Pocketful

Category: Demat Account

  • Difference Between Demat Account and Trading Account

    Difference Between Demat Account and Trading Account

    If you are new to the stock market and about to begin your investing journey, then you must know about trading accounts and demat accounts to better understand the stock market. A trading account allows you to place buy and sell orders in the stock market. Whereas, a demat account lets you store securities in electronic form.

    In this blog, we will explain a Demat Account and a Trading Account, their importance and differences. Moreover, we will also look at the fees associated with these accounts.

    Demat Account vs. Trading Account

    What is a Demat Account?

    A demat account is an account that investors use to keep securities like bonds, equities, mutual funds, and exchange-traded funds (ETFs) in electronic format. Before 1996, securities were bought and sold using physical certificates, which included several dangers, including losses from forgeries and theft. To mitigate these dangers, the concept of Demat Accounts was created. To participate in the Indian Stock Market, you must have a Demat Account. Demat account also allows you to nominate your near ones so that the securities can easily be transferred to them in case the investor dies. The other benefit of having a Demat account is the smooth settlement of securities.

    Importance of Demat Account

    A few points signifying the importance of Demat accounts are mentioned below-

    • Holding Securities – The sole facility that enables you to hold securities electronically is a Demat Account. 
    • Transactions – The settlement of transactions is easier if you have a Demat account. 
    • Nomination – The investor may designate a close relative to inherit the securities housed in their demat account in the event of the investor’s death. 
    • No Minimum Balance – You are not required to have any minimum balance, which means that it is not mandatory to own a certain number of securities in your demat account to keep it active.
    • Corporate Actions – The demat account manages and updates the securities data of all the corporate actions like right issues, bonus shares, mergers, etc.

    What is a Trading Account?

    Buying and selling financial instruments, including stocks, bonds, commodities, derivatives, and other tradable securities, is done through a trading account. The investor’s bank account and demat account are connected to this account. Brokers give investors an online platform to follow real-time market movements and place buy and sell orders. A trading account is mandatory to actively place buy and sell orders in stock exchanges such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

    Importance of Trading Account

    The importance of a trading account is mentioned below-

    • Real-Time Tracking – Investors can use their broker’s online trading platform to follow real-time market movements. 
    • Different Orders – With the help of trading applications, you can execute various types of buy and sell orders.
    • Ease of Access – One can easily access the market data through trading applications and access it anywhere with the help of a mobile or laptop.
    • Manage Risk – Various trading platforms allow you to place stop-loss orders, which helps the investors mitigate the risk.

    The Nature of Two Account

    Demat Account – The Demat account serves as a custodian for the investor’s securities, including stocks, bonds, mutual funds, and other assets. It allows you to dematerialize and rematerialize shares but does not let you purchase or sell equities. 

    Trading Account – As an intermediary between your bank account and the demat account, the trading account serves as a transactional account, enabling you to buy or sell stocks. It allows for real-time trading, enabling investors to make trades right away.

    Demat Account Vs. Trading Account

    The difference between trading and demat account are described in below mentioned table-

    ParticularDemat AccountTrading Account
    ObjectiveIt is used to hold financial securities in digital form.It facilitates the buying and selling of securities.
    Issued byThe demat account is issued by depository participants.A trading account is opened by SEBI-registered stock brokers.
    Unique NumberA Demat account has a unique 16-digit number.Trading accounts have a unique trading ID depending on the stockbroker.
    InterfaceDemat account is accessible through online applications provided by depository participants.It is accessed through online platforms provided by the stock brokers.
    RecordingIt records the ownership of securities.It only executes transactions made in the stock market.
    Charges The charges levied by the demat account include annual maintenance charges, custodian fees, etc.The brokerage is charged by the broker for using a trading account for transactions executed by the investors.

    Read Also: What is Tick Trading? Meaning & How Does it Work?

    Steps to Open Trading and Demat Accounts

    Steps to Open Trading and Demat Accounts

    Technological advancements allow you to open a Demat and Trading account in about 15 minutes. The procedures for opening a Trading and Demat account are as follows: 

    1. There are a few essential documents that you will need to open a trading and Demat account.

    • Identity Proof – The identity proof includes the PAN Card, Voter ID card, or Passport of the investor.
    • Address Proof – This will include your Aadhar card, driving license, etc.
    • Bank Proof – The bank proof will include a leaflet of cheque, passbook, bank statement issued by the bank etc.
    • Photograph – A latest passport-size photo is also required.
    • Basic details such as mobile number, email ID, occupation, income slab, etc.

    2.  After arranging all the relevant documents, you must select a broker.

    3.  Visit the broker’s website and find the Account Opening form.

    4.  Fill in all the required details in the given fields.

    5.  Then, you will be required to perform in-person verification online to verify your identity. Nowadays, in-person verification can be done online.

    6.  Under the online process, you will be prompted to sign the document digitally, which can be completed through an OTP on your mobile number.

    7.  Review your documents and submit your application.

    8.  After completing all the processes, the depository participant verifies your details. Upon successful verification, the account will be opened, and you will receive your login ID.

    9.  Download the broker’s mobile application or web portal and start trading.

    Fees of Trading Account and Demat Account

    There are various types of fees charged for having a Trading and Demat account-

    • Brokerage – The investors and traders typically pay the brokerage for using the broker’s platform to execute trades. Brokerage can be charged in two ways: fixed fees or fees based on transaction volume. 
    • Account Maintenance Fees – Brokers will charge fees from their clients who have their accounts with them. These charges vary from broker to broker.
    • Account Opening Fees – A one-time fee is charged by some brokers while opening a demat account with them. However, many brokers are offering zero account opening fees.
    • Margin Interest – Brokers lend money to their clients and charge interest on it.
    • Custodian Fees – This is a monthly charge levied depending on the number of shares held in the demat account. This charge can range from 0.5 INR to 1 INR for each ISIN.
    • Dematerialization Charges – Investors must pay demat charges when they convert physical shares into electronic form.

