A Demat or dematerialisation account is a savings account with significant uniqueness: a shareholder’s securities and shares are held in it in a dematerialised or electronic format, instead of in the form of money. In a Demat Account, an individual holds all the investments he had made in shares, securities, mutual funds, bonds, etc. in a single account. Shares are usually saved in the Demat Account when an individual buys them online thereby facilitating the ease of access for the shareholder.
In dematerialisation, the shareholder’s share certificates are converted from physical form to electronic form. Dematerialisation, thus, helps in cutting down on the lengthy process of investing in equity shares in physical form and also providing swift access by freeing one from the hassling paperwork.
The Demat Account functioning is similar to a bank account in the sense that purchasing or selling of shares is reflected in the Demat Account as either being credited or debited respectively. To open a Demat account, it is not mandatory to possess any share whatsoever for the time being. The account can be opened without having any share at all. At the same time, the Demat Account can be maintained with zero balance as well.
Opening a Demat Account is not tedious at all. Also, one can open online Demat Account with a minimum process. The documents required to open Demat account in different organisations are more or less similar.
The documents required for a Demat Account can be submitted online. SOURCE: Pixabay
Following are the cumulative list of documents required for opening a Demat Account:
I. Identity Proof
One of the following can be submitted as proof of identity:
- PAN Card with a valid photograph
- Aadhar card/ Driving licence, Voter’s card, Passport, etc.
II. Income Proof
One of these documents can be submitted to account for the proof of income:
- A salary slip for the running month.
- A photocopy of the Income Tax Return (ITR) Acknowledgement slip as submitted to the Income Tax Department upon tax filing.
- A statement of the bank keeping the investor’s income history of at least the past six months of the account holder.
- Certificate of annual income or net worth and their photocopies duly attested by an authorised Chartered Accountant.
- Documents providing the ownership of assets in the form of the account holder’s self-declaration.
III. Address Proof
For the address proof, one of the following can be submitted:
- Aadhar card/ Driving licence, Voter’s card, Passport, etc.
- Utility bills like electricity bill, telephone bill, gas bill, etc. which are not older than three months.
- Updated bank passbook having atleast the last three months transaction details.
- Address proof as given in the name of the account holder’s spouse.
Once the application form is submitted along with the account holder’s KYC documents, the individual might be required to present in person in the DP’s (Depository Participant) office so as to get his documents verified.
How To Open A Demat Account
Following are the steps to enable one to open a Demat account:
- First and foremost, one has to go through the apparent step of choosing a Depository Participant (DP) with whose organisation the investor would want to open a Demat Account.
- Then comes the step for filling an opening form to open Demat account. This process also involves a passport size photograph to be attached along with the necessary documents as an income, address and identity proof.
- The DP provides a document of terms and conditions. The account holder would be required to pay the necessary charges if any. Though the best ones are those which provide the facility to open a Demat account with zero charges.
- After the application is processed, the account holder will be provided with an account number. In addition to this, the investor will also be assigned a client ID. These pieces of information will be necessary to access the Demat Account.
- A Demat Account holder would require to pay annual maintenance charges if any. However, it is important to note that there are financial institutions that also provide the advantage of zero annual maintenance charges. If the shares are in physical form, charges might be incurred to convert them into dematerialised form.
Advantages Of Holding A Demat Account
Transfer of Shares
With the help of a Demat Account, an investor’s shares can be transferred by using a Delivery Instruction Slip (DIS). All the details can be inscribed into this slip for a swift transaction.
Access to Loans
The securities in an investor’s Demat Account can enable him to access different types of loans from the lenders. These securities or shares can be used as collateral to avail a loan.
Physical to Dematerial and Viceversa
With the help of a Demat Account, the conversion of shares becomes quite easy. The investor can request the DP to convert his physical share certificates into the electronic form. Also, the electronic shares too can be asked to be reconverted into the physical share certificates.
Ease of Accessibility
A Demat Account can be accessed through numerous media options. One can keep track of his shares or securities by monitoring them through various devices be it a computer, smartphone or a tablet. The same media accessibility also holds for the purposes of investing and trading.
A Demat Account holder can get the dividends, refunds or interest from the company on his securities automatically into his Demat Account. Besides that, all the transactions related to equity shares like stock split or bonuses are automatically updated into the account.
Freezing the Demat Account
A Demat Account holder can freeze his account for a specific period as and when required without the compulsion of providing any specific reason. Freezing the account will enable him to avoid any unnecessary or unrequired deduction or addition to his account. However, to freeze an account the investor has to maintain a specific amount of securities in his account.
A Demat Account, thus, comes with numerous benefits to add to the advantage of an investor. The process to open Demat account has become a matter of ease, even for a minor, especially with the availability of the online application process. Moreover, the risks involved with the Demat Account are considered negligible and therefore it is a preferred medium to keep stock of all of an investor’s shares. With the selection of a compatible DP, an investor can manage his securities effectively.