Stoxkart

What is a demat account?

If you’re a recent entrant into securities trading, you may not have heard of the pre-demat account era - a time when shares and securities were held ‘physically’ - in the form of certificates and sheets of paper. Imagine that - millions of reams of paper spread across hundreds of thousands of investors holding onto their stocks.

A dematerialized account is an electronic account that holds all your securities i.e stocks, shares, bonds etc in an electronic form.
In order to open an account, you need to go through a depository such as CDSL or NSDL.
There’s no need for you to hold on to physical share certificates.

Definition Of Demat Account

Courtesy the internet and of course, computers - we’ve migrated to a paperless era - the demat era. Instead of having to deal with obnoxious paperwork, investors now hold their stocks (or mutual funds and Exchange Traded Funds (ETFs)) in an electronic form - in a demat account.

Objectives Of Demat Account

Consider this account as the equivalent to a bank account, which holds your money. This account similarly holds your securities. Shares and stocks are transferred electronically to your account.

India began the transition to the dematerialized system in 1996. The Depository Act was passed in the same year and allowed for the setting up of depositories (like the NSDL and CDSL) that would hold such accounts. The NSDL (National Securities Depository Limited) came up in the same year and allowed for India’s first dematerialized accounts on par with global standards.

The National Stock Exchange was the first fully automated stock exchange in India. It began operations in 1994, and shortly after, in 1996, share trading in demat forms commenced. Demat holdings is now how the entire country conducts its securities transactions.

Objectives Of Demat Account

This account generally helps us to avoid problems which are associated with physical share certificates, such as:
- Delivery failures caused by a signature mismatch
- Eliminating the risks associated with forging of the shares certificates, and postal delay
It is easy and convenient to hold securities in this account
No stamp duty to be paid on the transfer of shares.
Safer than physical shares which are in paper form due to theft, forgery.
Change in clients address recorded with a demat partner gets registered with all companies in which the shareholder has securities thus no need to correspond with each of them separately.
Automatic credit into your online account for shares which arises out of bonus and splits.
It reduces risks of delayed settlement.
Traders can deal with shares from anywhere using this account.
You’re no longer losing your stock certificates to events like theft, fire or any other disaster. In the pre-demat era, losing these certificates would cause an extraordinary amount of trouble since you no longer had your primary proof of ownership.
Shares are now immediately credited to your account. You don’t have to wait for several days to receive your shares in the mail.
They’re cheaper. Printed certificates have costs. A demat holding, therefore, reduces transaction charges, and you avoid stamp duty on them as well.

Did You Know?

The National Stock Exchange was the first fully automated stock exchange in India. NSE started in 1994. Demat share trading started in 1996.

How to open a demat account

Online Demat Account Registrations In an increasingly Internet-dependent world, the traditional process of submitting paper forms is seeing a decline. Now, customers can opendemat account online without having to go through all the tedious form filling, simply by agreeing to an eKYC from online brokerages. Stoxkart verifies your data using your Aadhaar card. It’s all paperless!

Here’s the traditional way to open your account:

After selecting your DP of choice, you’re expected to fill out an account opening form with the DP. A proof of identity and a proof of address will also be required via submission of photocopies of appropriate documents.
Next up is an agreement you’ll need to sign between yourself and your DP. This agreement seeks to clearly state the responsibilities of the DP and the trader (you). You may retain a copy of this agreement.
At this stage, you’re more or less done with the demat account opening process. You’ll now receive your account number, also referred to as BOID (Beneficial Owner Identification Number). The DP is likely to levy the account charges towards maintenance, account opening and transaction fees.

Documents required for demat account

The “demat” is a short form dematerialized account. It’s the securities equivalent of your bank account, holding your financial instruments like bonds, shares, mutual funds, government securities and exchange-traded funds (ETFs). It’s called so because it holds all of them in a dematerialized or electronic format. You as an investor (or a shareholder) have the advantage of holding shares in electronic form rather than physical form. Hence, there are few governments approved documents required for your demat account.

You need to provide some documents in order to kickstart your demat account opening process. These include PAN Card, address proof, and bank proof. A properly filled out account opening form can go a long way in ensuring that your account is opened quickly.
If your phone number is linked to your Aadhaar Card then you can open a demat account online-completely paperless.

