In India, approximately 3% of the total population invests in the stock market. This includes 11 crore Indians who have a Demat account, which allows them to trade digitally.
A mandatory requirement when you trade in the stock market, a Demat account has many benefits. These include:
Providing a secure way to sell and buy shares
Enabling swift access to your dematerialised shares
Read on to know what is a Demat account, the required Demat account eligibility, who can open a Demat account, and more.
Opening a Dematerialised (Demat) account is crucial to trading securities like ETFs, stocks, shares, commodities, etc. This account holds all your certificates for various commodities in an electronic format.
When you trade online, you can buy or sell shares held in a Demat account effortlessly, helping you initiate hassle-free transactions. The two depositories in India, registered under the Securities and Exchange Board of India (SEBI), hold all your electronic certificates.
These are the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL). You can easily access your certificate on the depository participants' website with your account login details.
When trading, all your securities are debited from and credited into your Demat account.
Now that you know what a Demat account is, learn about the entities that can open an account.
This group includes those residents who have stayed in India for a period of 182 days in the previous financial year. If you have resided in India for at least 365 days within a period of 4 years before the year of opening your Demat account, you are eligible to open one.
HUF includes all the members of a single-family entity, where the ‘Karta’, or the oldest family member, is the signatory authority.
All the businesses functioning within the country or those paying taxes according to Section 2 (22A) of the Income Tax Act, 1961 are domestic corporations. These companies can also open a Demat account.
Individuals of Indian origin living outside of the country for employment or other purposes can also open an NRI Demat account.
Brokers often open a pool account to hold their clients' securities. In the same account, brokers receive securities from central depositories.
Here are the terms related to eligibility to open a Demat account in India.
The age of eligibility to open a Demat account is 18 years. Any Indian resident, member of a domestic corporation, NRI, and member of HUF over the age of 18 years can open a Demat account.
However, as there is no age limit for investing in the stock market, minors can also open a Demat account. To facilitate this, parents or an appointed guardian can open an account on their behalf. The rights to the account will transfer after the account holder reaches 18 years.
One of the key Demat account eligibility criteria is to have a valid PAN card. If you do not have a PAN card, you cannot open a Demat account. Minors can open an account using their parent's or guardians' PAN card details.
If you meet the required Demat account eligibility and open an account, here are some benefits you can enjoy:
Reduced risk of loss or damage to your security certificates
Avoid falling prey to fraudulent activities, as all your details remain safe with the depositories
Easy access to all your securities, helping you sell and buy stocks quickly
Checking these criteria for eligibility to open a Demat account can help you save time and ensure that you can trade or invest seamlessly. In addition to this, there are many other factors to consider before choosing your depository participant or stockbroker.
Make sure you compare the charges and assess the benefits to choose the best option for your trading experience. Once you have done the required research, you can open a Demat account on Bajaj Markets effortlessly.
Minors and students below the age of 18 years cannot open an independent Demat account. However, a parent or guardian can open an account on their behalf.
Yes. Children under 18 years can open a Demat account under the ownership of their parents or an appointed guardian. The appointed individual can submit their PAN card and proof of relation to open the account. The ownership shifts to the account holder once he or she reaches the age of 18 years.
You must submit proof of income only if you wish to trade in derivatives and currency markets. However, it is not mandatory when trading in the equity segment.
Yes. You must have a PAN card to open a Demat account. If you are under 18, you can open a Demat account with your parent or guardian's PAN card.