How to open Demat Account in India: Step-by-step guide and requirements

If you want to invest in the stock market and buy or sell shares in it, you must have a Demat account. In the earlier period, money papers were used to buy and sell shares. But now it has been digitized. A Demat account helps investors to keep their investments safe and in digital form in the stock market. If you are a new investor in the stock market, you must know how to open a Demat account, let's see about it in detail.

What is a Demat Account?

Demat means dematerialized. A Demat account is an electronic account that holds securities such as stocks, bonds, and mutual funds in digital form. The primary purpose of a Demat account is to securely hold your financial assets in electronic form. In India, the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL) are the two major depositories that maintain Demat accounts.

A Demat account is required to buy, sell, or transfer securities such as stocks, bonds, and ETFs in the Indian financial market. Opening a Demat account helps investors conveniently access their shares and ensures faster transactions compared to older paper-based systems.

Who can open a Demat Account?

Before opening a Demat account, it is important to know whether you are eligible to open it. Both Indian citizens and Non-Resident Indians (NRIs) can open a Demat account, although the process may be slightly different for NRIs.

Minimum age requirement: You must be at least 18 years of age to open a Demat account. Minors can also open a Demat account through a guardian (usually a parent).

PAN Card: PAN card is mandatory to open a Demat account. It acts as your personal identity for financial transactions and tax purposes.

How to open a Demat Account?

1. Choose a Depository Participant (DP)

A Depository Participant (DP), called Depository Participant, acts as an intermediary (broker) between you and the depositors NSDL or CDSL. DP is responsible for opening and maintaining your Demat account. You can choose a DP from various sources including banks, stock brokers or other financial institutions.

List of some of the most popular DPs in India 

Banks: ICICI Bank, HDFC Bank, Axis Bank etc. are DPs.

Stock Brokers: Zerodha, ICICI Direct, HDFC Securities, Angel One, Sharekhan are also DPs.

Online Platforms: Upstox, Groww, 5Paisa, etc. are DPs.

When choosing a DP, consider factors such as their fees, customer service, and ease of use. Some DPs offer discounts and help open a Demat account without charging any amount, while others may charge an Annual Maintenance Charge (AMC). It is important to choose one that suits your needs.

2: Fill out the application form

Once you have selected a DP, the next step is to fill out the Demat account application form. This form collects all the essential details about you, namely:

* Personal Information (Name, Date of Birth, Gender)
* Contact Information (Address, Phone Number, Email)
* Financial Details (Income, Occupation)
* Investment Preferences (Risk Profile, Investment Goals)

You can usually fill out the form online or at the DP's office branch. If you are applying online, you will need to upload scanned copies of the required documents.

3: Required Documents

To open a Demat account, you must provide the following documents:

* Proof of Identity: Government issued ID such as PAN card, Aadhaar card, Passport, Voter ID or Driving License.

* Proof of Address: Documents such as Aadhaar card, utility bill (electricity, water), passport or recent bank statement.

* Bank Details: Recent bank statement or cancelled check to verify your bank account and link it to your Demat account.

* Photos: Recent passport size photos.

It is important that all documents are valid and up to date. Some DPs may allow you to complete the process via Video KYC or e-KYC, which allows you to verify your identity details online instead of submitting the document directly.

4: KYC (Know Your Customer)

KYC process is mandatory for all financial transactions. Your DP will verify your identity and address details. Depending on the DP, this may include a video call, verifying documents at a branch, or submitting documents online.

KYC helps prevent online fraud and ensures that your identity is legitimate. During this process, the DP may also ask you to sign an agreement outlining the terms and conditions for using the Demat account.

5: Verification and Approval

Once your documents are submitted and your KYC is complete, the DP will verify the information and process your application. This usually takes 2-7 business days depending on the DP.

Once the verification is complete, you will receive a Demat account number (DP ID) and other login credentials. These details will allow you to access your Demat account.

Types of Demat Accounts

Not all Demat accounts are the same. There are various types of accounts to suit the needs of different investors:

1. Regular Demat Account (for Indian Citizens)
The most common type of Demat account is the regular Demat account, which is for residents of India. This account allows you to hold stocks, bonds, and mutual funds in electronic form.

2. Repatriable Demat Account (for NRIs)
NRIs who wish to invest in Indian securities can open a Repatriable Demat account. This type of account allows funds and securities to be transferred to a foreign bank account. It is linked to an NRE (Non-Resident External) bank account.

3. Non-Repatriable Demat Account (for NRIs)
A Non-Repatriable Demat account is for NRIs who wish to invest in Indian securities but do not wish to transfer funds or securities abroad. This type of account is linked to an NRO (Non-Resident Ordinary) bank account.

Fees Associated with Demat Accounts

There are several fees associated with opening and maintaining a Demat account. Below are the common fees to keep in mind:

* Account Opening Fees: Some DPs charge a one-time fee to open a Demat account. Many stock brokers offer free account opening as an advertisement.

* Annual Maintenance Charges (AMC): This is an annual fee your DP charges to maintain your account. It can range from ₹300 to ₹1,000 per year depending on the DP.

* Transaction Fees: For each transaction (buying or selling securities), you may have to pay a transaction fee, which is usually a small percentage of the transaction value.

* Dematerialization Fees: If you have physical share certificates and want to convert them to electronic form, your DP may charge a dematerialization fee.

* Other Fees: Additional fees may be charged for services such as pledging securities, transferring shares, or closing an account.

Before opening a Demat account, it is important to carefully review the DP's fee structure to avoid unexpected expenses.

How to use a Demat Account?

Once your Demat account is opened, you can start using it for various purposes such as buying, selling and holding securities.

1. Trading Account

To participate in the stock market, you need to open a trading account, which allows you to place buy and sell orders for stocks and other securities. A trading account is usually linked to your Demat account, so when you buy securities, they are deposited into your Demat account, and when you sell them, they are debited from your account.

2. Accessing the Demat Account

Most DPs offer online platforms (websites or mobile apps) to access and manage your Demat account. Through these platforms, you can:

Check your portfolio of securities, transfer securities to another Demat account, view your transaction history, buy and sell securities through an integrated trading platform.

If you want to invest in the stock market, bonds or mutual funds, opening a Demat account is an important step. The process is relatively simple and can be done online or in person. By following the steps outlined in this guide, you can easily open a Demat account and start managing your investments in a safe, electronic form.

Before opening an account, explore various DPs, understand their fee structures, and review the features they offer. Follow all the above details properly and start your investment in the stock market by starting a Demat account.