For trading hassle-free in the stock market, it is necessary to have a demat account. Just as you hold the money in your bank account, you hold the securities and shares in the demat account. If you open a stock market website or financial newspapers, then most of the times, you will notice advertisements for free demat accounts. Now, the question arises is do you have to pay any charges to open a demat account or it is free?
What is a Demat Account and How to Open it?
Gone are the days, when you had to make numerous phone calls to the stockbrokers or complete a lot of paperwork to buy or sell the shares. People used to stay away from making an investment in the stock market because of the inconvenience they had to experience. If you are a first-time investor, then there are chances that you must have read or heard a lot of negative reviews about the share market with regard to buying the stocks. In such a situation, there is nothing to worry as the purchase and selling of the shares has been made easy with the demat account.
When you formulate a plan to invest money in the stock market, then opening a demat account is absolutely essential. Here the shares you purchase is stored in an electronic form. In the absence of an account, you cannot trade in the market. If you want to get more information about the demat account, then you can either consult a financial advisor or better take the help of the top advisory services. For opening a demat account, there are some formalities you have to complete, which are:
You must have a savings account in any public or private bank.
Open a demat account in a back in which you have a savings account. For a demat account, certain documents are required –
- Aadhar card
- Pan card
- Passport size photographs
- Income tax return
- Bank statement of the last three months
- Cancelled cheque
Once the agreement has been signed and all the documents have been verified, then in about 15 days, you will get the demat account number.
Charges for Opening a Demat Account
There are some essential charges that you are required to pay to make your account operational, which are as follows:
You do not have to pay any kind of charges in order to open a demat account. Some of the banks open this account free of cost if you open a savings account with them. However, not all the banks provide the free demat account opening service as they may take annual charges upfront. It is important that you must check out the demat account opening charges before opening an account.
Shares Safety Charges
Earlier, an individual had to worry about the safety of shares and prevent them from getting stolen. However, with the demat account, all these worries have been completely minimized. As your shares are stored in an electronic form, you do not have to take any stress with regard to the safety of your shares. However, you will be required to pay safety charges to the banks and Depository Participants (DPs) quarterly or annually. The DPs are an agent of depository who acts as a mediator between the depository and the investor. A depository is essentially a financial intermediary that offers the demat account service.
Annual Maintenance Charges
This is a fee that you are required to pay every year. If you have a basic demat account, then there are no charges if a balance is maintained up to Rs 50,000. The charges you have to pay largely depends upon the number of transactions you carry out from the account. For instance, if you have a holding of Rs 50,000 to 2 lakh, then you will be required to pay an annual maintenance charge between Rs 100 and Rs 750.
Nowadays, the shares are held in an electronic form in the demat accounts. However, if you still have the share certificates in the physical form, then the banks or DPs may charge a nominal amount of fee in the form of dematerialization fee to convert the physical shares into demat form.
Hence, these are some of the important demat account charges that you have to essentially pay for opening a demat account. As a beginner, it is extremely imperative that you must have some basic knowledge about this account and its charges and for this purpose, it makes a great sense to take the right stock market advice from the advisory companies in order to make an informed decision.