Importance of Demat account
A Demat account provides a digitally secure and convenient way of holding shares and securities. It eliminates theft, forgery, loss and damage of physical certificates. With a Demat account, you can transfer securities immediately. Once the trade is approved, the shares are digitally transferred to your account. Moreover, in case events like stock bonuses, mergers, etc., you get shares automatically into your account. Your Demat account information regarding these activities is available online by simply logging into the website. You can trade on-the-go using your smartphone or desktop. So, you needn’t visit the stock exchange to transact. You also enjoy the benefit of reduced transaction costs because there is no stamp duty involved with the transfer of shares. These features and benefits of a Demat account encourage a larger trade volume by investors, thus increasing the potential for lucrative returns.
Demat account has made it easier to handle stocks. Indian exchanges have transitioned to a primary settlement cycle of T+1 days. This means that when you buy shares, the settlement (transfer of shares to your Demat account and funds to the seller) typically occurs on the next business day following the trade. Demat account has made the process of security trading seamless and hassle-free.
Benefits of Demat account
- Seamless and fast transfer of shares
- Facilitates digitally secured storing of securities
- Eliminates theft, forgery, loss and damage of security certificates
- Easy tracking of trading activities
- All-time access
- Allows to add beneficiaries
- Automatic credit of bonus stocks, rights issues, split shares
How does a Demat Account work?
Trading through a Demat account is similar to the procedure of physical trading, except that a Demat account is electronic. You begin trading by placing an order through your online trading account. For this purpose, it is necessary to link both trading and Demat accounts. Once an order is placed, the exchange will process the order. Demat account details the market price of shares and the availability of shares is verified before the final processing of the order. On completion of the processing, shares are then reflected in your statement of holdings. When a shareholder wishes to sell shares, a delivery instruction note has to be provided with details of the stock. Shares are then debited from the account and the equivalent cash value is credited to the trading account.
Having a Demat account is compulsory per the Depository Act passed in 1996. To facilitate it, the National Securities Depository Limited (NSDL) was formed in 1996. And, the Central Depository Services Limited (CDSL) became the second such institution three years later. Together the two agencies are the custodian of all the electronic securities held by investors. They offer the Demat account opening service through various depository participants, like Angel One. Both agencies and their partner brokers are registered with SEBI.
The Demat account opening process involves three parties - your bank, the depository participant, and the depository. Tagging your bank account with your Demat account is critical for trading seamlessly. Linking your account details ensure when you buy shares, the money gets debited directly from your bank account, and when you sell, the proceeds get automatically credited.
A depository participant can be a non-banking financial institution, a bank, or a stockbroker. You would need to approach a DP to open a Demat account. The third party is obviously the depository. They hold the Demat account on your behalf.
Types of Demat account
While opening a Demat account, investors need to select a Demat account type that suits their profile carefully.
The most common type is a regular Demat account. Any Indian investor or resident Indian can open a standard Demat
account within a few minutes using an online account opening process. Apart from the standard Demat account, there
are two other types. Let's take a look at them.
There are two types of Demat accounts—Repatriable Demat account and Non-repatriable Demat account. Repatriable
funds are deposited in a separate bank account known as the Non-Resident External Account (NRE account). Repatriable
funds are those funds which can be transferred abroad. The investments made from these funds are maintained in a The
Repatriable Demat account holds the investments made from repatriable funds. On the other hand, non-repatriable
funds (funds which cannot be taken/transferred abroad) are deposited in a different bank account known as the Non
Resident Ordinary Account (NRO account).The Non-repatriable Demat account holds the investments made from
non-repatriable funds. Money can easily be transferred from an NRE to an NRO account. However, once the transfer is
made, the repatriability is lost and the money cannot be transferred back to the NRE account.
- Regular Demat account: Regular Demat account is for resident Indian investors who want to trade in shares alone
and need a storing for securities. The stocks get debited from your Demat account when you sell and credited when
you purchase during trading. If you are trading in F&O, you don't need a Demat account because these contracts
don't need storage.
- Basic Services Demat Account: It is a new type of Demat account introduced by the SEBI. These accounts don't
have maintenance changes if the holding value is less than Rs 50,000. Between Rs 50,000 and 2 lakh, the changes
are Rs 100. The new type of account targets new investors who are yet to open a Demat account.
- Repatriable Demat Account: Non-resident Indian investors open a repatriable account to transfer their earnings
from the Indian market abroad. If you want to open a repatriable account, you'll have to close your regular Demat
account in India and open a non-resident external account to receive payments.
- Non-repatriable account: This account is also for non-resident Indians, but it doesn't allow fund transfer to
foreign locations.
SEBI has made it mandatory for investors to have a Demat account. You can't trade in the Indian stock exchange if
you don't have a Demat. Update yourself on the account opening process, charges, and select a trusted depository
participant.
Documents required for Demat account opening
There is a list of documents needed to open a Demat account, including personal details and bank/income details.
Here is a list of the documents required.
- Proof of identity
- Proof of address
- Proof of income
- Proof of bank account
- PAN card
- Passport size photographs
The online method has made the account opening process simple. You can now set up a Demat account by submitting
documents and completing KYC online.
Demat Account Charges
While opening a Demat account is often free, especially when you use online brokers or fintech platforms, there are a few charges you should know about before you get started. These costs can vary based on your Depository Participant (DP).
1. Account Opening Fee
Some brokers charge a one-time fee for opening a Demat account, typically in the range of ₹200 to ₹500. However, many modern brokers, especially online discount platforms, waive this fee altogether as part of promotional offers.
