Things to Keep in Mind Before Opening a Demat Account

For decades, trading in the financial markets has remained a prime lucrative opportunity for various investors across India. Today, with the advent of modern, online trading platforms and tools such as the efficient demat account, trading has become even more lucrative than ever.

There is no doubt that demat accounts online have become an indispensable component of investing in a financial market. However, if you are a newcomer to the trading world, the concept of a demat account might be a new one and might lead to various queries. Hence, to answer such queries as how to open a demat account and what is required for the process, let us take a deep dive into the topic:

What is a Demat Account?

Simply put, the purpose served by a demat account online in the trading world is the same as that served by your bank account for your money. It is a type of account that holds your traded securities and can be accessed whenever you need to transfer or transact with them for your trades.

Before the introduction of demat accounts in 1996, securities were held in paper form which made trading more cumbersome and exposed traders to various risks. By ‘dematerialising’ or converting your securities into an electronic form, your trades can become faster, safer and more efficient to execute. As for the question of how to open a demat account, the process is quite simple and is explained in detail below:

Requirements for Opening a Demat Account

Before following through with the procedure of opening a demat account online, it is best to keep in mind the prerequisites that are essential to the process. Here are documents and charges you must keep in mind before opening a demat account.

Required Documents

Similar to the opening procedure of any form of financial account, opening a demat account online requires you to submit a few documents. Out of these, the mandatory document requirement is that of a PAN Card. This is according to the guidelines laid out by the regulatory body known as Securities and Exchange Board of India, or SEBI, and helps them link and track all the trades executed by a trader.

Apart from the mandatory PAN card, you are also expected to submit a proof of identity and proof of address to open a demat account online. The documents under these categories can vary on the preference of the applicant. Passport and Aadhaar card are common documents submitted as identity proof, while ration card and driving licence can serve as proof of address.

Demat Account Charges

It is important to make a note of the charges associated with opening as well as operating a demat account. Keep in mind that these demat account opening charges can vary from one depository participant (DP) to another:

  • Account opening charges:
    This is the first form of essential fees levied to open your demat account online. With certain DPs, such as IIFL, you can even avail the benefit of zero account opening charges.
  • Annual Maintenance Fees:
    In exchange for providing the convenience of using a demat account online and offering various services, DPs charge a yearly fee to keep your demat account functional.
  • Transaction fee:
    Apart from these, your DP might also levy a transaction fee on your trades. These fees depend on a number of factors and if your DP offers discount brokerage, it can be extremely affordable.

Procedure of Opening a Demat Account

Finally, let us tackle the question of how to open a demat account. The procedure for opening a demat account is typically easy and convenient. Once the prerequisites are in place, it can be completed in no time.

In order to make the most of online trading platforms in the modern age, it is recommended that traders open a demat account online. Here are the basic steps you can follow:

  • Make your choice of depository participant by reviewing factors such as ease of account opening, robust trading platforms, and the trading resources they offer. For instance, DPs such as IIFL offer traders the opportunity to open a free demat account online .
  • Visit the website of your choice of DP, and then search and select the option to ‘open a demat and trading account’. Both of these services are more often than not offered as a single feature.
  • You will then be directed to fill out the applications for opening the demat account online.
  • As discussed above, upload the scanned copies of all the prerequisite documents necessary for the account opening procedure.
  • On submitting the required documents, your application will be processed by the DP. You can then expect to receive the information regarding your new demat account on your provided contact details.

Conclusion

If you are a newcomer to the trading world, this information about demat account and other associated information will hopefully prove useful as you venture ahead.

However, in the world of trading, it is also vital to get started on the right foot by choosing a reliable depository participant, such as IIFL. Not only does IIFL offer traders an opportunity to open a free demat account online but also provides an all-in-one account through which you can trade in multiple securities online.

Open Demat Account at IIFL