Demat Account: Complete Guide to Meaning, Opening, Types, Charges & Management

Demat Account: Complete Guide to Meaning, Opening, Types, Charges & Management
Wed Nov 11 2026
by Team StoxKart
00:00 / 00:00

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A demat account is a digital repository that holds financial assets such as company shares, bonds, Exchange Traded Funds (ETFs), and other securities in electronic form. It eliminates the need to maintain physical share certificates and makes it easier to hold and manage investments. 

According to the Economic Times, the total number of such accounts in India recently crossed 24.05 crore or 240.59 million. This shows the growing accessibility of the Indian stock market through digital investment platforms. 

Starting your investing journey? This guide will walk you through a demat account in detail, its types, associated charges and more.

What is a Demat Account?

A demat account allows you to hold shares and other market-linked securities in an electronic format. While a bank account holds cash, a demat account holds your investments, such as shares, bonds and ETFs.

A demat account and a trading account serve different purposes. A trading account is used to place buy or sell orders, while a demat account holds the securities purchased. Therefore, to invest in securities, you must create a trading account, which reliable stock brokers or financial institutions provide.

Example:

Suppose Priya is an investor who wants to purchase a company stock with strong fundamentals and future growth potential. She purchases 10 shares of the stock at the prevailing market price. Once the transaction is successful, she gets those 5 shares credited and reflected in her demat account generally within T+1 day.

Evolution of Demat Account

Before 1996, owning shares or other securities required holding paper certificates. Not only did it increase paperwork, but securities were also prone to damage, loss, forgery and other concerns. 

The Securities and Exchange Board of India (SEBI) established the framework for dematerialisation of securities through the Depositories Act of 1996. The two principal SEBI-registered depositories are:

  • National Securities Depository Limited (NSDL): One of India's two SEBI-registered depositories.
  • Central Depository Services (India) Limited (CDSL): The other SEBI-registered depository. 

Investors create a demat account through a registered Depository Participant (DP). These participants act as intermediaries between investors and the depositories. Stockbrokers, banks, or any other relevant financial institution can operate as DPs. 

What are the Key Features of a Demat Account?

The key features of a demat account include easy access to your investment portfolio, lower risk of fraud or forgery, keeping your invested financial assets safe and more. Apart from these, here are the other key features of a demat account:

A demat account allows you seamless access to your invested financial assets and their statement. Most stockbrokers and banks provide a mobile application and web portal to access your account. Hence, whether you are on a smartphone, laptop, or any other supported smart device, you can access your demat account anytime and from anywhere. 

Compared to paper-based security, demat is a much safer place to store your investment assets. You may simply ask: “What is the purpose of a demat account?” The answer is: Since paper-based security certificates are prone to wear and tear, damage or loss, storing them electronically increases their safety. A demat account ensures peace of mind that your investments are safe, and you simply access them by logging in to the account.

Aside from the chances of damage, loss or theft, forgery or manipulation of physical share certificates was easier. Through electronic records, a dematerialised account helps to reduce the chances of forgery or fraudulent attempts. Since securities stored in this account are tracked digitally, it adds a layer of security against unauthorised transactions.

Being a digital account, demat accounts allow retail investors settled abroad (e.g. NRIs) to invest in securities traded across Indian stock exchanges. With dedicated demat accounts, they also get access to equities of companies in India and other securities. This not only helps them grow as investors but also increases cash inflow in the Indian market. 

You may want to transfer shares held in one account to another for a certain reason. Your demat account helps with this since the process is much faster and cost-effective. Earlier, such a transfer could take up to a month. However, due to dematerialisation, you can transfer shares from one demat to another generally within 3 to 5 business days.

With a demat account, selling market securities is much faster and more convenient. During revised market hours between 9:15 AM and 3:30 PM, you can sell securities stored in your demat account via your trading account as you see growth potential. This helps with liquidity and you can gain access to funds as you observe growth or you need them for other purposes.

What is the Working Process of a Demat Account?

A demat account works alongside a trading account and a bank account. Each serves a different purpose:

  • Bank Account: Holds your money and is used to add or withdraw funds.
  • Trading Account: Allows you to place buy and sell orders through a broker.
  • Demat Account: Holds the securities you purchase in electronic form.

Example for Buying Shares:

Suppose an investor wants to purchase 50 shares of a company's stock trading at ₹100. Here is what happens when they proceed with their investment decision:

  • The investor funds their trading account with enough money to invest. They select the specific stock, choose the quantity and place a buy order. 
  • Their purchase order reaches the respective stock exchange (e.g. NSE or BSE) and gets matched with the seller.
  • Upon trade confirmation, the clearing corporation processes the trade settlement.
  • The investor’s Depository Participant (DP) receives a confirmation of that transaction, and the depository (either NSDL or CDSL) credits that particular amount of shares in their demat account. 
  • Since it generally takes T+1 day for the shares to be credited, after this timeframe, the investor can see those shares reflected in their account.

