Eligibility to Open a Demat Account

Last Updated: 16 Oct 2024

A Dematerialized (Demat) account stores all your securities like commodities, ETFs, etc. in an electronic format. It is not possible to trade in the Indian stock market without a Demat account. Want to open a Demat account? There are certain requirements for Demat account opening and to get started as a trader, it would be handy to know about them. In India, the two main depositories that will monitor and operate your Demat account are, the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

Here’s everything you need to know about the requirements for Demat account opening.

Age

It may seem to be contrary to the common assumption, but you do not need to be 18 or above when you open a Demat account for the first time. There is no age limit to investing in the Indian stock market. Both, as an adult or as a minor you can have a Demat account to trade in the stock market.

If you are under 18 years of age, your Demat account could be opened and operated by your parents or an appointed guardian in your name on submission of all the necessary documents. Once you turn 18, the Depository participant shall send an intimation to you, for submitting the documents to transfer your details and make your account a major operated one.

KYC Information

KYC or Know Your Customer is where you confirm your identity, address, and income by providing necessary documents. In India, it is mandatory to do KYC while opening an online or offline Demat account. A scanned copy or a photocopy of your PAN card will have to be submitted online or offline, respectively. Note that you may be asked to submit your Aadhar card details instead of the PAN card, so it is advised to keep that ready too.

What are the requirements to open a Demat account?

Other than the KYC required documents, while opening a Demat Account below mentioned documents may also be asked for, so it is advised to keep their scanned or photocopies along with the originals, handy.

Proof of Identity

This can include your PAN card, Aadhar Card, Passport, Voter’s ID, or any such valid document. You would also require two or more recent passport-sized photos of yourself. An Identity Card (ID) may also be used as a proof of identity if is issued by any of the following: Statutory/Regulatory Authorities, Central or State Government, Scheduled Commercial Banks, Public Sector Undertakings, or Professional Bodies like ICSI, ICWAI, and ICAI, or the Debit/Credit Card issued by your Bank.

Proof of Address

• Documents such as your Driver’s License, Ration Card, latest maintenance bill of your residence, the registered lease or sale agreement of your residence, insurance copy or any such valid document would be accepted.
• You may be asked to submit any utility or appliance bills.
• A bank account statement not older than 3 months can also be furnished as proof of address.
• The proof of address in the name of your spouse could be presented.

Proof of Income

Any one of the following documents classifies to be your proof of income while opening a Demat account. Kindly note that if you wish to trade only in equity, proof of income is not required:

• Scanned or photocopy of the ITR (Income Tax Return)
• Acknowledgement slip of the ITR submitted
• A certificate of your net worth issued by a Chartered Accountant
• Scan or photocopy your audited annual accounts with a qualification from your Chartered Accountant
• A relevant document like a Salary Slip or Form 16
• Current bank account statement reflecting your earnings for the last six months

How does a Demat account work?

The working of a Demat account is similar to that of a savings account. Savings account stores money in an electronic format, while in a Demat account securities are stored digitally. A Demat account is opened with a depository participant (DP) associated with the NSDL (National Securities Depository Limited) or CDSL (Central Depository Services Limited). A DP can be a bank, a broker, or any other financial institution.

When an investor buys any securities, they are credited to their Demat account. Alternatively, when securities are sold, they are debited from the Demat account. It works in tandem with a trading account. The trading account holds the money earned or spent during trading activities.

Who can hold a Demat Account?

The following categories of persons are eligible to open a Demat account in India.

Individual

• Resident Individuals
• NRIs
• Minors

Non-individual

• Corporate
• Partnership firms
• Bank
• Mutual Funds
• LLP (Liability Limited Partnership)
• Registered/Unregistered trust
• Registered/Unregistered society

Benefits of Demat Account

• With a Demat account, an investor has access to a variety of financing options. When issuing a loan, the bank has to ensure that the collateral is secure.
• The process of receiving benefits is simplified with Demat accounts. Whenever a company announces a dividend or refund or interest, it is automatically reflected in your Demat account.
• Demat accounts allow for geographical accessibility as they can be conveniently accessed through the internet from anywhere in the world.
• There are no limitations to buying or selling shares in fixed tranches. Transactions for a single share can also be made using Demat accounts.
• You can choose to open a Demat account with a brokerage that provides in-depth research analysis and helps you build your investment portfolio. IIFL is a reputed, trustworthy, and reliable brokerage to open a Demat account with.

Conclusion

In such a growing economy, diversifying your income by investing in the stock market would prove to be one of the best things to do. It will help you to enhance your wealth over time, will teach you the discipline of investing in ideas and companies you care about, and potentially create a nest egg that you can fall back on in times of crisis. To start investing, open your Demat account with IIFL now!

Frequently Asked Questions

Can I change my address in the Demat account?

Yes. Address in Demat account with IIFL can be changed by following these steps:

• You need to submit a self-attested Change in Account details form.
• Self-attested Identity proof
• Self-attested address proof is required
• Self-attested KRA form is required. Click here to download the form
• Submit the documents at the below address: IIFL House, Sun Infotech Park, Road No. 16V, Plot No. B-23, MIDC, Thane Industrial Area, Wagle Estate, Thane – 400604.

Is an Aadhar card mandatory to open a Demat account?

Aadhar Card serves as proof of identity in your application for a Demat account. Alternative documents that can be presented instead of Aadhar Card are PAN Card, Passport, or Voters ID.

What are the requirements for opening a Demat account without proof of income?

If you wish to trade only in equity and no other securities, a Demat account can be opened without proof of income. Make sure that you only select equity from the segments that you wish to trade while filling out the Demat account opening application.

Can I open a Demat account for a minor?

Ans: Parents or guardians can open a Demat account for a minor in the name of a person who is below the age of 18 year

Can I open multiple Demat accounts with the same broker?

Ans: No, you can not open multiple Demat accounts with the same broker. You can open numerous Demat accounts with different stockbrokers.