What is a demat account?
If you’re a recent entrant into securities trading, you may not have heard of the pre-demat account era – a time when shares and securities were held ‘physically’ – in the form of certificates and sheets of paper. Imagine that – millions of reams of paper spread across hundreds of thousands of investors holding onto their stocks.
- A dematerialized account is an electronic account that holds all your securities i.e stocks, shares, bonds etc in an electronic form.
- In order to open an account, you need to go through a depository such as CDSL or NSDL.
- There’s no need for you to hold on to physical share certificates.
Definition Of Demat Account
Courtesy the internet and of course, computers – we’ve migrated to a paperless era – the demat era. Instead of having to deal with obnoxious paperwork, investors now hold their stocks (or mutual funds and Exchange Traded Funds (ETFs)) in an electronic form – in a demat account.
Objectives Of Demat Account
Consider this account as the equivalent to a bank account, which holds your money. This account similarly holds your securities. Shares and stocks are transferred electronically to your account.
India began the transition to the dematerialized system in 1996. The Depository Act was passed in the same year and allowed for the setting up of depositories (like the NSDL and CDSL) that would hold such accounts. The NSDL (National Securities Depository Limited) came up in the same year and allowed for India’s first dematerialized accounts on par with global standards.
The National Stock Exchange was the first fully automated stock exchange in India. It began operations in 1994, and shortly after, in 1996, share trading in demat forms commenced. Demat holdings is now how the entire country conducts its securities transactions.
Advantages of Dematerialized Account
- This account generally helps us to avoid problems which are associated with physical share certificates, such as:
- Delivery failures caused by a signature mismatch
- Eliminating the risks associated with forging of the shares certificates, and postal delay
- It is easy and convenient to hold securities in this account
- No stamp duty to be paid on the transfer of shares.
- Safer than physical shares which are in paper form due to theft, forgery.
- Change in clients address recorded with a demat partner gets registered with all companies in which the shareholder has securities thus no need to correspond with each of them separately.
- Automatic credit into your online account for shares which arises out of bonus and splits.
- It reduces risks of delayed settlement.
- Traders can deal with shares from anywhere using this account.
- You’re no longer losing your stock certificates to events like theft, fire or any other disaster. In the pre-demat era, losing these certificates would cause an extraordinary amount of trouble since you no longer had your primary proof of ownership.
- Shares are now immediately credited to your account. You don’t have to wait for several days to receive your shares in the mail.
- They’re cheaper. Printed certificates have costs. A demat holding, therefore, reduces transaction charges, and you avoid stamp duty on them as well.
Did You Know?
The National Stock Exchange was the first fully automated stock exchange in India. NSE started in 1994. Demat share trading started in 1996.
If you’re looking to buy securities (like shares, mutual funds or ETFs) online, a dematerialized account is absolutely essential. Apart from the obvious benefits it offers (it’s cheaper and faster), it’s also a requirement when you wish to register yourself with any brokerage.
- There are two ways to start with your account: the online account opening method and the traditional method of submitting physical forms.
- Choosing a broker who fits your trading style and understands your financial goals is more important than the method you use to open your account.
- Sometimes brokers charge more for submitting physical forms, therefore, ensure that you check all the account opening costs associated with the opening procedure.
How to open a demat account
Before you get started on the demat account opening procedure, select your broker. This choice could depend on a variety of factors – such as brokerage fees/charges (more on this below), the platform’s / user interface, and its customer service.
In today’s digital world, the way you apply for your account matters. Your broker is the one who’ll help you open a demat account in the easiest way possible. Is it the traditional method involving paper forms? Or the new-age Aadhaar-based paperless online method?
We’ll lay them out here for you and let you figure out what’s easier.
Steps to open a demat account
The online account opening method
In today’s digital world, there really shouldn’t be any reason for you to be filling out physical forms when almost the entirety of your information can now be stored digitally. Fortunately, some brokers have the online processing part figured out. Customers can sign up and complete the registration process online. As long as you have an Aadhaar card with your mobile number linked to it, you’re good to go!
- Head to the Upstox online demat account opening page.
- Enter your basic details, and click Sign Up.
- Keep scanned copies (i.e. soft copies) of your documents (Aadhaar, PAN, Cancelled Cheque, and your latest bank statement) with you for when you are directed to upload them.
- Enter your Aadhaar details and the OTP you receive on your linked mobile number in order to verify your identity.
That should be it. Your upstox demat account upstox demat account should now be created.
Traditional/offline upstox demat account opening process
- Your broker will hand you an account opening form – either when you’ve visited its office or if you’re meeting one of its employees.
- You will need to fill out this form, and attach a proof of identity and a proof of address. These proofs can be submitted using photocopies of appropriate documents.
- Once done, you’ll also be expected to sign an agreement with your broker. This document will state your responsibilities as a trader/investor, and that of your brokerage firms. Keep a copy of this document with you for future reference.
- Once your broker verifies and processes your documents, you’ll be given your account number, similar to how you receive a bank account number. This number is called the Beneficial Owner Identification Number (or BOID) or Unique Client Code (UCC) if you’re trading with Upstox.
You’ll also receive additional confidential data – such as a Login ID and key for accessing online portals and placing trades. Keep in mind that these transactions are likely to attract charges. You might incur some charges for using certain portals.
upstox demat account charges
There are multiple sorts of account charges you’re likely to come across – both during the time when you hunt for your preferred broker and when you’ve completed your registration process. Primarily, these charges can be classified into 3 types:
- Account Opening Fees
- Annual Maintenance Fee
- Transaction Fees
Account Opening Fees is the fees your broker will collect for the whole process of registering your upstox demat account . Not all brokers charge this fee, so you’re likely to come across a few where you would not be paying any such fees. Some online brokers might charge a nominal account opening fee to trade on different segments.
Annual Maintenance Fee is usually a prepaid amount that your broker collects to keep your account active throughout the year. While these charges are usually nominal (Rs 300 – 800 for the year), many brokers in the industry have now begun to charge zero fees here as well. The race to provide traders with the best rates and services has led to some intense competition in the brokerage industry landscape.
Transaction Fees refer to the charges your broker will levy for moving (debiting and crediting) your stocks or other securities to and from your dematerialized account. This can vary wildly across brokers depending on their target audience.
We charge minimal upstox demat account opening fees (Rs 150 + tax). An Annual Maintenance Fee of the same amount also applies to the account.
Upstox continues to keep costs low with the Transaction Fees as well – charging Rs 13+5.5+tax (Rs 5.5 being CDSL’s depository charges) – significantly lower than large traditional broking firms.
While discount brokerages charge low account opening fees and brokerage, that’s not to say they cut down on services. For example, it is entirely possible to open an account using the traditional paper method on Upstox as well. Head over to the forms section and download the upstox demat account opening form. You can choose the segments you want to trade on while opening your account. Fill out the forms, attach the required documents, and send them over via courier to this address:
30th Floor, Sunshine Tower,
Senapati Bapat Marg, Dadar (W),
Mumbai- 400 013
If you see the merits of a convenient and online Aadhaar-based registration, you’re welcome to get started with the online upstox demat account opening.
- You can open a dematerialized account online by filling out forms on the broker’s website. Ensure that you keep all required documents handy.
- With the spread of cashless transactions and increasing reliance on digital technology in the financial world, opening an account with stockbrokers has also moved to an online portal.
- The traditional method of opening an account involves printing out the physical forms and sending them via courier to your broker’s address. While making the decision to choose one type of account opening procedure over the other keep in mind the account opening fees and hidden courier charges.