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Having a demat account is mandatory in India if you plan to invest in stocks. With this account, your securities are stored in a digital format, helping minimize the risk of loss due to theft, damage, and more.
To meet the needs of different investors, there are different types of demat account you can choose from. Understanding these specific account types is crucial for establishing the correct, cost-effective framework, ensuring convenient and efficient management of your digital investment portfolio.
Key Takeaways
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A Demat account holds your financial securities digitally, facilitating safe and seamless paperless investing.
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India has several types of Demat accounts depending on whether the investor is a resident or an NRI.
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BSDA accounts enable small investors to cut costs while maintaining crucial Demat services.
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Understanding the appropriate Demat account type allows you to invest more effectively and manage your portfolio better.
What is a Demat Account?
A Demat account, also known as a dematerialised account, is used to hold shares and other securities digitally. It works like a secure online locker where your investments, such as stocks, bonds, mutual fund units, and ETFs, are stored electronically. This removes the risks linked to physical share certificates, like damage, forgery, or deterioration.
As India's markets moved towards paperless investment, the significance and usefulness of a Demat account have expanded. It is now necessary to successfully carry out transactions, receive company operations, and track your assets. Regardless of whatever type of demat account you pick, the goal is the same: to make investing easier, more secure, and more manageable for both novices and experienced traders.
Types of Demat Accounts in India
India offers several types of Demat accounts in India to suit the needs of resident investors and NRIs. The variations occur because investment rules, repatriation rights, and cost structures vary according to an investor's profile. Here is a simple explanation of each type:
1. Regular Demat Account
A Regular Demat account is meant for Indian residents who invest in equity shares and other securities. All holdings are stored digitally, making it easier to buy, sell, and track investments.
This account is perfect for investors who trade often or hold stocks for a medium to long time. It works perfectly for those who engage in stock delivery trade, but it is not required for futures and options since they do not entail share delivery.
2. Basic Services Demat Account (BSDA)
A BSDA account is designed for small investors to reduce overall costs. The account offers lower or zero Annual Maintenance Charges (AMC) if the value of holdings remains within SEBI’s specified limit. This makes it an affordable option for beginners, students, or occasional investors with a modest portfolio.
It functions exactly like a regular Demat account but is more cost-effective, making it suitable for beginners or those with smaller portfolios.
3. Repatriable Demat Account
A Repatriable Demat account is meant for Non-Resident Indians (NRIs) who want to invest in Indian securities and transfer funds abroad. It must be linked to an NRE bank account.
This type of Demat account supports fund repatriation, subject to SEBI and RBI guidelines. NRIs must close their resident Demat account once their status changes and shift their holdings to an NRO or NRE-linked account.
4. Non-Repatriable Demat Account
A Non-Repatriable Demat account is also available for NRIs, but does not permit transferring funds outside India. This account must be linked with an NRO bank account. It is ideal for NRIs who want to invest in India but do not require overseas fund transfers.
However, while it allows for investing in Indian securities, withdrawals and profits are non-repatriable, separating domestic income from overseas earnings.
Documents Required for Opening a Demat Account with Angel One
To open a Demat account India, you need to submit standard KYC documents. The requirements may slightly vary based on whether you open a resident or NRI Demat account. Typically, the documents include:
For Resident Indian Investors
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PAN Card
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Aadhaar Card or other valid address proof
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Bank account proof (cancelled cheque or bank statement)
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Passport-size photograph
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Income proof such as salary slips, ITR acknowledgment, bank statement, or Form 16.
For NRIs
NRIs must provide all standard KYC documents and the following:
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Passport (Indian or foreign) with visa, or OCI/PIO card.
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Overseas address proof, such as utility bill, residency permit, or bank statement.
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NRE or NRO Bank Account Proof is required, depending on whether they create a repatriable or non-repatriable Demat account.
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FATCA/CRS Declaration is necessary under worldwide tax compliance standards.
Is a Demat Account Mandatory?
A share Demat account is mandatory if you want to buy and hold shares in electronic form. Since all listed shares in India are traded and stored digitally, holding a Demat account is essential for equity delivery.
However, if you trade only in futures and options (F&O), a Demat account is not required because these contracts do not involve the delivery of shares. For equity investing, IPO allotments, and long-term holdings, a Demat account is compulsory. and long-term holdings, a Demat account is compulsory.
Conclusion
The right type of demat account for you depends on your investment needs and strategy. Resident Indians typically use a Regular or BSDA account, with the latter being a cost-effective choice for smaller portfolios. NRIs must select between a Repatriable or Non-Repatriable account, which determines their ability to transfer funds abroad and must be linked to the appropriate NRE or NRO bank account. By carefully considering these factors, you can choose to most efficient demat account for your investment.
