A Demat account, or “Dematerialized account” is mandatory if you want to trade securities or any other financial instruments in India. A Demat account is opened with a depository and all your shares, bonds, mutual funds, and other financial instruments are stored there. There are two depositories in India, NSDL and CDSL. Generally speaking, it doesn’t matter with which depository you open your Demat account. Like all accounts, there are certain documents required for opening a Demat account.
Documents required for opening Demat Account
The documents required for a Demat account are similar to the requirements for opening a bank account. To open demat account, you need to approach a depository participant, such as a bank or trading house. The depository participants are registered with the Securities and Exchange Board of India and have affiliation with either or both of the depository. The Demat account requirements are as follows:
1. Proof of identity, it could be any government-issued id with a photograph. For example, driving license, passport, voter id card, aadhaar, etc.
2. Proof of address, for example, recent utility bills, passport, aadhaar, etc. Proof of address of your spouse is also accepted.
3. Proof of income, this is mandatory only if you want to enter into certain specific kind of transactions such as derivatives, futures, and options. You may be asked to submit proof of salary, recent income tax returns, bank account statements, etc.
4. Proof of bank account, this is a mandatory document required for opening a Demat account. You can submit a canceled cheque or recent bank statement to the depository participant who is opening your account.
5. PAN card, your permanent account number has to be attached with other documents for the Demat account. This allows the income tax department to supervise for possible tax evasions.
6. Photographs, depending on your broker, you may be asked for 1-3 recent photographs.
7. If you are opening the account as a company or NRI or a Hindu Undivided Family, additional documents will be required to prove your status and eligibility.
Apart from these documents, one primary Demat account requirement is that you should be eligible to open a Demat account. Four categories of persons are allowed to open a Demat account;
i. Resident individuals
ii. Hindu Undivided Family
iii. Companies (domestic)
iv. Non-resident Indians
While Demat account requirements can seem daunting at first, you should note that most of the depository participants allow the opening of a demat account online. In fact, if your bank is a depository participant, they often allow you to open a Demat account in a few clicks from their electronic portal. If you are uncomfortable with the online opening of a Demat account, most depository participants have agents who can come to you for filling up the form and collect documents. If you are interested in only trading in shares and holding mutual funds, documents for the Demat account are mostly the same as the documents for opening a bank account.
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