Opening a demat account is the first step to investing in the stock market. A demat or dematerialisation account stores your securities in digital form. While demat account opening used to be a lengthy process, it can now be done online quickly and conveniently. SEBI introduced the demat system in India in 1996. Let’s explore the key features of a demat account and the different types available.

What is a Demat Account?

A demat account stores your financial securities like stocks, bonds, and mutual funds in electronic form. It simplifies buying, selling, and holding investments by eliminating the need for physical share certificates. 

When you buy a share, it gets credited to your demat account, and when you sell, it gets debited. This makes transactions quick, safe, and convenient. By holding everything digitally, a demat account reduces paperwork and lowers the risk of loss or damage to physical documents. It’s essential for anyone who wants to trade in the stock market.

Using the best trading platform for demat purpose provides users with intuitive tools, real-time data, and robust security to facilitate efficient and informed trading decisions.

Different Types of Demat Account

Now that you understand what a demat account is, let’s explore the different types of demat accounts available in India. The main types of demat accounts in India are:

• Regular Demat Account

Indian citizens interested in investing in the Indian stock market can open a regular demat account.  The NSDL and CDSL offer these accounts through intermediaries such as stockbrokers. The demat account opening online charges vary depending on the stockbroker’s terms and conditions. 

In addition to the account opening fees, you will also have to pay annual maintenance charges. To open a demat account, you will need to provide the following:

• Address and identity proof
• PAN card
• Photograph
• Proof of income

After submitting the required documents and completing verification, you will receive your demat account details via email, including your demat login information and demat account number.

• Basic Service Demat Account (BSDA)

In 2012, SEBI introduced the Basic Services Demat Account (BSDA) to cater to small investors with portfolios under ₹2 lakhs. Unlike a regular demat account, a BSDA comes with no maintenance charges.

However, if your investment value exceeds ₹2 lakhs, your BSDA will automatically convert into a regular demat account. This account is ideal for investors who don’t trade frequently. It provides an affordable way for smaller investors to participate in the stock market.

To open a BSDA, you must meet these criteria:

• You should be the sole account owner
• You cannot have any other demat account
• You can only hold one BSDA
• For joint accounts, you must not be the primary account holder

• Repatriable Demat Account

Along with Indian residents, many non-resident Indians (NRIs) also invest in the Indian stock markets. If you’re an NRI looking to invest, you will need to open a repatriable demat account.

A repatriable demat account, like a regular demat account, holds your securities in electronic form and allows for quick transactions and share transfers. However, there are a few things to keep in mind before opening this account:

• You must follow the regulations set by the Foreign Exchange Management Act (FEMA)
• Your repatriable demat account must be linked to your non-resident external (NRE) account

To open a repatriable demat account, you’ll need to provide:

• A copy of your PAN card
• Passport and visa
• A canceled cheque leaf from your NRE account

These documents should be attested by the Indian embassy in the country where you reside.

• Non-repatriable Demat Account

NRIs can also use a non-repatriable demat account to carry out stock market transactions in India. It functions similarly to a repatriable demat account but with one key difference: funds cannot be transferred outside India. To open a non-repatriable demat account, you must link it to a non-resident ordinary (NRO) account.

Demat Account Benefits

Here are the benefits of a demat account:

• Stores your securities electronically, making them easier to monitor
• Simplifies the process of buying and selling securities
• Reduces the risk of fraud, theft, or loss linked to physical certificates
• Helps you easily track and manage your investment portfolio
• Allows smooth transfer of corporate benefits like dividends and bonus shares

Which Demat Account is the Best?

Consider these factors while opting for a demat account:

• Choose a demat account with low annual maintenance charges (AMC) and transaction fees. Some accounts offer free or minimal charges, which can save you money.
• Opt for a provider with excellent customer support. Good customer service ensures that you get help whenever you need it.
• Pick a demat account with a user-friendly online platform or app. It should be easy to navigate and manage your investments.
• Some demat accounts offer additional features like research reports, investment advice, and trading tools. These can be useful if you want more support.
• Choose a demat account that integrates smoothly with your trading account. This makes buying and selling securities easier.

Conclusion

To trade stocks regularly, engage in intraday trading, or deal with options trading, you’ll need a demat account. This account is your gateway to the stock market and can be a crucial first step towards successful investing. You can open a demat account either offline or through a demat app.

With an HDFC SKY demat account, you can invest in stocks from various company sectors. Open your demat account today to start investing in stocks that align with your goals and risk tolerance.

Frequently Asked Questions

What is the Main Function of a Demat Account?

A demat account’s main function is to electronically hold and manage securities, such as stocks and bonds, in digital form. It eliminates the need for physical certificates, making buying, selling, and transferring securities more efficient and secure.

How do Demat and Trading Accounts Differ?

A demat account holds your securities (like stocks and bonds) in electronic form, making it easy to manage and track them. A trading account is used to buy and sell these securities in the stock market. While the demat account stores your investments, the trading account facilitates the actual transactions.

How Much Amount Can You Invest Using a Normal Demat Account?

There is no specific limit on the amount you can invest using a normal demat account. Depending on your financial goals and risk tolerance, you can invest as much as you want.  

Where Can I Access the Demat Summary?

You can access your demat summary through your brokerage firm’s online trading platform or mobile trading app. Alternatively, you can contact your depository participant (DP) or visit their website for a detailed summary of your demat account.