Documents required to Open demat Account

Proof of identity
- PAN Card
- UID (Aadhaar)
- Driving Licence
- Passport
- Voter Identity Card
- NREGA Job Card
- Any document notified by the central government
Proof of Address
- PAN Card
- UID (Aadhaar)
- Voter Identity Card
- State issues Driving License
- NREGA Job Card
- Utility bill which is not more than two months old of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill).
- Bank account or Post Office savings bank account statement.
- Documents issued by Government departments of foreign jurisdictions and letter issued by Foreign Embassy or Mission in India.
Proof of Bank
- Your name
- Bank’s IFSC Code
- MICR

Fields that are to be filled in the demat account form:

Type of account (Ordinary, NRI, NRI-Non-Repatriable or HUF)
Account holder information (name, address, telephone no., email id etc.)
Second holder details
Guardian details
Extra information for NRIs (foreign address, RBI reference no. and RBI reference date)
Bank details (Account no. , account holder’s name etc.)
Financial details (PAN number)
Photograph
Declaration (Holder’s name and signature)

Procedure for opening a demat account

Armed with these documents, you’re only one step away from opening a demat account. Choose your broker after having compared them based on factors such as customer service, account charges, and user experience.

Depending on the format you’re storing these documents in (paper or electronic), you can choose between 2 paths on completing this process.

Paper forms
- Download and print the demat account opening form, and fill in the necessary details.
- Submit the account opening forms along with the required documents specified by your broker. Your broker might ask for an updated KYC form if it is not already updated. Proof of identity and proof of address are one of the most important proofs that you need to submit.
- The account opening form will also ask you to mention a nominee. A nominee is a person who will be in-charge of your account and its assets if some kind of mishap were to happen to you.
- You’ll also come across the Depository Participant-Investor agreement, which contains details such as the charges you’ll incur while holding the dematerialized account, the rules and regulations, terms and conditions, and also the duties of the broker and your rights as an investor.
- An in-person verification to check that your details are true and valid may be completed.
- NREGA Job Card
- After all the formalities are completed, you’ll receive a Beneficiary Owner Identity (BOID) or Unique Client Code (UCC) - a unique account number which will be used in all future transactions you conduct.
Electronic demat registration (eKYC)
- As you can see the paper registration process can be cumbersome and stretch over multiple days. Thanks to the internet and our increasingly integrated systems, it’s a lot easier to open a dematerialized account now.
- If you have soft copies of all your required documents and the Aadhaar Letter as Proof of Address for Know Your Client (KYC), you can register your account online. Simply feed in basic details - such as the email ID and mobile number you’d like to use. In order to receive the OTP, make sure the given mobile number is linked to your Aadhaar Card.
- The next screen should ask you your PAN number for validation.
- After this screen, we come to the most important feature of the account opening process--validation via Aadhaar details.
- Enter your Aadhaar (UID) number, and Stoxkart will perform all the remaining data validation for you - such as full name, address, age, gender or all the other details will be prefilled.
- Once you upload all your documents, your account registration should be complete. Good luck trading!

Demat account opening procedure

If you’re looking to buy securities (like shares, mutual funds or ETFs) online, a dematerialized account is absolutely essential. Apart from the obvious benefits it offers (it’s cheaper and faster), it’s also a requirement when you wish to register yourself with any brokerage.

There are two ways to start with your account: the online account opening method and the traditional method of submitting physical forms.
Choosing a broker who fits your trading style and understands your financial goals is more important than the method you use to open your account.
Sometimes brokers charge more for submitting physical forms, therefore, ensure that you check all the account opening costs associated with the opening procedure.

How to open a demat account

Before you get started on the demat account opening procedure, select your broker. This choice could depend on a variety of factors - such as brokerage fees/charges (more on this below), the platform’s / user interface, and its customer service.

In today’s digital world, the way you apply for your account matters. Your broker is the one who’ll help you open a demat account in the easiest way possible. Is it the traditional method involving paper forms? Or the new-age Aadhaar-based paperless online method?

We’ll lay them out here for you and let you figure out what’s easier.

Steps to open a demat account

The online account opening method :-

In today’s digital world, there really shouldn’t be any reason for you to be filling out physical forms when almost the entirety of your information can now be stored digitally. Fortunately, some brokers have the online processing part figured out. Customers can sign up and complete the registration process online. As long as you have an Aadhaar card with your mobile number linked to it, you’re good to go!

Head to the Stoxkart online demat account opening page.
Enter your basic details, and click Sign Up
Keep scanned copies (i.e. soft copies) of your documents (Aadhaar, PAN, Cancelled Cheque, and your latest bank statement) with you for when you are directed to upload them.
Enter your Aadhaar details and the OTP you receive on your linked mobile number in order to verify your identity.

