A Demat account is very similar to a bank account, however, instead of cash you hold equity shares and other securities in the account. Demat account is beneficial for those who want to invest in stock markets. Process of trading of shares is secure and speedy when you use a Demat account. It keeps the entire experience of investing in an equity share easy and streamlined.
Investing in equity shares in physical form is a lengthy process with lots of paperwork involved and a risk of getting fake shares. Demat account is used to hold shares and securities in dematerialized/electronic form while trading online. Share certificates are converted from physical to electronic form under dematerialization, hence increasing their accessibility.
Demat account can be used to hold many types of investments like mutual funds, equity shares, exchange-traded funds, bonds, and other government securities. It is optional to hold any shares. Demat account can be maintained on a zero balance, which is again a big plus.
Key facilities offered by a Demat Account
· Share transfers – An investor can transfer physical shares into electronic form using a Demat account. For share trading, a Delivery Instruction Slip (DIS), is used and all relevant details need to be provided by the shareholder.
· Facility of loan – Demat account gives access to a large variety of loans at competitive interest rates.
· Dematerialisation and rematerialization – Conversion of securities into different forms becomes a cakewalk if you have a Demat Account.
· Options to multiple access – All the online trading activities can be completed using any smart device, and internet facility.
· Freezing Demat accounts – To avoid any risk of unpredicted debit or credit, holders can freeze their Demat account, as and when they like.
· Speed E- facility – Holders may send the instruction slip electronically instead of going physically when they use a Demat account.
Key documents required to open a Demat Account:
Opening a Demat account is very similar to opening any other bank account. The process is simple and streamlined at most leading banks, you can open demat account online. Here are the key documents most financial institutions ask for when you wish to open Demat account online with them:
· Income proof
One of the following documents (of your choice) is required-
A photocopy of the Income Tax Return acknowledgment slip.
Certificate of Net Worth or photocopy of annual statement of accounts authenticated by a CA.
Form 16 or salary slip of the current month.
Latest statement of the bank account where income history of last 6 months is mentioned.
Any documents proving ownership of assets through self-declaration.
· Identity proof
One of the following is needed :
Aadhar card/ voter ID card/ driving license/ passport.
Identity card having applicant’s photo, issued by Central / State Government and, Statutory/ Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, University affiliated colleges, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council, and credit/ debit cards issued by Banks.
· Proof of residence:
One of these can be submitted –
Passport/voter card/ Ration card/ Registered lease or sale agreement of Residence/ driving license/ flat maintenance bill/ Insurance Copy.
Utility bills like landline phone bill, electricity/gas bill which should not be more than 3 months old.
Bank Passbook not more than 3 months od.
Self-declaration of a new address
Identity card containing address from bank managers of scheduled commercial bank/ co-operative bank/ multinational foreign bank/gazetted officer/ MP
Address proof having address issued by any government body, statutory/regulatory authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, University affiliated colleges, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council.
Address proof given in the name of spouse.
How to open Demat Account?
· Choose Depository Participant.
· Fill an account opening form. Attach passport size photograph with all proofs of address and identity. Carry originals for verification.
· Depository Participant will provide rules and regulations, terms of the agreement and necessary charges to be paid.
· An In-person verification will be done.
· An account number will be provided by the DP after processing of the application.
· After becoming a Demat account holder, an annual maintenance fee needs to be paid. A transaction fee is charged for buying and selling via Demat account.