Eligibility Criteria to Open a Demat Account
Stock Markets are an investment haven for millions. The apparent reason for this is the exponential growth in it and the consequent abundant wealth creation opportunities that stocks offer. If you want to get aboard the share market wagon, too, you will need to open a Demat Account.
What is a Demat Account?
A Demat Account is a storage account that keeps your shares and securities in an electronic mode. In the earlier time, physical share certificates were used while trading in the stock market, but that is no longer in practice. In this new-age era, shares are sold and stored electronically. The concept of Demat Account was introduced to convert your physical share certificates into digital form. If you want to invest in the stock markets now, a Demat Account is mandatory. More so, the physical format came with risks like theft, forgery, loss, etc. And since a Demat Account is digital, it eliminates these risks.
Additional Read: Features and benefits of a Demat Account
How does a Demat Account work?
Your Demat Account is assigned a unique ID that helps companies to identify you correctly when they have to credit and debit shares from your account.
Demat, Trading, and Bank Accounts are interlinked. The Trading Account transacts share trades using the funds from your Bank Account and shares from your Demat Account. Simply put, the shares you purchase through your Trading Account are credited into your Demat Account, and the funds to buy them are debited from your Bank Account. Similarly, when you sell shares, they are debited from your Demat Account, and the funds earned are credited to your Bank Account.
Additional Read: Is it possible to have two Demat Accounts?
Additional Read: Best Demat Account for beginners
Eligibility Criteria for opening a Demat Account
You can open a Demat Account only through a registered broker or brokerage firm. ICICI Direct is a registered broker that can quickly help you open a Demat Account online or offline. The process to open a Demat Account is similar to opening a Trading or Bank Account. Likewise, the eligibility criteria to open a Demat Account are also on the same lines as a Trading Account.
Anyone can have a Demat Account – minors as well as adults.
If you are a minor, your natural or appointed guardian can open the Demat Account for you. However, in this case, you cannot have any charge over this account till your turn 18 years old. Your natural or appointed guardians will function on your behalf.
A valid PAN Card is mandatory.
You need a functional Trading Account to buy and sell shares from your Demat Account. However, you can have a Demat Account without a Trading Account if you only hold the shares or securities and do not sell them. Even in the case of an IPO, you need a Demat Account to store the shares. A Trading Account is not necessary here.
Bank Account Proof
You need a functional Bank Account for opening a Demat Account. Submitting either one will serve as bank proof - A Cancelled cheque, Bank Passbook, latest 6-month Bank Statement.
You need income proof if you want to invest in Futures and Options. Submit any of these to prove your income – the latest 6-month Bank Statement, 3-month salary slip, ITR statement.
You can submit any of these as address proof - PAN card, Aadhaar Card, Driving License, Passport, Voter ID Card, up to 3-month old utility bill, or bank statement.
You need your passport photo and your PAN card matching signature on white paper to complete the documentation.
Additional Read: Can a student open a Demat Account?
The process to open your Demat Account in a hassle-free and quick manner requires having your documentation handy. Once your documents are in order, choose the best broker in terms of service quality and price to make your stint in shares a happy one.
Additional Read: Can I open a Demat Account online?
Additional Read: 7 Important Things to Know all about a Demat Account
1. Who cannot open a Demat account?
While anyone can open a Demat account, there are some criteria that you have to meet to be eligible for opening your Demat account. These criteria include mandatory documentation that you need to submit to your broker to open your account. If you do not match the following eligibility criteria, you cannot open a Demat account.
- You must have a PAN card.
- You need a functional Bank Account for opening a Demat Account. Submitting either one of these will serve as bank proof - A Cancelled cheque, Bank Passbook, latest 6-month Bank Statement.
- You need to submit an address proof document. Submitting either one of these will serve as Address proof - A PAN card, Aadhaar Card, Driving License, Passport, Voter ID Card, up to 3-month old utility bill, or bank statement.
- You also need to submit your passport photo and your signature (as on your PAN card) on white paper.
Additional Read: How to apply for a PAN card and what is its Importance?
2. Can an under-18 have a Demat account?
Yes, a person under 18 can also have a Demat account, provided you meet the eligibility criteria. As per these criteria, you must submit your PAN card and essential KYC documentation like valid Bank proof and Address proof for opening a Demat account.
But, if you are a minor, you cannot open or operate your account yourself; your natural or appointed guardian can open and function the Demat Account for you on your behalf till you become a major. You can take charge of this account once you turn 18 years old.
3. Can a student make a Demat account?
Yes, a student can have a Demat account. Anyone who meets the eligibility criteria can have a Demat account. Mainly the requirements include having your PAN card and essential KYC documentation like valid Bank proof and Address proof.
If you are a minor student, you will not be allowed to open and operate a Demat account yourself. Your natural or appointed guardian can do it for you on your behalf. Once you turn 18 years old, you can take charge of your account.
If you are a student above 18 years of age, you can open your Demat account yourself and operate it.
4. What is the age limit for trading?
The age limit for trading is 18 years. You can trade shares and other securities only through a Trading account. It involves contracts between your broker and you. And the Indian Contract Act (1872) does not permit minors to enter into any contracts. Hence, if you are below 18 years of age, you may have a Demat account but not a Trading account.
ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No: 022 - 2288 2460, 022 - 2288 2470. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purposes.