ve to open a new Demat account and do the necessary.
Documents Required For Creating A Demat Account
Following are the documents that are required to open a demat account.
1. Proof Of Identity
This includes your PAN card, voter’s ID, passport, driver’s license, bank attestation, IT returns, etc.
You must stick the applicant’s photo issued by the central/state government with these documents. You can also carry your Aadhar card. The unique identification number contained proves your identity.
2. Proof Of Address
This includes the ration card, passport, voter ID card, driving license, bank passbook, etc.
You must carry an identity card that marks your issued address. The central or state government must have issued it. You can use the telephonic bills (landline), electricity bills, etc.
3. Income Proof
Carry with yourself a salary proof stating your income. This includes a copy of the ITR acknowledgment provided by the IT department.
4. 1-3 Passport-Sized Photos
For identification purposes. Make sure it is a recent one and not your 10 years back picture.
1. What are the secure banks to open a Demat account?
Almost all large banks in India provide an option for opening a Demat account. Banks like SBI, PNB, ICICI Bank, HDFC Bank, Yes Bank, Axis Bank own a high-class rank when it comes to trust and security.
2. Is there any way to open the Demat account for free?
Yes, it is absolutely free of cost to unlock a Demat account. Yet, there are certain extra charges associated. They’re like maintenance charges, transaction charges, etc.
3. Is Demat account safe?
Back in earlier days, it was a matter of great concern. Related to safety, Demat accounts posed nervousness. The data is stored in an electrical form and not a physical certificate. Thus, are electrical forms really trustworthy?
Okay then, calm down. Now, this is quite interesting to note whether you open your Demat account with NSDL or CDSL. The government runs these two institutions. When you choose a DP, they are actually under these government institutions. Therefore, take a long breathe and enjoy its high security.
4. How long does it take for a Demat account to form?
It varies with DP and other factors. Usually, you can get it completed in a week. But in certain cases, it takes 15-20 days.
5. Can you withdraw money from your Demat account?
No, for withdrawing, you need to shift to the trading account. The Demat account is used for storing shares in electronic form.
Today’s world is working on the nib of the internet. Starting from ordering food and grocery to making and operating bank accounts, everything is online. With modernization, we must also avail of some opportunities. From this article, you must have known by now how important the Demat account is. I hope this article helped you in acquiring more knowledge about it. Be it now or in the future!