2. Annual Maintenance Charges (AMC)
AMC is a recurring fee charged by your broker or DP for maintaining your Demat account. It usually ranges between ₹300 and ₹700 per year. Some brokers offer zero AMC for the first year, and others even provide lifetime free AMC to attract new users.
3. Transaction Charges
Every time you sell shares, your Demat account is debited, and a small transaction fee is applied. These charges are typically ₹10 to ₹25 per transaction or a flat percentage of the trade value.
4. Dematerialisation and Rematerialisation Charges
If you still hold physical share certificates and want to convert them into electronic form (dematerialisation), your DP may charge ₹5 to ₹10 per certificate. Similarly, converting digital holdings back to physical format (rematerialisation) also incurs some cost.
5. Custodian Fees
These are nominal charges levied for holding securities in your Demat account. In most cases, this fee is absorbed by the broker, especially with retail investors, so you may not see it directly.
6. Pledge and Unpledge Charges
If you pledge your shares as collateral for a loan or for margin trading, additional charges may apply. These can vary from ₹25 to ₹100 depending on the broker and the value of securities involved..
Benefits of opening a Demat Account with Angel One
Like any other DP, Angel One offers a Demat account opening service that comes with a hoard of benefits.
Angel One is one of the most renowned stockbroking houses in India. The Angel Group is a member of the
Bombay Stock Exchange (BSE),
National Stock Exchange (NSE) and the two leading Commodity Exchanges in the country:
NCDEX &
MCX. Angel One is also registered as a Depository Participant with CDSL.
We are the #1 trusted brand by more than six million investors.
Main features of an Angel One Demat account
It is free: You can get your Demat account free of cost. We don't charge for opening a Demat account. However, there are annual maintenance charges when you maintain an account with us.
Easy tracking: When you open the Demat, you get qualified to receive monthly statements on your mobile and email id. The tracking features allow you to watch account activities and manage actions.
Seamless service: We allow seamless and fast linking with your bank account for a holistic experience. You can transact seamlessly with more than forty banks through net banking and UPI.
Complete trading ecosystem: Angel One Demat account has an ecosystem of the trading platform, apps, and tools attached for a better trading experience.
Benefits, offers, and rewards: With the Angel One Demat account, you gain access to offers, rewards, and benefits offered by the company.
- Invest Easily & Earn Better
-
Gain access to the award-winning Angel One App - Trade, learn, and stay updated on the go. The app gives you latest news, research reports, and real-time updates on your fingertips. It also offers Portfolio Health Check to help you maintain an ace portfolio
- Get a better chance of earning higher returns with ARQ
- Fastest account opening process - Start trading in 1 hour
- Highly secure & speedy financial transactions
In addition to the advantages outlined above, you can learn more about the benefits of online share trading in India with Angel One.
Advantages of trading with Angel One ARQ-Prime
One advantage of opening an Angel One Demat account is access to the complete suite of applications offered by the company.
Angel One is known for its digital-first approach towards stock trading. We have introduced several remarkable trading tools to help our investors generate index-beating returns from their investment. ARQ-Prime is a unique tool that combines analytics, machine learning, and AI to offer unparalleled returns. It rules out emotional biases while making recommendations and functions on a set of rules derived from the investor's profile.
The tool offers solutions on a wide range of stocks and lets you pick winners from categories of value stocks, quality stocks, high momentum stocks, growth stocks, and more. We have tested it against the most challenging market conditions, and it has delivered envy-worthy results under all circumstances.
Advantages of using ARQ-Prime
- The rule-based strategy offers the maximum benefits
- Minimises risks by cutting losses early
- Starts earning higher returns from your subscription date
- Offers live updates
- Exhibited a proven track record of regenerating 100% returns in 11 months
- Free to try; after that, get hassle-free auto-renewal
Demat Jargons
- Demat: Demat stands for dematerialisation. It is a process of storing securities in a digital format. SEBI has made the Demat account mandatory for stocks investors.
- Depository participant: A depository participant is an agent of the depository, offering Demat account opening services. They are registered with the Securities and Exchange Board of India.
- Depository: A depository holds and offers a Demat account. In fact, all securities owned by investors in digital format are stored with the depositories. There are two primary depositories - NSDL and CDSL. All depository participants (DP) are listed with a depository.
- NSDL: NSDL stands for National Securities Depository Limited. It was formed in 1996 when the Demat account was introduced to the Indian stock market. As of November 30, 2021, NSDL had 2,45,96,176 active investors accounts.
- CDSL: The Central Depository Services Ltd is the other depository besides NSDL. It has 592 enlisted partners and 5,26,37,291 active accounts.
- Electronic Certificate: Bank account, trading account, and Demat account are the three essential necessities while dealing with investments. When you purchase a company’s shares, your ownership is marked with a certificate. This certificate is now available in electronic format and is known as Demat credit.
- Central Depository (CD): Central Depository is basically a central agency that maintains all the relevant information pertaining to Demat accounts that are opened with DPs throughout the country. India’s central depository agencies include National Services Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
- Depository Participants (DP): The DPs or Depository Participants are fundamental intermediaries between the account holders and the Central Depository. DP’s include several banks, brokerage firms, and other financial institutions that offer investors with Demat accounts.
- Transaction Identification: In order to buy and sell electronic securities, every investor needs a trading account, which is as important as a demat account. Every trading account is given a unique identification number that has to be used for all the transactions of an investor.
- Portfolio Holding: The Demat account of an investor keeps all his investment holdings of investors including: equity holdings, exchange-traded funds, mutual funds, government securities and bonds. All the holdings together are referred to as the investors’ portfolio holding, which they can access through their Demat account. All their purchases are reflected as Demat credits while all their his sale transactions are debited from the Demat account.
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