Demat account, short for ‘dematerialised account,’ is an account that allows investors to hold their shares in an electronic form. It is difficult to hold shares in physical forms due to various factors, including a lot of paperwork, tedious and lengthy process, and of course, the risk of investing in fake shares. So, such an account allows you to convert physical shares into electronic format. It acts like a bank account, where you hold your money and respective entries are done in bank passbook. Apart from shares, these accounts allow you to trade in bonds, government securities, mutual funds, and several other such forms of financial instruments, which is why it may also be known as a trading account. You can open an account with zero amount, and you don’t need to maintain a minimum balance either. As such, you can have zero balance in the account.
What are the objectives of demat accounts?
These accounts have many different functions. The most important of which are:
- To store financial instruments like stocks, shares, bonds, etc. in an electronic format
- To let you hold all your physical certificates in one safe place
- To cancel out the fear of misplacement or loss of important documents
- To electronically transfer shares and stocks
Before you decide to open one of these accounts, it’s a good idea to take stock of these important points:
- Problems associated with physical certificates like delivery failures, forgery, etc. are averted.
- It’s a safe and convenient way to hold securities.
- There’s no stamp duty charge to transfer shares.
- You can manage your share trades from anywhere, at any time.
- Shares will be immediately credited to the account, so you will not have to wait for several days.
- There has been a reduction in transaction costs, so you do not require large sums to hold certificates.
How to open demat account?
You can choose an online or offline broker who will assist you through the opening and maintenance process of a demat account. Your broker will request to fill up a demat opening form and submit copies of your documents that act as your identity and/or address proof. These documents include:
- Identify Proof: A colour scanned copy of your PAN card. Ensure that your photo and name are clearly displayed.
- Address Proof: Lease or sale agreement of residence, passport, voter ID, driving license, bank statement or passbook, telephone bill, electricity bill, gas bill, ration card, or Unique Identification Number (UID) (Aadhaar).
- Bank Proof: Either the first page of your bank statement or a cancelled cheque. Keep in mind, whichever document you provide, it should have your name on it.
- Income Proof: Acknowledgment Copy of Income Tax Return, Form 16, annual accounts, net worth certificate, bank statement, salary slips, or demat account holding.
- Specimen Signature: In case of digitally signed applications, the specimen signature is needed for any offline transactions that may occur.
To get started, you can visit https://www.kotaksecurities.com/
Once you have followed the steps above and made an application, your demat account will be activated in just a couple of hours, and then, you can start trading immediately.
Demat account opening and annual maintenance charges are subject to change.