Documents Required To Open a Demat Account

Document submission is the most crucial stage of a Demat account. For example, an individual who wants to be a stock market investor or share trader must submit documents for Demat account opening. They must submit their documents to the organization or Demat account provider. 

Because it is compulsory for the process, the aspiring investor will always need to present the documents required to open a Demat account before their organization or their Demat account provider.

For instance, if you’re planning to open a free Demat account or even paying to open it, in both cases, the required documents for a Demat account are essential to submit.  

The number of documents required from an individual can change from one Demat account provider to another, but at the same time, some standard documents are always needed.

Documents Essential for the Demat Account

Here are the following documents required to open a Demat account in India.

• Proof of your Identity [ Passport, the Aadhar card, the PAN card]
• The voter identity card.
• The state issues driver’s licenses.
• A government-approved document.

KYC Requirements

KYC (Know Your Customers/Clients) is a standard requirement or a guideline designed to protect financial institutions from fraud, terror financing, or money laundering. KYC is one of the essential requirements to open a trading or Demat account with your broker. Because of KYC, verifying the customer’s identity makes it easy to trace the flow of funds. 

The process of KYC in a Demat account is as follows:

• Fill in the KYC form, where you will have to fill in your basic details like your name, phone number, email id, residential address, office address, etc.
• Provide your Identity proof that includes your Driving license,  Aadhar card, etc.
• Submit proof of your address that includes documents like an Electricity bill, a  Telephone bill, etc.
• Submit your income proof.
• Submit your Bank account proof that includes the canceled check from your active  Bank account.

Your PAN Card is a must, along with proof of identity, proof of address, proof of income, and proof of bank account. It is mandatory to have a PAN Card for opening a Demat account.

Proof of Identity

The following are the documents that you can submit as your identity proof:

Driving license

You can apply for a driving license with documents such as your voter id card,  Ration card, birth certificate, and permanent proof of address like a self-owned house agreement, passport, etc.

Voters’ ID

The Election Commission of India provides the voter’s ID card. It is an important document, and any citizen of India who does not have a voter ID card is not allowed to vote in India. In addition, you will require some standard documents like your results, birth certificate, and a recent passport-size photograph, along with some additional documents for a voter id card. Having a voter ID card is essential because it allows you to vote and helps in eliminating election fraud.

UID

A  Unique Identification Number (UID) is provided to every citizen of India by the Unique Identification Authority of India on behalf of the Central Government. The number gives a unique identity to every Indian citizen, and it can get used by them whenever there is a need for identity proof.

Proof of Address

Proof of address is required to verify the residential house of the client in India. The following documents can get submitted as proof of address for your Demat account:

• Voter ID cards
• Electricity bill: It must be a new or less than three-month-old  Electricity,  Phone bill, Housekeeping bill, etc.
• Passport: It is one of the most important documents to travel to a foreign country. A passport works as an  Address proof as well as your identity proof. You can use both online and offline methods to apply for a passport.
• Aadhar card: Your Aadhar card is proof that you are a citizen of India. The information on your Aadhar card includes your phone number, address, and date of birth.
• PAN card: Your PAN card works as the backbone of all financial transactions, and every taxpayer must have a PAN card.

Proof of Income

Submit a copy of your ITR Acknowledgement, etc., to verify your income and determine whether you can pay. It is necessary to trade in derivatives like futures and options (F and Os). You can submit the following documents mentioned below as proof of income:

• Tax Certificate
• Salary Slip

Proof of Bank Account

You have to submit a canceled cheque to provide your bank details, such as the bank account holder’s name, bank account number, and your IFSC code to confirm whether you have your own Bank account required for transactions. It is an essential document for a Demat account.

PAN Card

If you wish to be an investor or trader in the stock market, you will need a Demat account, as it holds your shares and other securities purchased from the stock market. Since the people of India require to have their PAN card to carry out all financial transactions in India, it is mandatory to provide an original PAN card when opening a Demat account. Therefore, it is one of the essential documents to open a Demat account.

While submitting documents for Demat account opening, you have to ensure that none of them has crossed their expiry date and that they are all valid and appropriate for the submission. 