That should be it. Your demat account should now be created.

Traditional/offline account opening process

Your broker will hand you an account opening form - either when you’ve visited its office or if you’re meeting one of its employees.
You will need to fill out this form, and attach a proof of identity and a proof of address. These proofs can be submitted using photocopies of appropriate documents.
Once done, you’ll also be expected to sign an agreement with your broker. This document will state your responsibilities as a trader/investor, and that of your brokerage firms. Keep a copy of this document with you for future reference.
Once your broker verifies and processes your documents, you’ll be given your account number, similar to how you receive a bank account number. This number is called the Beneficial Owner Identification Number (or BOID) or Unique Client Code (UCC) if you’re trading with Stoxkart.

You’ll also receive additional confidential data - such as a Login ID and key for accessing online portals and placing trades. Keep in mind that these transactions are likely to attract charges. You might incur some charges for using certain portals.

Demat account charges

There are multiple sorts of account charges you’re likely to come across - both during the time when you hunt for your preferred broker and when you’ve completed your registration process. Primarily, these charges can be classified into 3 types:

Account Opening Fees
Annual Maintenance Fee
Transaction Fees

Account Opening Fees is the fees your broker will collect for the whole process of registering your demat account. Not all brokers charge this fee, so you’re likely to come across a few where you would not be paying any such fees. Some online brokers might charge a nominal account opening fee to trade on different segments.

Annual Maintenance Fee is usually a prepaid amount that your broker collects to keep your account active throughout the year. While these charges are usually nominal (Rs 300 - 800 for the year), many brokers in the industry have now begun to charge zero fees here as well. The race to provide traders with the best rates and services has led to some intense competition in the brokerage industry landscape.

Transaction Fees refer to the charges your broker will levy for moving (debiting and crediting) your stocks or other securities to and from your dematerialized account. This can vary wildly across brokers depending on their target audience.

We charge minimal demat and trading account opening fees of Rs 300 + GST (For Equity a/c). An Annual Maintenance Fee of the same amount also applies to the account.

Stoxkart continues to keep costs low with the Transaction Fees as well - charging Rs 15.5 + GST(including CDSL’s depository charges) - significantly lower than large traditional broking firms.

While discount brokerages charge low account opening fees and brokerage, that’s not to say they cut down on services. For example, it is entirely possible to open an account using the traditional paper method on Stoxkart as well. Head over to the forms section and download the demat account opening form. You can choose the segments you want to trade on while opening your account. Fill out the forms, attach the required documents, and send them over via courier to this address:

11/6B, Shanti Chamber, Pusa Road, Delhi-110005.

If you see the merits of a convenient and online Aadhaar-based registration, you’re welcome to get started with the online demat account opening.

Eligibility criteria to open a demat account

The enormous growth we’re witnessing in our economy finds an obvious indicator in the stock markets. Presently, after understanding the dynamics of the share markets, mutual funds and more, an increasing number of people seem to be more inclined to invest big in these markets.

But can everyone jump in? Only if they have a dematerialized account.

In India, there are two depositories that hold your demat account for you. These are the CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited).
Contrary to what you may assume, you don’t need to be 18 to get started. There is no minimum age to invest in the stock market.
A PAN card is a necessity to get started with your online stock trading.

It is important to know if you’re eligible to open a demat account in the first place.

How does a Demat account work?

A dematerialized account holds all your securities (shares, commodities, ETFs etc) in an electronic form. You cannot trade in the stock market without one. Let’s get the basics out of the way first. Here is a list of things to understand the working of this account:

Central Depository: In India, there are two depositories that hold your stock accounts for you. These are the CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited).
Unique ID: Every dematerialized account has a unique ID for identification. This number is not only used for transactions but also helps individual companies to identify you correctly in order to credit shares into your account.
Depository Participants: Access to your stock account, held by the central depository, is provided by Depository Participants - DP, or what we call brokers. They act as an intermediary between the central depository and the investor. DPs could be traditional banks, financial institutions or more recently, discount brokers.
Portfolio Holding: A stock holding account contains all the details of the accounts’ transactions. They are automatically updated every time a transaction occurs.

Did You Know?

CDSL was set up in 1999 to help manage the rush of demat account registrations that the NDSL was dealing with.

Eligibility Criteria

CDSL was set up in 1999 to help manage the rush of demat account registrations that the NDSL was dealing with.

