As per the Securities and Exchange Board of India (SEBI) guidelines, a Demat account is mandatory for those willing to invest in the stock markets or trade securities. With the popularity of online trading platforms, the Demat account opening process has become more streamlined. You can now open an online Demat account or a 2-in-1 Demat and trading account, which allows you to store and trade securities in electronic form.
However, one crucial aspect of the Demat account opening process is documentation. This blog will guide you through the required documents for the Demat account, eligibility criteria, and the steps involved in opening an online Demat account. Keep reading.
What is a Demat account?
Before you move on to the Demat account required documents, you must know what a Demat account is. It is the short form for a Dematerialised account, which allows you to store securities such as stocks, bonds, and mutual funds in digital format. A Demat account eliminates the need for physical share certificates, making trading more convenient and secure.
A Demat account works similarly to a savings bank account. Just like the latter is used to store your money in electronic form, a Demat account stores your financial securities securely. When you place a buy or sell order on the stock exchange, the transaction is processed through your Demat account, where the securities are automatically credited or debited.
Documents Required for Opening a Demat Account
The market regulator, SEBI, has made it mandatory for stockbrokers to collect certain documents from investors willing to open a Demat account. The Demat account required documents can be classified into several categories:
Proof of Identity
You need to submit proof of your identity for opening Demat account with a stockbroker. It can be any of the following documents:
- Aadhar Card
- PAN (Permanent Account Number) Card
- Voter ID Card
- A Valid Passport
- Driving License
- Ration Card
Proof of Address
You are also required to submit proof of your address to open your Demat account. You can submit any of the documents mentioned below:
- Aadhar Card
- A Valid Passport
- Voter ID Card
- Driving License
- Ration Card
- Lease agreement or house registration certificate
- An insurance policy issued in your name
- Utility Bills (electricity, water, or gas bills) not more than three months old
- Any other proof of address issued by the state or central government
Proof of Income
For specific types of trading, such as options trading, submitting proof of income is mandatory. Below are the documents accepted as proof of income:
- Salary slips not more than six months old
- Income Tax Return (ITR)
- Form 16 (if you are a salaried individual)
- Bank statements for the last six months
- Net worth certificate duly signed by a Chartered Accountant (CA)
Proof of Bank Account
Many investors often ask, “Do I need a bank account for a Demat account?” The answer is Yes. A valid bank account is essential to transfer funds to and fro from your Demat and trading account. You can submit the following documents as proof of bank account at the time of your Demat account opening:
- A Cancelled Cheque
- Bank Passbook
- Recent Bank Statements
Photographs and Signature
Lastly, to complete your Demat account opening process, you will need to submit your signature and passport-size photograph. You can submit these documents by uploading them in the pdf or jpeg format on your Demat app or website.
What is the minimum age to open a Demat account?
A common question people often ask is, “What is the minimum age to open a Demat account?” In India, the minimum age to open a Demat account is 18. However, minors can also open a Demat account under the guardianship of a parent or legal guardian. Once the individual turns 18, the account can be transferred to their name.
Where to Open a Demat Account?
Another common question that investors ask is, “Where we can open a Demat account?” The following entities allow you to open a Demat account in India:
Banks
Several prominent banks, such as HDFC, ICICI, and SBI, allow you to open a Demat account in India. Apart from Demat account opening, these banks also provide services such as stock market advisory, portfolio management, etc.
Discount Stockbrokers
Numerous discount stockbrokers offer Demat accounts in India. Some of them include Zerodha, Angel Broking, and Upstox. These brokers often provide a Demat account app or online trading and account management.
Depository Participants
Both NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) are depositories that manage Demat accounts in India, and their authorised DPs facilitate account openings.
How to Open a Demat Account?
Now that you know the required documents and the eligibility criteria to open a Demat account, let’s move on to the Demat account opening process. Most stockbrokers in India facilitate online Demat account opening, which involves the following steps:
Choose a Stockbroker
The first step on how to create a Demat account involves choosing a stockbroker. Make sure to compare various parameters, including the brokerage charges, services offered, and user-friendliness of the web trading platform, among other features, while making the choice.
Fill Out an Account Opening Form
Next, you need to fill out an online Demat account opening form through a Demat app or website. You need to enter your personal details, such as name, mobile number, residential address, email ID, etc., bank details, and trading preferences.
Submit the Required Documents
After filling out the Demat account opening form, you can submit the required documents by uploading them directly on the Demat app or website. The Demat account required documents are mentioned above in this blog.
Complete Your e-KYC
For faster processing, you can complete your Know Your Customer (KYC) process. This involves verifying your identity electronically, which can significantly speed up the process.
Wait for the Verification
Once you have completed the Demat account opening process mentioned above, wait for the verification process. The stockbroker will verify your documents and KYC details before opening your Demat account. You will receive a text message on your registered mobile number once the verification process is complete.
Conclusion
Opening a Demat account is an essential activity for anyone looking to invest or trade in the stock markets. Understanding the Demat account required documents, eligibility criteria, and the online Demat account opening procedure can make the process hassle-free for you.
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