What is a Demat Account?

Modified on Sat, 16 Jul 2022 at 04:10 PM

A critical tool for maximizing your wealth and safekeeping, Demat accounts make share trading quick and easy. It eliminates the risks and challenges associated with physical share certificates. In India, if you wish to invest in the stock market, it is mandatory to open a Demat account.

Earlier, shares were held in a physical form through share certificates. However, it made the entire process of share trading cumbersome and difficult to carry out at short notice.

To eliminate these limitations, the CDSL (Depository) They introduced the concept of Demat accounts, which could be used to electronically store shares and securities of companies. If you own physical shares, you need to convert them to electronic records before using a Demat account. 

Importance of Demat account

With a Demat account, you can hold a wide variety of investments such as bonds, equity shares, government securities, mutual funds, and exchange-traded funds (ETFs). Similar to a bank account, a Demat account is either credited or debited each time you buy or sell shares of a company.

It not only eliminates unnecessary paperwork but also helps streamline the process of share trading. All of the Demat accounts in India are maintained by two depositories, namely National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

How does a Demat Account work?

The nature of a Demat account is homogenous to a savings bank account. Just like one can store cash in electronic form into the savings account, the investor can store securities into the Demat account of a depository participant (DP) associated with the NSDL or CDSL. When shares or securities are purchased, the Demat account is credited. However, the account is debited when shares or securities are sold. For transacting in equity and securities through your Demat account, it is a prerequisite to link it to your trading and savings account.

Documents required for Demat account opening

For the convenient and hassle-free process of opening a Demat account, you must have some essential documents. Here is a compiled list of required documents given below.

  • - Proof of identity with a photo. For example, Aadhaar card, PAN card, voter ID card, driving license, etc.
  • - Proof of residence - Registered lease agreements, driver's licenses, passports, landline telephone bills, electricity     bills,apartment maintenance bills (if applicable), copy insurance, gas bills, etc.
  • - Proof of bank account - The bank's passbook or account statement (must be no more than three months old).
  • - Proof of Income - Payslips or taxes (mandatory for the currency and derivatives segment)

Demat account fees and charges

Several leading depository participants in India offer exceptional services. They charge a certain sum to open these accounts, which may vary for every participant. It makes it difficult for investors to comprehend the nature of services and fees a depository participant charges. To make it easy for you to understand, here's a brief explanation of the particulars of each service.

Particulars of serviceCharges Including GST (in Rs.)
Account opening feeRs. 295
Annual Maintenance Charges (AMC)Rs. 0 (for the 1st Year)
Dematerialization of share certificatesRs. 17.7 (per certificate)
Rematerialization of share certificatesRs. 17.7
Conversion of Mutual Fund unitsRs. 0
DestatementizationRs. 0
Reconversion of Mutual Fund units into Statement of AccountRs. 0
Redemption/RestatementizationRs. 0
Postal chargesRs. 47.2 (per request)

When you open a Demat account with Gill Broking, there are no account opening charges, and the Annual Maintainance Charge for the first year is also waived off.

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