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Can a student open a demat account?

Students can open demat accounts, provided they know the rules.

Stock trading in the past involved the exchange of physical share securities. But with the introduction of dematerialization or demat accounts in 1996, the stock market was not the same again. Dematerialization is defined as the process of converting physical shares into an electronic form. A demat account holds shares and securities electronically, storing your market securities safely in one place.

Can a student open a demat account?

Yes, a student may open a demat account. But there are certain terms and conditions that students need to know. They are as under:

  • Students above 18 years of age, may open both demat and trading accounts. However, like all stock market traders, they need to have a valid PAN card to be eligible for trading.
  • Students below 18 years of age (minors) may open demat accounts, but they may not open trading accounts, and therefore such students cannot purchase and sell share market securities.
  • Minors may not enter into any trades because of the Indian Contract Act of 1872 that prohibits minors from entering into any contracts. Since share trading involves - contracts between a broker and a client, minors are not allowed to open a trading account.
  • Demat accounts can be opened in the name of a minor child only by the natural guardian (parents) or court-appointed guardians.

How to open a demat account?

  1. Identify and approach a Depository Participant (DP). A DP is an intermediary associated with Central Depositories in India – the CDSL and NSDL. The DP could be a bank or a stockbroking firm.
  2. Fill up the account opening form. Along with the application form, submit your KYC (Know Your Customer) documents. These include – passport-sized photos, PAN Card, proof of identity and proof of residential address.
  3. The DP verifies your documents and opens your account by allotting a beneficiary ID (Demat account number). The DP ID and Beneficiary ID merged becomes your unique demat account number.

Advantage of opening a demat account

  • You do not need to store the securities bought in a physical form.
  • It is more convenient and involves minimal paperwork
  • Demat accounts eliminate the risks of theft and fraud associated with the exchange of physical stock certificates.
  • The execution of trade transactions and settlements are also simplified.

Demat accounts have revolutionized share market investments. As a student, the earlier you begin your investment journey, the more substantial are the benefits.

Disclaimer: The contents herein mentioned are solely for informational purpose 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.

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