The post Quick guide on how to open a Demat Account first appeared on Corp India News.
]]>What is a Demat Account?
A Demat account is a shortened version of a dematerialization account is an account to hold financial securities in the electronic form, whether it is equity or debt. Specifically, these accounts are meant to convert share certificates from physical to electronic format, thereby providing greater accessibility for account holders. In addition, unlike past times, where stocks and shares used to be exchanged as certificates, the Demat account simplifies these exchanges without burdening of paperwork.
An online Demat account carries your financial securities in a safe form, just like a bank account that guards your liquid cash. There are two open depositories in India, CDSL (Central Depository Services Limited) and NDSL (National Depository Services Limited). You can seamlessly operate your equities, bonds, ETFs (exchange-traded funds), mutual funds, and invest in IPOs (Initial public offerings) through a Demat account.
There are minimal documents required for opening a Demat account, and you can go through the following list for easy preparation of collection documents:
- Proof of photo identity cards such as Aadhaar, PAN, voter ID, driving license, etc.
- Two passport-sized photographs.
- Evidence of your residence includes electricity bills, lease agreements, license, passport, telephone bill, gas bill, apartment maintenance bill, ration card, etc.
- Evidence of your bank account with a bank’s passbook or account statement (not older than three months) and a cancelled cheque.
- Proof of income with a copy of your most recent paycheques or tax return (compulsory for the currency and derivatives segment).
Steps involved in opening a Demat account in India
Step 1: You need to choose a depository participant (DP), a financial organization like a bank, broker, financial institution, or online investment platform. DP works as a mediator between the investor and the depository. Thus, select your depository participant wisely, suitable for your requirements. You will get the statement of fees for maintaining your account on DP’s website. So, be aware of all charges before selecting your DP.
Step 2: Visit DP’s official website and fill out the online Demat account opening form details. Don’t forget to assign a nominee name, as it will be crucial to handle future transactions. Furthermore, linking your trading account to your Demat account is necessary for trading in stock markets.
Step 3: After completing the form, fill out KYC information (Know Your Customer).
Step 4: You need to submit scanned copies of KYC documents, including identity, income, address proofs, and bank account statements.
Step 5: You will need to go through an ‘In-Person Verification’ process (IPV) after providing KYC details. IPV is a mandatory process to check the validity of your records. DP can either do this online using a webcam/smartphone or at their office, where the investor needs to be physically present at their office for verification.
Step 6: Next in-line, you need to sign a contract with your DP. This contract lists all responsibilities and rights of both the DP and the investor.
Step 7: Once you have signed the agreement, your DP will thoroughly check your Demat account application. After you get the approval of DP, you will be assigned a unique BO ID number (Beneficial Owner Identification Number) that you can use to access your online Demat account.
Benefits of a Demat account:
- A Demat account gives the convenience of holding your securities without maintaining physical records. You can even sell one share as there is no odd-lot problem.
- It nullifies the possibility of forged shares as it is safer than paper and all shares in your account are genuine.
- A Demat account saves a lot of paperwork in the transfer of securities, change in the address, etc.
- You can smoothly access your investment information anywhere and anytime, giving traders an extra advantage of handling multiple accounts.
- It reduces transaction costs, handling charges, and stamp duties on physical share certificates.
- You benefit from multiple securities with a Demat account as it holds the equity share market, bonds, mutual funds, and debt securities under a single roof.
- Depository participant takes care of the transmission of securities, and thus, you need not worry about notifying companies.
- You get an automatic credit in your Demat account for shares out of split/bonus, a merger of companies, etc.
- Closure of the Demat account is as swift as the opening procedure. You need to submit a closure application form signed by all the holders (in case of multiple holders) to DP and transfer all the holdings before closing.
Now that you are aware of all the procedures involved in opening a Demat account hassle-free, you should always be watchful of your financial securities and investment in shares and the stock market with all its risks. In addition, you need to supervise the key market players such as stockbrokers as they can manipulate the market. Nevertheless, if you are eager to invest in equities and relish the benefits of compounding by long-term investing, a Demat account will be ideal for you. Many agents in the market can help you open a Demat account with minimal additional charges. But, you can follow the above discussed easy process of opening a Demat account.
The post Quick guide on how to open a Demat Account first appeared on Corp India News.
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