Who Can Open a Demat Account In India?
In some respects, a Demat account is like a bank account. You have equity shares and other securities in your Demat account just as you keep your cash balances in your bank account. Shares were historically held in physical (share certificates) form (before 1997). Once these physical shares are dematerialized, they are held in a Demat account, minimizing concerns about slow delivery, loss of share certificates, bad signatures, etc. Nowadays, both share purchases and sales are done in Demat-mode.
Why do you need to open a Demat Account?
Opening a Demat account is necessary since the entire financial platform of saving, trading and retaining/holding stocks and shares is moving over to electronic or digitized format. Demat accounts save time and give the user a smooth, easy experience, which is important for trading in India's stock markets. The conversion of securities into different formats is instantaneous. You may start dematerialisation formalities by providing instructions to your DP (depository participant), i.e., to transform certificates of physical share into an electronic form.
What are the benefits of a Demat Account?
Lower risk is one of the primary advantages of having a Demat Account. With the opening of a Demat account, risks associated with physical securities in the form of thefts, losses, or damage are completely removed. Holding certificates is easy with the option of keeping all investments in electronic form, as it is a tedious job to maintain physical papers. It also reduces time and expenses as there is no paperwork involved and extra costs, including stamp duty, can be avoided.
Who Can Open a Demat Account in India?
1.Resident individual
An individual is said to be a resident in the tax year if he/she is: physically present in India for 182 days or more in the tax year, or stays in India for the immediately 4 preceding years is 365 days or more and 60 days or more in the relevant financial year.
2.Hindu Undivided Family (HUF)
A HUF is a family composed of all individuals descended linearly from a common ancestor, as well as the male ancestors' wives and daughters. It consists of the Karta, which is usually the oldest person or head of the family, while the coparceners are other family members.
A Demat account for HUF shall be opened in the name of the oldest male family member or ‘Karta’ who becomes the signatory authority unless otherwise stated for all trading and Demat account transactions.
3.Domestic Corporation
A business that conducts its affairs in its home country is a domestic corporation. A domestic enterprise is also regulated differently from a non-domestic enterprise and will have to pay tariffs or fees on the goods it imports.
4.Overseas Indians
Non-resident Indians(NRIs) are persons of Indian birth/descent residing in India for less than one hundred and eighty-two days during the preceding financial year, or those who have left India or are living outside India for employment purposes.
NRIs can also trade in Indian capital markets by opening a Demat account with their option of DP or depository participant. In their account opening form, they need to explicitly mention that it is an NRI Account.
5.Clearing Member
A clearing member (pool account) is the portfolio of a broker, where the broker keeps his/her clients' securities. It is also the account where the securities from the central depositories are collected by the broker.
Conclusion
New entrants are frequently confused with investing in stock markets which is a relatively straightforward method in reality. All you need is a bank and a Demat account. You can open a Demat Account by approaching a depository participant (DP) or a broker approved to open a Demat Account on your behalf as an investor.
By submitting a PAN card, government ID and address evidence, and filling out a KYC form, anyone can open a Demat account. Your brokerage verifies and implements the process of opening an account. After the process, a client ID is created which can then be used for future transactions.