Demat or Dematerialized accounts are those accounts where people can save their securities in electronic formats.  Much similar to the bank accounts, Demat accounts are used to save bonds, shares, exchange-traded funds (ETF’s) securities, and similar assets. The purchased shares get credited to the Demat account and the sold shares also get debited from the same account. 

Thus, a Demat is a basic and foremost requirement for conducting trading activities. 

Types Of Demat Accounts

The share market is flooded with different investors having different investment purposes. Based on the individual investor needs, Demat accounts are classified into the following three types:-

Regular Demat Accounts

To start investing in stocks, any Indian Resident requires a Regular Demat account.  These Demat accounts are ideal for those investors who wish to expand their portfolio size and want to trade frequently. Across the country, Regular Demat account services are provided by NSDL and CDSL through intermediaries such as depository participants/brokers.

A recent introduction by SEBI under this category is the Basic Services Demat account (BSDA). These are similar in nature to regular accounts apart from the fact that these are suitable for investors who are not frequent buyers or sellers.  Also, these accounts do not have any annual maintenance charge (AMC) if the holding is below Rs. 50,000. For investors who have shareholdings between the range of 50,000 to 2 lakhs, the AMC is Rs. 100.  

Repatriable Demat Accounts

These Demat accounts are meant for Non-Resident Indians, who wish to trade in the Indian stock market while living anywhere in the world. For opening such accounts, an individual needs to have a Non- residential external (NRE) bank account as the funds cannot be deposited into a normal bank account.  To trade in the Indian stock market, an NRI needs to open a Portfolio Investment Scheme (PIS), and can buy or sell stocks from the non-repatriable Demat accounts. 

An NRI is required to submit copies of the following documents for opening a Repatriable Demat account. The documents need to be self-attested as well as attested by the Indian Embassy.

  1. Address proof in India
  2. Latest photographs
  3. Copy of PAN card
  4. Proof of address in the country of residence
  5. FEM Declaration
  6. Visa and Passport photocopy
  7. Canceled cheque leaf of the NRE/NRO bank account.

Non- Repatriable Demat Accounts

Please note these Demat accounts are solely for NRIs who wish to trade in the stock market. But, the funds generated through these accounts cannot be transferred abroad. Also, an NRI should have a linked Non-Resident Ordinary account to these accounts to carry out the trading activities. Also, if an individual has had a Demat account with a bank before moving out of the country, they need to close that account and transfer all the shares or securities to an NRO account if they wish to trade further. An NRO account can be opened jointly with a resident Indian or with an NRI.

Difference Between Demat Account And Trading Account

As the name suggests, Dematerialization accounts convert the assets into electronic format. It is the first requirement when an individual wish to enter the world of trading. Once you open a Demat account online, you need to open a Trading account from where you can buy or sell shares from your Demat account. 

Benefits of opening a Demat account

  • It reduces the risk of holding physical shares and other assets.
  • It decreases the amount of time and effort wasted in managing hard copies of your assets.
  • It keeps a thorough track of the investment made 
  • No TDS is deducted while making any payments or receiving interest on the bonds or securities in the Demat account.