For anyone looking to enter the world of trading, the first step is to open demat account. However, specific demat account charges are associated with the account opening and maintenance process. Here’s a look at everything you need to know about these charges and how to open a Demat account easily.
Understanding a Demat account
The word Demat is a short form of Dematerialised, hence the adoption of the term Demat account. Think of the demat account as a way of electronically holding the securities of investors in the share market. Thanks to a Demat account, investors no longer need to hold physical share certificates to participate in trading.
Understanding Demat Account Charges
If you are looking to open a Demat account, then there are certain Demat account charges that you should be aware of. Here’s a look at the various charges associated with opening a Demat account.
- Demat Account Opening Charges:
- The first step to open a Demat account involves connecting with a Depository Participant or DP.
- The DP can be any brokerage firm or even a bank that holds securities for its customers in a Demat account.
- Most DPs come with a nominal online Demat account opening charge while some will even have the option of providing a free Demat account for a year and then charging for the account in the years after.
- Demat Account Maintenance Charges:
- Apart from the Demat account opening charge, DPs also charge a certain amount to help maintain your account annually.
- The annual maintenance charges are usually very nominal but will depend on the DP and the value of the transactions carried out from the account in a year.
- SEBI’s new guidelines state that if an investor’s portfolio value stands at not more than ₹4 lakh, no annual maintenance charges will be levied for a BSDA or a Basic Service Demat Account
- For investors having portfolio values between ₹4 lakh and ₹10 lakh, ₹100 will be applicable.
- For portfolios valuing over ₹10 lakh, BSDA gets converted into a regular Demat account.
- Transaction Charges:
- DPs also usually charge you a nominal fee for the transactions that you carry out.
- Any time an investor buys or sells a security, most DPs will charge a nominal transaction fee
- Some DPs might even levy these charges every month instead of per transaction.
- The charges might be different for buying or selling securities.
- The transaction charges are levied by exchanges like the National Stock Exchange, the BSE or the Multi Commodity Exchange.
- STT or Security Transaction Tax
- This is a tax levied by the NSE when you buy and sell stocks on the Indian stock exchanges.
- For intraday equity trading, the charges stand at 0.025% or ₹25/lakh on selling
- For equity delivery, the charges stand at 0.1% or ₹100/lakh on selling
- For options trading, the STT stands at 0.125% of the option’s intrinsic value when exercised or 0.1% of the premium for shorted options.
- In future trading, the STT stands at 0.02% or ₹20/lakh on selling.
- SEBI Turnover Charges
- The SEBI turnover charges are levied at 0001% of the total trade value on both the buy and sell side.
- This applies to all securities apart from debt instruments
Opening a Demat Account
For anyone who wishes to open a Demat account, here is a step-by-step guide:
- Do Your Research
- Investors need to research the different DPs in the market and the charges associated with the Demat account that they are providing.
- Also, ensure that you are taking into consideration factors like how user-friendly the interface is, the customer service offered by them and the investment options available
- Fill Out the Demat Account Opening Form
- Once you have selected the DP you wish to open your Demat account with, you need to fill out their account opening form
- This can easily be done online, usually through your DP’s official website
- It is important to keep details and copies of your name and address proof, PAN, etc handy when doing this
- Documents Required
- For identity proof, you can use copies of your PAN card with a valid photo, Aadhaar, Voter ID, driving licence, passport or any ID card.
- For address proof, you can use copies of the voter ID, passport, ration card, Aadhaar, utility bills, spouse’s address proof in spouse’s name or any address proof issued by government bodies, PSUs, etc
- For income proof, you can use copies of your ITR, salary proof, bank account statement for the past 6 months or a net worth certificate that has been certified by a CA.
- Adding Bank Details
- When opening a Demat account, bank details like account number, account type, IFSC, etc need to be added
- By adding a bank account, crediting the amount payable to the investor becomes easier.
- Such credits could include dividends, interest, etc. from the shares that are being held in the Demat account.
- Form Submission
- After the DP asks you to E-sign the Demat account opening form, it will be submitted, very soon after which your Demat account will become active.
- All details that will help you access your account like account number and the login credentials will be shared with you.
Conclusion
With the process of opening a Demat account having become easier, one can start their trading journey with ease. However, it is always better to know about the various Demat account charges associated with the process before getting started to avoid getting blindsided.
