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Demat Account

Anyone who is looking forward to starting their investment in stocks would have come across the term "Demat account" and also the need of different documents required for opening a demat account.

Let us look into the term "Demat account" and understand how it works, and also learn more about the different documents required for opening Demat account.

Investment in securities is now an often used strategy to get better returns than the age-old strategies of term deposits. As the number of people who invest in stocks has increased exponentially over the years, the Depositories Act of 1996 brought a relevant change in the mode to holding securities. Prior to 1996, people had to trade physical securities. But there was a higher risk that the physical assets might be lost, stolen, or damaged.

With the introduction of Demat accounts, investors were able tostore the physical certificates such as share certificates, debenture certificates, ETFs, bonds, and so on in electronic form. They were also easy to transact in. A Demat account is similar to that of a bank account, where you can see all possible information about the stocks you have invested in and other details like transaction history, credits, debits, balances, etc.

To start off with investing in securities, you will need a bank account, Demat account and a trading account. The Demat account will only be for the safekeeping of the stock documents; to start trading in securities, you will need to have a trading account.

Documents Required for Demat Account Opening

To open a Demat account, you will need to complete the KRA- KYC, and for this, you will need to submit some documents while opening the account with Geojit. Through Geojit, you can open a Demat account online in a few minutes. Given below are the documents required to open a demat account.

    • Photographs: Recent passport size photo
    • PAN Card: A copy of the PAN card with a clear signature by the client. If the current signature does not match the signature on the PAN, additional ID proof with the current signature or a declaration from the bank mentioning the reason for the change in signature must be collected.
    • Identity and Address Proof: Your driving license, voter's ID, Aadhaar card, National Population Register letter, and passport will be accepted as proof of identity.
    • Bank account proof:As per the NSDL master circular, any one or more of the following documents can be accepted as proof of bank details: a specimen copy of a cheque or cancelled cheque, a copy of a bank statement, a copy of a bank passbook, or a letter from bank. The aforementioned documents must contain the following information to be acceptable as proof of bank details: Name of account holder, account number, bank name, branch address and IFSC/MICR code.
    • Derivative proof and Commodity categorization form (if required):If the client opts to trade in the F&O/CDS segment/commodity segment, then a derivative proof is required. Some of the derivative proofs accepted in the case of individuals are - a bank account statement for the last six months, in the case of salary income - salary slip, copy of Form 16, net worth certificate, copy of ITR Acknowledgement, copy of demat account holding statement.
    • For 2nd & 3rd holders in demat, CKYC and supporting proofs: Documents required as per the holder's residential status.

    Benefits of a Demat Account

        There are many benefits to a Demat account:

      • There is no tedious paperwork required to be processed to register transactions.
      • The share certificates and other important documents are easily protected and will not be lost or damaged.
      • The documents can be easily accessed from anywhere, anytime.
      • The investors will be investing in many kinds of securities, and it might become difficult to track investments and the related documents. A depository account facilitates the storage of these documents in one location.
      • When a trade occurs, it becomes easier to sell securities without the need for a last- minute document search. If you are purchasing stocks for a minor, you can easily transfer those shares into the minor's Demat account.
      • If you have an old set of physical securities in your hands, you can easily convert them to electronic documents with a simple click.
      • With the help of the Demat account, it has now become easier to process requests for dividends, and now dividends are easily credited to the Demat account using an electronics clearing service and the unique ID that you possess.
      It is appropriate to keep some points in mind before choosing to open a Demat account:
        • Choose a trusted depository participant. Make sure that the DP is registered with SEBI and that they adhere to all the guidelines and terms and conditions.
        • The security of the Demat account should be ensured wherever you open your Demat account.
        • Check the brokerage fees.
        • The online trading platform should have an easy to use interface.
        • The platform should provide adequate customer support
        When you are planning to open a Demat account, make sure you have all the necessary documents required for opening demat account in hand and choose the best depository participant for opening the account.