A demat (short for “dematerialized”) account is an account used to hold your stocks in an electronic format, instead of physical certificates. In India, a demat account is mandatory if you wish to buy or sell shares, bonds, mutual funds or other securities in the stock market.
Suppose you want to buy 100 shares of Reliance Industries Ltd. (RIL). If you don’t have a demat account, you’ll receive a physical certificate for your shares. This certificate must be kept in a safe place and can be a hassle to transfer when you want to sell your shares.
However, with a demat account, your shares are stored in an electronic form, making the buying and selling process much simpler and quicker. When you buy shares, they are automatically credited to your demat account, and when you sell, they are debited from the same.
How to Open Free Demat Account in India:
Choose a Depository Participant (DP): A DP is a company that provides demat services and acts as a link between you and the depository (e.g. National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL)).
Fill out an account opening form: This can be done online or in person at the DP’s office.
Submit KYC (Know Your Customer) documents: This includes ID proof, address proof, and PAN card.
Fund the account: You’ll need to make an initial deposit to start trading.
Zerodha and Dhan are popular discount brokers in India that offer demat services to clients. Here’s a step-by-step guide to help you open a demat account with either of these brokers:
With Zerodha:
Visit Zerodha’s website and click on the “Open Account” button.
Fill out the online account opening form with your personal and financial details.
Submit the required KYC (Know Your Customer) documents, including a PAN card, address proof, and ID proof.
Complete the e-KYC process using the Aadhar card linked to your mobile number.
Fund your account with an initial deposit to start trading.
With Dhan:
Visit Dhan’s website and click on the “Open Account” button.
Fill out the online account opening form with your personal and financial details.
Submit the required KYC documents, including a PAN card, address proof, and ID proof.
Schedule an appointment with a Dhan executive for verification of documents and e-KYC.
Fund your account with an initial deposit to start trading.
Benefits of Having a Demat Account
- Quick and Easy Trading: You can buy and sell securities easily and quickly.
- Safety: Electronic storage eliminates the risk of loss or damage to physical certificates.
- Convenient Transfer of Securities: Demat makes it easier to transfer securities between individuals or between brokers.
- Easy Portfolio Management: You can view your complete portfolio in one place.
- Paperless Transactions: No need to physically send or receive certificates.