Hope you found this helpful information to understand which documents are needed to open a Demat account in India.

Eligibility Criteria

If a customer meets the following criteria, they can start a Demat account:

• People who live in the area
• Minors
• Indian Citizen
• In the case of children, the account must be managed by a guardian/parent until the minor reaches the age of eighteen.

Non-individuals Who Fit Into One of the Following Categories to Open a Demat Account

• Corporations are businesses.
• Trusts that are both registered and unregistered, with the trustees’ names on the Demat account Partnership firms, with the Demat account in the name of the partners’ Partnership firms, with the Demat account in the name of the partner societies (registered or unregistered).
• Partnership firms with Demat accounts in the names of the partner’s Partnership firms with Demat accounts in the names of the partners Registered/unregistered societies with Demat accounts in the names of the member’s Societies that are either registered or unregistered and have a Demat account in their members’ names.
• An Association of People (AOP)
• A Limited Liability Partnership (LLP)
• Even mutual funds and banks are able to open a Demat account.
• Foreign institutional investors
• International portfolio traders can both open trading accounts.

How Do I Update My Address in a Demat Account?

The mandatory documents to change your Demat account address: Appeal for a new address in the required format, self-attested specific authorization of all account holders, proof of address, and self-attested real evidence of new (Correspondence/Permanent) location in the name of the first owner.

Involvement in Opening the Demat Account

The process of opening a Demat account has the involvement of various departments. So, who has the involvement in this process? Apart from the two depositories in India, NSDL (National Securities Depositories Ltd) and CSDL (Central Depositary Services Ltd), through which the shares are held by the various depository participants, other parties involved in Demat account transactions include Depository Participant (DP) or authorized stockbroking firm; financial institution, i.e. the bank; clearinghouses, which handle the debiting and crediting of shares, and National Securities Clearing Corporation Ltd.

Opening a Demat Account for Minors

The process of opening a Demat account for a youngster is rather straightforward. The guardian must give the relevant documentation to the Depository Participant (DP) involved, including evidence of identification, proof of address, photocopy of proof of age, and pictures. After that, the DP validates the paperwork and enters the minor’s PAN card information into the DPM system. A Demat account for minors will be opened after completion, submission, and verification of the presented document.

Benefits

Here are the following benefits of a Demat account opening.

• Many of the most significant benefits of opening a Demat account is the little risk it entails. For example, physical assets carry a risk of theft, loss, or damage, which can be fully eliminated by opening a Demat account, which allows investors to hold all of the existing investments in digital format.
• It’s a less expensive choice than a cash account. It’s a fussy option to store your wealth in India because the money stays in the format of securities. Account holders won’t pay any fees. One can also buy and sell stocks and mutual fund units.
• It also saves time and money because there is no documentation to deal with. Additionally, you can avoid additional charges such as stamp duty, which really is payable when trading actual shares.
• Modifications in a customer’s location reported with a Demat partner are automatically registered with all firms in which the investors buy securities, eliminating the need to communicate with each one separately.
• Shares arising from bonuses and splits are automatically credited to your online account.
• It lowers the chances of a late settlement.

Demerits

Opening a Demat account is a relatively simple way to open a savings account in India. Nevertheless, there are a few downsides to consider before establishing such an account.

It is not comparable to a custodial account in terms of service. Rather than the bank holding the tangible assets on behalf of customers, individuals hold them in a Demat account. This implies that they are in charge of the security of their assets. Unless they are willing to take on the duty, this can be a significant benefit, but it comes with a price.
rnIt carries a variety of dangers, including the possibility of paying costs and delays, which investors who open a standard finance account avoid.

Conclusion

The digital account contains all of your securities in electronic forms, such as stocks, bonds, and other investments. To set up an account, you must go through a depository, including Central depository services or National securities deposition.  There’s no need to keep physical stock certificates on hand.  As a result, you’ll need a Demat account to ‘keep’ your securities.  It’s a good opportunity to open a Demat account unless you’re only intending to handle futures and options.

Frequently Asked Questions (FAQs)