Can A DEMAT Account Be Opened Without A PAN Card?

DEMAT accounts, short for dematerialized accounts, are fairly similar to bank accounts in their underlying principle. The main point of difference is that they hold securities and financial instruments instead of money. These accounts have become the preferred method of storing securities and are regulated and maintained by depositories such as the NSDL or CSDL in India, although traders generally avail their services through brokerage firms.

Demat accounts have significantly accelerated the process of trading and greatly reduced the risk of theft, loss or damage to physical paper-based trades since their inception. They are an essential prerequisite for those seeking to enter the arena of trading in securities or other financial instruments and the procedure to open DEMAT accounts is fairly uniform among banks, brokerage firms and other financial institutions that provide platforms for online trading.

The documents required to open an online DEMAT account are as follows:

  • Proof of Identity : Such as a driving licence, Voter ID, UID or Unique Identification Number, PAN card etc.
  • Proof of Address : Passport, Voter ID, Aadhaar cards or a ration card may suffice.
  • Proof of Income: This is essential for trading in derivatives such as Futures and Options. A copy of an Income Tax Return Acknowledgment should meet this requirement.
  • Proof of Bank Account: A cancelled cheque leaf is likely to be accepted.
  • PAN Card: Possessing a PAN card is mandatory if you wish to open DEMAT account with certain exceptions such as those who are exempt from having to apply for PAN.
  • Size Photographs: It is also necessary to provide 1 to 3 passport size photographs to the broker, bank or financial institution when applying for a demat account

Is It Necessary To Have A PAN Card When Opening A DEMAT Account?

As per a circular issued by the Securities and Exchange Board of India on April 27th, 2007, submitting your PAN card is mandatory when opening a DEMAT account regardless of investment size or objective in doing so. This applies to each of the holders of an account in the case of a joint account as they will both have to submit their respective PAN cards for evaluation before opening an account.

If you are an NRI or a person of Indian origin, you would also have to submit your PAN card when opening an online DEMAT account . Exceptions are only made if you are prevented from obtaining a PAN Card due to unforeseen circumstances, in which case you may be allowed to open a ‘limited purpose Beneficiary Owner account’ if you hold securities in a physical form and are only interested in selling them.

The conditions for the operation of such accounts are as follows:

Any accounts opened before December 31st, 2006, would have been suspended for debit until the depository participant provided verification of their PAN details. This can be done by producing the original PAN card at the time of verification of the photocopy provided earlier. In the case of joint accounts, all account owners must furnish their PAN cards for verification.

Some Conditional Exemptions To This Rule are as follows:

  • If you are applying for an account as an HUF, association of persons , partnership firm or unregistered trust, the PAN of the respective body must be obtained even if the beneficiary account is in the name of one or more of its members. For a registered trust, corporate body or minor, the PAN must be obtained when accounts are opened under their names.
  • UN agencies or other bodies that are exempt from paying taxes from the country are exempt from the PAN requirement when opening online DEMAT accounts subject to the verification of their status. This also applies if you are an investor residing in the state of Sikkim subject to the verification of your place of residence.
  • Entities registered with SEBI under Section 12 of the SEBI Act 1992 may be allowed to open beneficiary accounts without PAN for a period of 30 days after which the accounts may be frozen in the event of failure to provide a PAN card.
  • Exceptions are also made if you belong to the scheduled tribes of some areas in the North East of the country such as Mizoram, Arunachal Pradesh, Tripura, Nagaland Manipur, as well as some parts of North Cachar Hills in Assam, you may be allowed to open DEMAT accounts if the sum you plan on investing does not exceed Rs. 50,000.

IIFL is an ideal choice if you are interested in opening a DEMAT account to invest in mutual funds or other financial instruments. IIFL’s cutting edge trading platform, lauded research team, intuitive interface and low account charges and fees could provide you with the perfect start for a successful entry into the world of trading.

Open Demat Account at IIFL