The dematerialisation or Demat account is basically an account used by shareholders to facilitate online share trading and storing their securities in an electronic format, making it more convenient to transact. The benefit of having a Demat Account is to avoid tiring paperwork, time-consuming procedures, and the risk of getting access to fake shares.
The Demat account is like a bank account; while deposits and withdrawals are credited and debited in a bank account, selling and buying of shares are credited and debited in the Demat account.
Also, maintaining shares is not mandatory while opening a Demat account, you can always maintain a demat account without any shares.
Demat accounts can be utilized to hold various types of investments, including mutual funds, government securities, bonds, exchange-traded funds, and so on. If you want to invest and trade online, you have to Open a Demat Account after choosing a Depository Participant (DP). A DP acts as an intermediary between the investor and the depository.
Next, you have to fill an account opening form either physical or online, with your passport-sized photograph and photocopies of proof of address, proof of income, and proof of identity attached.
Proof of income can include any one of the following:
· Photocopy of ITR acknowledgment slip
· Certificate of net worth
· Current month’s salary slip
· Form 16
· Bank account statement of the last 6 months
Proof of address can include any one of the following:
· Ration card
· Voter ID card
· Utility bills (electricity or telephone)
· Self-declaration of a new address given by the judges of the High Court and Supreme Court
· Address proof given in the name of the spouse
Proof of identity can include any one of the following:
· PAN Card
· Aadhaar card
· Voter ID card
· Driving license
· Any identity issued by the government
PAN card is compulsory and you must carry your original documents for verification.
The DP will provide you a copy of the rules and regulations and terms of agreement for which you have to pay the required charges/fees. Also, you’ll be contacted by a representative of the DP during in-person verification.
Once your application is processed, you will get your account number or client identification number needed to operate the Demat account online from the DP. You must pay an annual maintenance fee and transaction fee for purchasing/selling shares through your Demat account.
With a Demat account, you can transfer the shareholdings of an investor, access different types of bank loans, freeze accounts for a limited period, and much more. Add to it, the ease of access across devices and the ability to send instruction slips to the DP electronically, you have a user-friendly way of investing in shares on your fingertips.