Age
- Contrary to what you may assume, you don’t need to be 18 to get started. There is no minimum age to invest in the stock market. Both a minor and an adult can invest in stocks.
- An account can be opened in a minor’s name by the parents or the appointed guardian after submitting their respective documents. The parents or the guardian/s will be in charge of the account until the minor attains adulthood.
- Post the minor turning 18, the depository participant will send an advisory to the individual in order to obtain certain KYC (Know Your Client) documents to open and transfer details to a new account.
PAN and KYC details
- A PAN card is a necessity to get started with your demat account. You’ll need to submit a copy of your PAN card along with the KYC document when opening the account.
- The KYC process is witnessing a shift to an online format that uses your Aadhaar card. It is Upstox’s most popular method of registration. You too can do your eKYC online.

Documents required for a demat account

To be eligible for a dematerialized account; in addition to your PAN card, you must provide a few more documents for identification and address proofs along with your latest photographs. Only photocopies of the documents are required for submission. However, the originals will be required for verification.

Proof of identification (POI): A voter’s ID, a PAN card, a passport, a driver's license, electricity bills, telephone bills, ID cards with applicant's photo issued by the central or state government are a few documents which can be submitted for proof of identification.
Proof of Address (POA): Ration cards, passports, a voter ID card, a driver’s license, a bank passbook or a bank statement, verified copies of electricity bills, residence telephone bills are a few of the documents which can be submitted for address proof.

Demat and trading account charges

Investing and trading have proven themselves to be extremely popular, super reliable methods to generate wealth and financial security. But of course, there are no free lunches in this world! Setting yourself up to trade and invest in securities comes at some cost, and these costs are passed on to the customers by brokerages and other service firms.

Opening a demat account or a trading account comes at a price. It is important that you ensure you find a service provider who suits your needs and budget.
There are five types of account opening charges for a demat account: account opening, account maintenance, custodian fees, transaction fees, dematerialization fees.
Traditional or full-service brokers usually have more overhead costs as compared to discount brokers. Thatâ€™s why the account opening charges might also vary depending on the type of broker you choose.

Itâ€™s important, in such scenarios, to have a crystal clear idea of the basic requirements, and your costs before plunging into investments and trading.

Get the detailed understanding of What is a demat account? and What is a trading account?

Demat account charges

Youâ€™re likely to run into plenty of fees and charges when you start investing in the stock market. Some of these charges are levied during your transactions, while others are generally charged on an annual basis. These charges vary from one broker to another. So choosing your broker is a very important decision!

There are mainly 5 types of charges that are levied on the account holder:

Demat account opening charges : These charges are what your broker will levy to set-up your dematerialized account. When the broker happens to be an existing banking institution, this account is usually free of cost. This is because the banking institute that offers broking services is doing it for a reason. The bank intends to generate more revenue by charging higher transaction fees, making this a fairly common business tactic. Thatâ€™s why you should ideally check the account opening charges in light of all other bank-related fees before you begin.
Annual Maintenance fee : This charge is levied on an annual basis, to be paid in advance to keep your account working and providing you services regularly as per your demand. The fee usually varies between 300-800 INR but isnâ€™t necessarily directly proportional to the quality of service. This is best reflected in Stoxkartâ€™s charges, which are significantly lower than all other brokers.
Custodian fee : The custodian fee is charged by the brokerage firm for the safe-keeping of your securities. This is generally charged yearly, based on the number of assets held onto by the firm. It may vary (Rs. 0.5-1) per ISIN (no. of securities) in a month.
Transaction fee : A brokerage firm will usually levy a charge on each trade. Typically, these charges vary based on the number of stocks involved and the value of the trade. Charges from depositories like CDSL are also passed on, although many brokers add their own significantly higher margins to this fee. A transaction fee would be payable by you depending on the scheme and broker you choose.
Dematerialization fee : If you hold onto some securities in the physical form, the firm would charge a nominal fee to convert these physical securities into demat form. This charge is only applicable if you wish to convert your physical securities into demat form.

Trading account charges

A trading account also has some costs associated with it. These charges are based on the number of transactions done through the account. These charges vary from one firm to another.

There are mainly 3 types of trading account charges:

Trading Account Opening Charges : A trading account is usually free of cost when the firm is a banking institution, for reasons mentioned earlier in this article.
Annual Maintenance fee : This charge is primarily levied in advance on a yearly basis to keep your account working and ensure consistent service delivery. Many broker firms seek to simplify this process by clubbing it with account opening fees.
Transaction fee : Any brokerage firm usually charges based on the number of transactions - either based on value or on the number of stocks. As the numbers go up, so does the transaction fee. A brokerage fee would be payable by you which depends on the scheme and broker you chose.