Continuing with the same example, let us explore the role of demat in selling market-linked securities stored in it. 

Example for Selling Shares:

Suppose the investor sees the stock reaching ₹130 per share due to a market rally. They decide to sell their shares to book a profit:

  • The investor places a sell order by choosing how many shares to sell using their trading account. 
  • Upon trade execution, their DP instructs the respective depository to debit that number of shares from their demat account. 
  • The shares get debited from that account through the stipulated settlement cycle. 
  • Once the settlement is complete, the respective proceeds reach their trading account. 
  • The investor can withdraw this amount and transfer it to their linked bank account after deducting charges and taxes. They may also keep the proceeds in that trading account to continue with further investments or trades.

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How Many Types of Demat Accounts Are There?

Demat accounts are available in different categories depending on the investor's residency, eligibility and requirements. These include regular accounts, Basic Service Demat (BSD), repatriable, and non-repatriable accounts. Here is a detailed description of each:

A regular demat account is intended for Indian citizens and is offered by NSDL and CDSL through DPs. With this type, you can invest in stocks, bonds, ETFs and other securities. There is no general upper limit on the value of securities that an investor can hold in a regular demat account. Depending on your DP, you may be liable to pay an Annual Maintenance Charge (AMC).

BSDA is a basic version of a regular demat account for Indian residents. It is generally suitable for those investors who do not invest frequently and whose total investment valuation in this account does not cross ₹2 lakh. Additionally, you can invest in stocks, ETFs, bonds, and other supported securities within the specified limit. 

Being a basic type of account, the AMC is generally lower. Depending on your broker, you may not need to pay an AMC for holding a value less than ₹50,000. For valuations between ₹50,000 and ₹2 lakh, a nominal AMC may apply.

A minor demat account is for individuals aged below 18 years. Since a minor cannot actively participate in investments, their parents or guardian create and maintain this account on their behalf. Similar to a regular account, parents or guardians can invest in equities and other securities on the minor’s behalf. 

It is restricted to delivery trades and does not allow equity or currency derivative trades. When the minor turns 18, the account must undergo the required changes and KYC formalities to continue as an adult account.

Non-Resident Indians (NRIs) can invest in the Indian securities market through a repatriable demat account with a Non-Resident External (NRE) bank account. Under Reserve Bank of India (RBI) guidelines and the FEMA Act, an NRI using a repatriable account can transfer investment proceeds to their country of residence overseas on a 100% repatriable basis. 

This flexibility makes this account popular among NRI investors. However, NRIs can repatriate the proceeds after paying applicable taxes and charges.

NRIs can create this type of demat account through permitted non-repatriable routes. It is commonly linked to an NRO bank account. NRI investors with income sources in India may find this account suitable to invest those earnings in securities and enjoy potential growth. 

However, since this is a non-repatriable account, NRIs cannot repatriate the entire proceeds from investments. After paying taxes and subject to RBI guidelines, NRIs can repatriate up to $1 million in a financial year.

What are the Required Documents to Open a Demat Account?

To open a demat account with a stock broker, bank or any other relevant financial institution, you must produce a set of documents. Here is a list of some crucial documents that you must keep handy for a seamless account creation experience:

  • Proof of Identity: Provide your 12-digit Aadhaar Card number, passport or voter ID.
  • PAN Card: PAN details are generally required for securities-market KYC.
  • Proof of Address: Provide details of your Voter ID, passport or copies of recent utility bills. 
  • Bank Account Details: Produce a copy of your income proof (e.g. latest salary slips, bank statements, etc.), generally to activate the derivatives segment.
  • Photograph and Contact Details: A photograph, active mobile number and email address may be required as part of the application and verification process.

Important Note: You may require additional documents such as:

  1. Demat Account for Minors: Documents required include the minor’s proof of age and KYC documents of parents/guardians.
  2. Derivatives Segment Opening: Proof of income may be needed in case the individual wants to open the derivatives segment. This is not necessary for opening an ordinary demat account.
  3. NRI Demat Account: Additional documents include passport, foreign address proof, visa/residence proof, and bank account proof of NRE or NRO.

How to Open a Demat Account for Investments?

You can generally open a demat account online through a registered DP. The process may differ slightly depending on the provider, but it usually involves the following steps:

Step 1: Choose a Depository Participant

Choose a reputed and SEBI-registered DP such as a stockbroker or a bank and head to their official website. Most DPs generally have a dedicated investment mobile application, and you may start the account creation process by downloading that app. 

