Open Demat Account: How can I get a Free Demat Account?
If you are interested in investing in shares, you need to get a demat account. For this you will have to go to a depository participant (DP), which could be a stockbroking firm or a bank.
You will be able to get a free Demat Account with many of the DPs since they waive charges in order to attract customers. So it’s always best to look around first before you open a Demat Account. When you can open a Demat Account with zero charges, why pay extra?
What is Demat & How Does it Work?
A Demat Account is an electronic account where you store securities in the digital form. Demat stands for Dematerialisation. Since 1996, the Securities and Exchange Board of India made it mandatory for traders to have a Demat Account to trade in stock markets.
A Demat Account works similar to a bank savings account. Just as a savings account stores your money, gets debited or credited every time you withdraw or deposit cash, a similar thing happens with Demat Accounts. It is where your securities are stored. Every time you buy securities, they get credited to your Demat Account. When you sell securities, they get debited from your Demat Account.
Features & Benefits of Demat Accounts
- A Demat Account gives easy and immediate access to your investments.
- These details are readily available online and you can access them through your computer, mobile phone or any other smart device.
- You automatically receive stock dividends, stock splits, bonus shares, public issues, etc. in your Demat Account.
- It is easy to convert physical share certificates into the Demat form. All you must do is approach your DP for the same and it will be done in a while.
- You can take a loan against securities in your Demat Account.
- If you do not want to use your Demat Account for a while, then you can freeze the account.
Of course, you must remember that while account opening may be free, there are other costs that you may not be able to avoid. There are two such costs: one is annual maintenance charge, and the other is transaction charges.
The annual maintenance charge is a fixed fee that you have to pay each year. This could range between Rs 300 to Rs 800. Many DPs also waive annual maintenance charges for a limited period of time, like a year, as an introductory offer to new clients.
Another fee is the transaction charges, which is charged per transaction. Usually, this fee is applicable when you sell securities, and not when you buy them. Few brokers don’t charge clients for these transactions too. Otherwise, this charge is a small percentage of the value of the transaction or could be a fixed charge of around Rs. 15 to Rs. 20. Some DPs also charge a fixed fee per month instead of per order charges.
Basic services Demat Account
If you invest only small sums in the stock markets, do you have an option to reduce your demat costs? Yes, you do. The Securities & Exchange Board of India (SEBI), in order to safeguard the interests of small investors, issued guidelines instructing DPs to open basic services Demat Accounts that offer reduced rates. If you open such an account, you will not need to pay any annual maintenance charge if your equity holdings are under Rs 50,000. If your equity holdings are up to Rs 2 lakh, you need to pay only Rs 100. For debt securities, there will be no charge for holdings up to Rs 1 lakh.
Additional Read: Features and benefits of a Demat Account
How To Open A Demat Account
You can open a Demat Account at any stockbroking firm or bank that is also registered as a depository participant. All you need to do is fill the account opening form and complete the KYC formalities through your Aadhaar number or Digilocker facility offered by the Government of India. Since most reputed DPs today waive charges for it, you can get a free Demat Account in no time at all. It’s always better to have a Demat Account since you will need it to buy shares and also to invest in certain debt instruments.
A Demat Account is much cheaper than trading in physical certificates, as it used to be. While there are certain unavoidable costs with opening a Demat Account, it is possible to find a DP who offers free Demat Accounts, i.e. does not charge for opening a new account. You must do your research and find one that works best for you.
1. Is it possible to open Demat Account online?
Yes, it is possible to open a Demat Account online. All you need to do is go the DP’s website, fill up certain forms and details and your account will be activated.
2. How much does it cost to open a Demat Account?
While many DPs charge a small fee open a Demat Account, others offer this service for free. You need to compare the different accounts to see which suits your requirements.
3. What is the minimum balance required for a Demat Account?
A Demat Account is where financial securities are stored in electronic form. It does not involve money. For this reason, there is no minimum balance that you need to maintain for Demat Accounts.
Disclaimer: The contents herein mentioned are solely for informational purposes and shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.