You would be required to open a dematerialisation account or a demat account if you intend to directly invest in the equity markets or stock markets. A demat account stores your financial securities in electronic form.
If you are an equity investor, you need to have a bank account, a trading account, and a demant account to buy, hold, and sell your equity investments.
The investments you do through a trading account are stored in your demat account in digital form. NSDL and CDSL are the two government-mandated depository organisations or participants that maintain demat accounts in India. Your brokerage firm will partner with either of them to open a demat account for you.
Procedure to Open a Demat Account
To open a demat account, you will be required to furnish proofs of identity, address, income, bank account, copy of your PAN, and passport photographs. You can use PAN as your ID proof as well as any of the government-approved IDs such as driver’s license, passport, or voter ID. As address proof, you can use government IDs such as passport, voter ID, utility bills, recent bank account statements or passbooks, or any other approved proof. For proof of income, you need a copy of your recent income tax returns, salary proofs such and salary slips.
Here are the steps to follow for opening a demat account:
- Choose a depository participant (DP). This could be your bank which offers its in-house online trading services, or any online brokerage platforms that exist.
- Once you have chosen a DP, you will have to fill their application form with a recent passport size picture.
- Pay the DP the application charges.
- You will also have to attach photocopies of the required documents to establish your identity and address with the duly filled form.
- The depository participant (DP) will provide you with an agreement copy that will have details about the necessary charges and other rules and regulations. You will be required to sign the agreement after carefully going through it.
- For opening your account, the DP will conduct your in-person verification. You will have to provide all the relevant details whenever DP contacts you.
- You will get an account number or client ID after your form is successfully verified and processed. You can use these details to access your online demat account.
Before opening a demat account, make yourself aware of the associated charges, not just at the time of the account opening but also its annual fees. Also, the online trading via your brokerage will attract fees per transaction as described in your service contract.