Step 2: Enter Your Basic Details

Provide information like your name, the mobile number you want to register and your email address.

Step 3: Complete the KYC Process

Complete your KYC verification by uploading key documents: PAN, Aadhaar Card and bank details for faster verification. Note that your mobile number must be linked with your Aadhaar Card.

Step 4: Complete Verification and E-Sign

Depending on your DP, you may need to provide your selfie or participate in a video KYC. When prompted, e-sign your application using Aadhaar-based verification. 

Step 5: Wait for Account Activation

Your DP may take some time to verify all the documents you uploaded and your eligibility for the application. Once approved, you will receive a notification via the app or email, and you will get your demat account number or BOID and other credentials.

How to Manage Your Demat Account After Creating It?

Opening a demat account is only the first step. You should also understand how to access your account details, monitor your holdings and authorise transactions.

You must first understand the Beneficial Owner Identification Number (BOID) that you receive after account creation. It is your unique demat account number in a 16-digit numeric or alphanumeric format. Its format depends on the depository:

  • CDSL: If your account is registered with CDSL, you will receive a 16-digit numeric code. For example, your BOID will look like 9876564534231098. 
  • NSDL: If it is registered with NSDL, you will receive it in a 16-digit alphanumeric format. NSDL-registered BO IDs start with IN and, for example, will look like IN09876756453423. 

By logging in to your demat account through your DP’s app or web portal, you can see it under ‘Profile’ or a similar relevant section. For better management of your account upon investment, you may keep a periodic check on your holdings using the account. In a statement of holdings, you can confirm them using the unique 12-digit ISIN number.

Depending on your depository, you must set a 6-digit T-PIN or M-PIN for the first time. While setting it for the first time, you may need to verify this PIN generation through an OTP. You generally need this PIN when selling your purchased securities. 

What are Some Charges Associated With a Demat Account?

Before you create a new demat account with your preferred broker or any other type of DP, you must understand the charges applicable. The amount and structure may differ across providers. The common charges include:

Most DPs such as brokers or banks do not impose any charge while creating a demat account. This means you can open one for free. Also, you get a trading account with it to participate in the purchase and sale of securities. Banks generally provide a 3-in-1 account creation option containing a savings, demat and a trading account. 

This is a recurring fee that you must pay annually to keep your account maintained and active. Especially if your DP is a stockbroker, the amount generally differs based on the availability of services. Full-service brokers generally charge more, between ₹300 and ₹750 or more, with GST. Discount brokers generally impose a nominal charge for maintenance.

These are the charges that your stockbroker or DP levies as you execute trade orders through their platform. Similar to AMC, depending on broker type, discount brokers generally follow a flat-fee structure. Full-service brokers may levy this charge on a percentage basis of the total transaction value.  

You may need to pay a DP charge when you sell shares stored in your demat account. Your broker usually charges this fee only once, even when you sell shares through multiple orders on the same day. They levy this charge generally as a flat fee per ISIN or company stock on a trading day. 

Your broker or DP may also levy miscellaneous charges for additional services. For example, depending on your broker, you may need to pay an amount for physical statements or non-periodic ones. For other services like updating nomination, requesting a DIS booklet, etc., you may be liable for additional charges. 

Key Factors to Consider While Creating a Demat Account

Choosing the right DP can make it easier to manage your investments. Consider the following factors before opening an account:

  • Check the DP’s Registration Status: Select a SEBI-registered DP and analyse its profile and experience.
  • Compare Account Fees: Compare the fees on account opening, AMC, DP fees, etc. Even small fees may become significant when added together.
  • Check the Trading System: In case you are going to trade as well, evaluate the broker’s website, mobile application, order execution, etc.
  • Seek Customer Support: Find out whether there are customer support options available for resolving account problems.
  • Understand the Services: Study all the services provided by the company, such as account services, statements, transaction notifications, and others.
  • Keep Your KYC Details Updated: Fill in your KYC data correctly and have an active mobile number and email.

Final Words

A demat account is a digital vault to store the securities that you purchase from exchanges like the BSE or NSE. Unlike paper-based security certificates, this account stores your investment instruments in a digital format that protects them from getting damaged, stolen or lost and makes investments or trades faster and more convenient.

Also, remember that a demat account holds securities, while a trading account is used to place buy and sell orders.

With Stoxkart, invest in company stocks or trade in futures and options and more and strengthen your portfolio. Download the mobile app or log in using the web platform to start your investment journey!

FAQ's

Yes, you can create a joint demat account, and in this, you can add up to three account holders. This means that, aside from the primary account holder, you can add two more individuals to a joint account.
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