A demat account facilitates buying and selling shares, precluding cumbersome paperwork and meaningless delays.

Advantages of a Demat Account -

• It is a safe, secure and convenient mode of transacting in shares.
• Minimizes brokerage charges
• Ensures immediate liquidity
• Removes uncertainty on ownership title of securities
• Allows quick allotment of public issues
• Enables smooth process in pledging shares
• Avoids delays due to wrong/incorrect signatures, post, and misplacement of certificates
• Prevents risks like forgery and counterfeit, theft or damage to documents
• Saves on stamp duty, paperwork on transfer deeds
• Gives immediate benefits from bonus shares and stock splits

Who offers Demat Facility?

          Depository Participants or DPs offer demat account services, which would include banks. Holding a demat account with a bank enables quick on-line dealings, ensuring credit of a transaction to the account holder’s savings account by the third day. Banks have an added advantage over other DPs with their large network of branches.

How to Open a Demat Account in India

• Fill up the demat account opening form at the nearest Depository Participant
• You may refer to either

          CDSL at http://www.cdslindia.com/demat_acct/open_demat.jsp or
NSDL at https://nsdl.co.in/ for the list of DPs in India.

• Joint demat accounts can be opened, retaining the same order of names
• Separate demat accounts have to be opened for different combinations of names in the case of three or more joint holders.
• Any number of demat accounts and DPs are permitted
• A multiple-sign demat is feasible, operated by several holders
• DPs charge a fee for switching shares from electronic to physical form and vice-versa, which varies from a flat fee to a variable fee. Remat and demat charges may also show a discrepancy between DPs
• Some DPs offer a discount to frequent traders
• It is advisable to maintain all demat accounts with the same DP to keep track of capital gains liabilities. Different DPs follow dissimilar methods of computing the capital gains, which is determined by the period of holding.
• The charges on a demat account vary between DPs. Broadly, they are: account opening fee, an annual folio maintenance charge paid in advance, a monthly custodian fee, and a charge on transactions, which may either be charged every month or as a flat fee per transaction, and its nature. Some DPs may skip the account opening fee but charge a re-opening fee for the account. Account holders are also subject to a service tax.
• No opening balance is required for a demat account

Supporting documents to open a demat account

• Passport-size photograph
• Proof of identity, address and date of birth
• DP-client agreement on non-judicial stamp paper
• PAN Card
• The applicant receives an account number and a DP ID number which are required for all future communication with the DP.

NRI Demat Accounts

          NRIs need to fill in NRI in the type and “repatriable" or “non-repatriable” in the sub-type on the form. No special permission from the RBI is required by NRIs to open a demat account, though specific cases may require authorization from the designated authorised dealers.

          NRIs require separate demat accounts for securities under the foreign direct investment (FDI) scheme, which is repatriable; and the Portfolio Investment Scheme and Scheme for Investment which can be either repatriable or non-repatriable. Repatriable and non-repatriable securities cannot be held in a single demat account.

          Resident Indians can continue to hold non-repatriable demat accounts they hold even after they acquire non-resident Indian status. However, when a NRI returns to India permanently, he must inform his designated authorised dealer of his new status, and a fresh account would have to be opened. The securities held in the NRI demat account would have to be transferred to the new resident demat account, and the NRI demat account closed.

          The demat account would have to be linked with the NRI’s NRO account for non-repatriable accounts and NRE accounts for repatriable accounts to credit dividends and interest.