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Demat stands for dematerialized account, and in simple terms, it is an electronic depository that holds shares and securities in digital form. A demat account replaces the physical certificates of securities and thus allows broader access for trading and convenience in investing in financial instruments.
What Is a Demat Account?
A demat account is an account that holds the securities in an electronic format. When an investor buys shares through the stock exchange, those shares are credited to the demat account. When the investor sells the shares, the demat account debits the securities. It removes all the risks associated with having a physical certificate like theft, forgery, or damage.
Documents required to open a Demat account
To set up a demat account, one has to submit many documents. These generally include:
Proof of identity: PAN card is mandatory
Proof of address: Aadhaar card, voter ID, passport, or utility bill
Photograph: Passport-size photo
Bank details: Canceled cheque or passbook copy
Types of Demat Accounts in India
Three types of demat accounts exist in India.
Regular Demat Account: Charged for resident Indians who want to invest in the Indian financial market.
Repatriable Demat Account: This account allows NRIs to trade in India and repatriate the funds abroad. It requires a Non-Resident External (NRE) bank account.
Non-Repatriable Demat Account: It is meant for NRIs who do not wish to repatriate funds abroad. It links to a Non-Resident Ordinary (NRO) account.
How Can One Choose the Best Demat Account in India?
Investors should consider the following parameters for choosing the best demat account in India. These parameters directly link to the service offerings, fee structures, and support systems provided by the depository participants.
1. One-Time Charges for Opening the Account
Certain depository participants charge a one-time fee to open a demat account, while others provide this service at zero cost. Understanding these charges helps investors manage their initial spending.
2. Annual Maintenance Charges (AMC)
This is the agreed annual fee that the customer pays to maintain the demat account. It tends to vary with the type of account opened as well as services rendered. Thus, it is prudent to check the AMC structure before one opens the account.
3. Transaction Charges
Depository participants debit these in case of any kind of debit transaction (i.e., when securities are sold). Some may offer either a flat charge per transaction or apply a percentage-based charge. Understanding this structure is essential to estimate trading costs.
4. Ease of Account Access
Many people prefer depository participants whose systems integrate with online functionality such as mobile applications and web portals. The ability to see holdings, statements, and trades online enhances the investment process.
5. Customer Service and Support
A responsive customer service team can greatly help in resolving any query regarding accessing the account, issues with a transaction, or documentary verifications. Certain participants provide online chat support, telephonic assistance, and email support for their customers.
6. Integration with Trading Account
Many brokers provide accounts with a dual or triple feature, combining them with a trading account, a demat account, and a savings bank account. Choosing such an integrated service eases the task of buying and selling securities.
7. Compliance with Regulatory Authority
All depository participants must abide by SEBI norms and must be registered either with NSDL or CDSL. An investor should verify the regulatory status of the concerned participant before opening an account with it.
8. Nomination Facility
This allows the account holder to designate a beneficiary in case the unforeseen happens so that their holdings can be transferred without hassle to legal heirs.
9. Reports and Statements
Some depository participants provide detailed reports and analyses using the profit/loss statements, tax reports, and capital gains summaries. These help in record-keeping or tax filing.
How to Open a Demat Account: Step-by-Step Process?
Select Depository Participant: Compare different participants on their offerings.
Fill out the Account Opening Form: Online or at a branch office.
Submit Required Documents: PAN, address proof, bank details, and photograph.
Complete In-Person Verification: This can either be done physically or by video call.
Sign Agreement: Rights and duties of both parties.
Receive Client ID: The system may take some time to process the ID and credentials.
Conclusion
Understanding how to choose the best demat account in India involves going through most, if not all, of the considerations concerning the charges for the account itself, access methods, regulatory compliance, and service infrastructure.