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Documents Required for Opening a Demat Account

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. The NSDL stands for the National Securities Depository Limited, and the CDSL stands for the Central Depository Services Limited. Both these hold shares of millions of Demat accounts in digital formats. The NSDL acts as the shareholding depository for shares traded on the National Stock Exchange or NSE. The CDSL is the primary depository of the stock traded on the BSE, the Bombay Stock Exchange.

Both exchanges are dynamic places for trading activity on any day. Generally speaking, it doesn’t matter with which depository you open your Demat account. It actually all depends on the shares of the companies you would wish to trade with or invest in. Like all accounts, there are certain documents required for opening a Demat account. Demat account requirements can be found on any bank website that offers you a Demat account facility, as well as on the portals of reputed brokerages such as Motilal Oswal. Today, with easily navigable platforms, no one finds it difficult to open a Demat account. 

Documents required for a Demat Account

The documents required for a Demat account are similar to the requirements for opening a bank account. To open a 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 card, 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 kinds of transactions such as derivatives, futures, and options. These are crucial documents required for opening a Demat account, provided these are the investment avenues you select. 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 Demat account opening 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

Documents for a Demat account should not be hard to procure as most documents already exist with individuals in India. Opening a Demat account is easy, and in a bid to encourage more Demat account holders, SEBI or the Securities and Exchange Board of India has made online opening seamless and smooth with brokerages like Motilal Oswal. Especially for salaried individuals who would be the majority of young investors today, opening an online Demat account and a linked trading account is a path to the investment world at an early age. 

Conclusion

Before summing up the documentation required to start a Demat account, there is one thing you should note. While on the subject of opening a Demat account, a minor can open one too. This can be done jointly with a parent or any other guardian. The Demat account opening process in such cases will require certain documents about the minor and the parent or the guardian. In the case of a minor, the adult opening the account jointly must be the father. In the event of the father’s absence, the adult can be the mother. 

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 with 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 to fill 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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