Demat Account Opening Charges

Only a decade ago, investing in shares was considered risky and the cup of tea of highly experienced investors who had a substantial capital amount to invest. Today, advanced technology has made it possible for retail investors to gain easy exposure to the Indian stock market through online trading and digital trading platforms. Owing to the ease of trading and other investor-oriented features such as financial literacy, stock charts, safety, and transparency, the Indian stock market is witnessing unprecedented demand. However, as the Indian stock market has shifted from a physical system to an electronic one, every investor must open a Demat account to start investing.

The demand has allowed for the opening of the highest ever number of Demat accounts in India. According to SEBI’s data, the number of active dematerialized (Demat) accounts in the country jumped 63 per cent in the past 12 months to 89.7 million in the financial year 2021-22 (FY22). Since equities are capable of providing investors with the highest returns across investment instruments, equity investment makes up for a vital investment for attaining financial freedom. Numerous stockbrokers can assist you in opening a Demat account but come with various charges.

If you are looking to open a Demat account and enter the world of better profits, you should know about all the Demat account opening charges.

What is a Demat Account?

'Demat' refers to dematerialization, a process by which physical securities are converted into electronic format. Therefore, a trader can use a Demat account to hold, transfer, and transact securities without the hassles of dealing with physical securities. As a result, trading has become a safer, quicker, and much more efficient method of storing securities and executing trades.

A Demat account helps manage your equity, bonds, and mutual fund investments. It is similar to a bank account. The only difference is that instead of holding money in a bank account, a Demat holds securities - shares, bonds, or debentures. You don’t need to carry physical shares with you when you have a Demat account. However, opening a Demat account comes with several Demat account opening charges.

How Do Online Demat Account Works?

Demat accounts are primarily used for investing in shares and securities in an electronic form that is more accessible with a Demat account. Specifically, these accounts are meant to convert share certificates from physical to electronic format, thereby providing greater accessibility for account holders. Every stockbroker levies certain Demat account opening charges for the services rendered and the management of the Demat account throughout its lifetime.

Demat accounts work similarly to how bank accounts function. For a Demat account to perform to its fullest potential, it must be linked with a trading account. Your depository participant forwards your 'buy' order to the stock exchange whenever you buy a company's share via your trading platform. The exchange matches your 'buy' request with another trader or investor's corresponding 'sell' request. Once your order is matched, an order from the stock exchange is sent to a clearance house, settling the trade. Once the transaction has been settled, the number of shares you bought gets credited to your Demat account at the end of the trading day. Simultaneously, the Demat account of the seller is debited for the number of shares that were sold.

For an account as important as a Demat, you must know what are the charges for opening a Demat account in India. There are several advantages to opening an online account. They provide protection for your holdings, facilitate transactions, allow faster settlements, enable access to loans, and protect against Demat Account fraud and forgery. As a result of these advantages, Demat accounts have largely replaced paper-based trading in India.

Demat Account Opening Charges: How much does it cost to open a Demat account?

The Depository institutions, NSDL, and CDSL have licensed numerous stockbrokers such as IIFL that offer exceptional Demat account opening services to the customers. They levy Demat account opening charges to open these accounts, which may vary for every participant. However, as the title of the charges is multiple, investors may become confused about what are the charges for the Demat account. To make it easy for you to understand how much is charged for the Demat account, here's a brief explanation of the particulars of each service.

Demat Account Charges

Account opening fee:

The account opening fee is a one-time fee charged by the stockbroker at the time of opening the Demat account. The fee is non-recurring and is only charged once at the initial stages.

Annual Maintenance Charges (AMC):

Annual Maintenance Charges is a fee charged annually to maintain your Demat account, irrespective of the number of transactions you make every year.

Dematerialization of share certificates:

Dematerialization is the process of converting actual share certificates into electronic records, for which they charge a fee.

Rematerialization of share certificates:

Rematerialisation converts electronic records of shares into physical certificates of ownership. Similar to dematerialization, a fee is charged for the rematerialization as well.

Conversion of mutual fund units:

Depository participants typically charge a fee to convert mutual fund units held physically into a dematerialized form. As a general rule of thumb, most depository participants only charge a flat fee for converting mutual fund units.

Destatementization:

The process of converting mutual fund units from their physical form into a dematerialized electronic form is known as dematerialization.

Reconversion of mutual fund units into Statement of Account (Restatementization):

Conversion of mutual fund units held in a Demat account into their physical is called "Restatementization", represented by a Statement of Account (SOA), which includes a small fee.

Redemption:

The redemption process involves returning your mutual funds units to the fund house. Most depository participants charge a flat fee per redemption request.

Postal Charges:

Postal charges are levied by depository participants to physically courier documents and statements of account to you.

Different Modes of Opening a Demat Account in India

Among numerous stock brokers available, you can choose to open your Demat account with IIFL, which comes with the lowest Demat account opening charges. The charges and the process of opening a Demat account with IIFL are listed below:

Particulars of service Charges Including GST (in Rs.)
Account opening fee Rs. 295
Annual Maintenance Charges (AMC) Rs. 0 (for the 1st Year)
Dematerialization of share certificates Rs. 17.7 (per certificate)
Rematerialization of share certificates Rs. 17.7
Conversion of Mutual Fund units Rs. 0
Destatementization Rs. 0
Reconversion of Mutual Fund units into Statement of Account Rs. 0
Redemption/Restatementization Rs. 0
Postal charges Rs. 47.2 (per request)

Now that you know the Demat account opening charges, here is the process of opening a Demat account with IIFL using the Online and Offline mode.

Online Mode:

Step 1: Visit the Website or the Mobile Application

Visit the IIFL Securities website or download the IIFL Markets app from the app store. Click on the ‘Open a Demat account.’

Step 2: OTP and Link

You will receive a one-time password (OTP) on the mobile number. You will also receive a link on your registered email ID. Enter the OTP received on your registered email id. After verifying the OTP, you need to fill out the online Account Opening Form.

Step 3: Fill out the Online Application Form

Fill out the online form for a free Demat account with IIFL Securities. It will require you to submit the above-mentioned essential documents in the account opening format.

Step 4: E-KYC Process

Get your KYC details verified online. The verification of your KYC details is done online after you have submitted the required documents.

Step 5: Receive Demat Account Number

Once the documentation process is completed and the forms are received at HO, the account will be opened within 24 hours. Afterwards, you will receive your Demat account number, and you can start investing.

Offline mode:

For those who are more comfortable opening a Demat account physically, you can give a missed call to 080 6671 9101. You will be contacted by a Relationship Manager at IIFL and guided through the entire account opening process.

Conclusion

SEBI has made it mandatory to open a Demat account before an investor can start trading. The account offers numerous benefits over the physical system and protects investor interest in a better way. If you are planning to open a Demat Account, IIFL offers the lowest Demat account opening charges. You can visit IIFL’s website or download IIFL Markets App from the app store to open your Demat account in a matter of clicks. IIFL’s trading app and platform come with comprehensive features to let you trade better than the rest.

Frequently Asked Questions Expand All

Ans.No, you cannot open a Demat account with a depository directly. You can open an account only with a depository participant like IIFL.

Ans. Yes, there are no restrictions on the number of Demat accounts you can possess.

Ans.Yes, you can pledge the securities in your Demat account with a bank or a financial institution to secure a mortgage. However, a nominal fee for creation of pledge might be levied by your depository participant.

Ans.Yes, you can temporarily freeze your Demat account for a specified period of time, during which no debits or credits to your account can be made.