Today, the concept of a Demat account is common knowledge to several people. In fact, with the rise in exposure to the stock markets, many potential investors have opened Demat accounts recently, and numbers are increasing. If investment in shares or any other security related to a Demat account is your goal, you may wonder who can open a Demat account. Are you eligible to do so? Finding out so you can get cracking on your investments is worthwhile.
With regard to investing in the markets, entrants who are new to the process are frequently at a loss concerning where and how to start. The first thing to do when an investor intends to delve into stocks is to open a Demat account. After this, you also need a trading account and a bank account linked to the Demat account. Before you find out who can open a Demat account in India, it is crucial to get your bearings about a Demat account straight.
A Demat account is a repository that stores your securities in an electronic format. The trading account that is connected to your Demat account is for the transactions of buying shares (stored later in the Demat account) and selling your securities (from the Demat account). This is the way that a Demat account works. A Demat account stores different securities, from stocks to bonds and ETFs. Electronic storage is a safe way of storage with all the securities consolidated in one spot. Furthermore, all transactions are transparent and seamlessly conducted online.
A Demat account is started with a DP (depository participant), translating to a brokerage or any Demat department in a bank. These entities are authorized to open a Demat account for the individual investor. Before you go ahead to open a Demat account, either to invest in the stock markets or in advance of being allotted a subscription to any upcoming IPO, it must be clear as to who can open a Demat account. The following can open a Demat account:
1. An individual resident of India - Any individual who is a resident of India may open a Demat account. The individual must have lived in India for a period of 365 days in the 4 years prior to opening the Demat account.
2. A Hindu Undivided Family or HUF - A single family belonging to the Hindu religion can open a Demat account as one unit. The oldest member (male) of the family is the primary account holder.
3. Any Indian corporate - Any Indian firms (domestic organizations) may open a Demat account. This means that any company for which the tax laws of Section 2 (22A) of the Indian Income Tax Act of 1961 apply can have a Demat account.
4. Indians who are Non-residents - Also called NRIs, Indians who are non-residents can hold Demat accounts.
5. A Pooled Account - A pooled account is an account of a broker in which securities of clients pooled together are held. This is also called a “clearing member” Demat account. A Demat account of this nature can be opened too.
Other than the above, the key prerequisites to open a Demat account is that individuals must be above 18 years of age and hold a PAN card and an Aadhaar card. It is also required that Demat account holders have bank accounts. You can open a Demat account at any proficient brokerage, which is your pathway to diversification in investment. Do have a look at any upcoming IPO to broaden your financial portfolio.