The difference between traditional and discount brokers

Youâ€™re likely to come across two different kinds of brokerage firms when you decide to start investing in the stock market - the traditional brokers and the discount brokers.

Full-Service / Traditional brokers

Full-service brokers, or traditional brokers, provide a bunch of add-on services apart from offering you the ability to trade on all sorts of securities (stocks, commodities, and currency). These usually include advisory services, research, asset management, retirement planning and investment banking. They also allow for a broader range of trading options - such as forex, mutual funds, pension plans, insurances, bonds, IPOs and FDs. Since you are getting personalized services, they come with significantly high operating costs. This could eat up a decent chunk out of your profits in the long run.

Discount brokers

Discount brokers, also known as budget brokers - are rapidly gaining in popularity. While they offer significantly lower brokerage rates, high-speed trading in stocks, commodities, and forex. These brokers won't offer you trading advice, so if you believe in your decisions and research, a discount broker is an obviously better choice. Budget brokers are ideal for a fast-paced trader who wants to place orders in a timely manner. Apart from being affordable budget brokers also offer strong and latest trading platforms that make your trading life easier.

Clearly, both these accounts are essential for everyone looking to trade and invest in securities. Now, with the new-age Aadhaar based online registrations, opening an account is easier (and cheaper) than ever.

Difference between demat account and trading account

Are you considering to invest (or trade) in the stock market? If you’ve been following our guides, you might know that a demat account and a trading account are essential for trading and investing in securities. A common issue, however, is the average investor does not realize exactly what the differences between a demat and a trading account are.

A dematerialized account is where you store your shares, bonds, government securities and mutual funds in electronic format.
A trading account facilitates transactions of the shares, bonds, government securities and mutual funds that you hold in your dematerialized account.
A trading account is a bridge between your bank account and your stock account. You can transfer funds from your bank account to this account and conduct transactions through a trading account.

Demat Account vs. Trading Account

Now, let us note down some points that bring out the major differences between a trading and a demat account.

Differences in the Nature of the Accounts
- A dematerialized account or stock account holds shares, bonds, government securities and mutual funds in electronic form. The financial instruments that are held in a stock account are traded in the stock market with the help of a trading account.
- Here’s a real-world analogy: Imagine you have a thousand rupees in your wallet (i.e. trading account) You walk into a departmental store (i.e. the share market). You purchase several items and finalize the price. You then pay the due amount already existing in your wallet. In this case, your wallet is the trading account since it was the source of funds for the transaction. Your shopping bag is the demat account since it now holds the assets you purchased.
Differences as per the Compliance
- To open a demat account or even a trading account, you need to approach a SEBI approved broker and a Depository Participant (broker) registered with the NSDL or CDSL. In case of a trading account, such approvals are not required. But the number of demat or trading accounts that a person can possess is not limited - although there is no point in having multiple accounts. In fact, you cannot have more than one trading account with a brokerage since the accounts are uniquely linked to PAN cards.
- Every DP has their own set brokerage charges. You should check all the charges and compliance certificates usually displayed on their website.
Functional Differences
- The main function of a dematerialized account is that of securities storage, but it also performs the function of re-materialization, that is the conversion of the shares from electronic to physical form. The task of selling and buying the stocks is the responsibility of the trading member, under the instructions of the client or by the client themselves. If a trader wants to trade in, say currency, only a trading account is required; but if a trader wishes to trade in stocks, both accounts are mandatory.

How does trading take place?

Once the process of opening both demat and a trading account is complete, the question that arises is that how to trade with these accounts? Once the account is opened, the account holder receives a client ID and password to login to the trading portal using these credentials.

The trader needs to transfer money from his bank account to trading account. When stocks are purchased, they get added to the demat account and the amount that goes towards their purchase gets debited from the trading account. In case stocks are sold, they are debited from the demat account and the money is credited to the trading account.

Basically, a trading account acts as a link between a bank account and a dematerialized account. Therefore, many banks have started offering three in one packaged accounts, where the holder will simultaneously get the benefits of all the three account. The charges levied on such packages are usually expensive. Which is why discount brokers such as Stoxkart have stepped in to fill in an increasingly common need for many investors.

What is a Demat Account?

A demat account is an account to store your shares, bonds, government securities and mutual funds in electronic form. To know more read our above linked article.

What is a trading account?

A trading account is, in simple terms - a platform to facilitate transactions in shares/securities/stocks for investors. To know more read our above-linked article.