    Role of Trading and Demat Accounts

    Both trading and demat accounts have unique roles in the Indian Stock Market.

    Demat Account – It permits investors to hold securities in electronic form, including bonds, stocks, exchange-traded funds, and so forth. The depository’s statement gives a clear picture of the investor’s assets. Any shares purchased by an investor are credited to their demat account; conversely, any shares sold by them are deducted from it. 

    Trading Account – An investor can execute, buy, and sell orders in real time on the stock exchange by using a trading account. Investors can easily keep an eye on the market through their trading accounts. If they believe a security will move in a specific way, they can execute a trade to create a long position using a trading account. 

    Read Also: Demat Account Charges Comparison

    Conclusion

    To sum up, you must comprehend the distinction between trading and demat accounts before investing. There are several brokers throughout India, but there are only two depositories. It is necessary to open both accounts to trade the stock market with ease because the trading account allows you to execute transactions, and the demat account lets you store the purchased securities. However, investors must do thorough research regarding the fees associated with trading and demat accounts before choosing a broker. 

    Frequently Asked Questions (FAQs)

    1. Who can open a trading and demat account?

      Any Indian citizen, NRI, HUF, minor and business entity can open a demat account.

    2. How many digits does a Demat account number have?

      A Demat Account account is a unique 16-digit number that is provided by the depository.

    3. Is there a difference between a demat account and a trading account?

      The trading account allows you to purchase and sell assets, whereas the Demat account just stores them in electronic form. 

    4. Is it mandatory to add a nominee while opening a demat account?

      While opening a demat account, you must choose to add a nominee or opt out of nomination. 

    5. Can I open a trading and demat account with the same broker?

      We can open a trading and demat account with the same broker. 

  • Can I Have Multiple Demat Accounts in India?Rules 2025

    Can I Have Multiple Demat Accounts in India?Rules 2025

    The word Demat account stands for Dematerialized account, and it is essential for holding shares in electronic form. Indian investors are exploring the flexibility of holding the multiple Demat accounts to segregate and analyze the performance of different investment strategies. But is it legal to have multiple demat accounts in India? The answer is yes.

    In this blog, we will look into the benefits, rules, and considerations for maintaining multiple Demat accounts in India. 

    Is Opening Multiple Demat Accounts Illegal?

    The Indian stock market has seen a significant rise in market participants in the past few years. Many new participants want to implement different investment strategies in the financial markets and often want to segregate different strategies to better analyze their performance. Having multiple Demat accounts looks like a perfect solution, but many new investors wonder, “Can I open two Demat accounts?” or “Can I open multiple Demat accounts?” The answer is yes; it is completely legal to open more than one Demat account in India. According to Indian market regulations, an individual can open multiple Demat accounts with different Depository Participants (DPs). There is no restriction on how many Demat accounts one can open as long as they comply with the rules and regulations set forth by the SEBI.

    Investors can open multiple Demat accounts to categorize their Demat accounts according to their investment strategies. For instance, one account can be used for long-term investments, while another is designated for short-term trading or specific financial goals. Having multiple Demat accounts helps in better portfolio management as you can separate your investments into different accounts based on purpose or risk tolerance. Additionally, the different DPs offer a variety of services, fee structures giving you flexibility in choosing what works best for you.

    However, it is important to note that while opening multiple Demat accounts is legal, you cannot have two Demat accounts with the same DP. But you can easily open them with different DPs like banks or brokerage firms.

    Read Also: Joint Demat Account: Meaning, Features, Benefits, and Steps

    Rules To Know If You Have Multiple Demat Accounts

    Now that we know it is legal to have multiple demat accounts, we must know that there are some important rules to keep in mind. Opening multiple Demat accounts in India is legal, provided that you follow certain guidelines set by regulatory authorities, as mentioned below:

    1. You cannot open more than one Demat account with the same Depository Participant (DP). However, you can open them with different DPs such as banks or brokerage firms. This offers the flexibility to manage your investments with various service providers.
    1. All demat accounts are subject to Know Your Customer (KYC) norms. Each time you open a new Demat account, you will need to submit KYC documents like proof of identity, address, etc. 
    1. Each demat account will have its own set of charges including the annual maintenance charge(AMC). Be prepared for additional costs if you choose to have multiple Demat accounts, even if you don’t use all of them.

    Read Also:HUF Demat Account: Benefits, Documents & How to Open

    Requirements to Open Multiple Demat Accounts

    Requirements to Open Multiple Demat Accounts

    An individual wanting to open multiple Demat accounts in India can do so by meeting a few requirements given below:

    • First, every Demat account, whether it is your first or additional one requires you to comply with Know Your Customer (KYC) norms. This includes submitting the essential documents such as proof of identity (Aadhaar, PAN card, and passport etc.) and proof of address (utility bills and rental agreements ). KYC is mandatory for every Demat account.
    • Second, while you can open multiple Demat accounts, they must be with different Depository Participants (DPs). You cannot open more than one account with the same DP, but you can open additional demat accounts with different brokerage firms, banks, or financial institutions.
    • Third, each account requires an individual PAN number as it serves as a unique identifier for every investor. A PAN card is compulsory for opening any Demat account in India.
    • Lastly, be prepared for annual maintenance fees (AMC) for each account. Ensure you factor in these costs when deciding to open multiple Demat accounts to manage your portfolio effectively. 

    Read Also: Best Demat Account in India 2025 – Top Picks for Traders & Investors

    Pros of Opening Multiple Demat Accounts

    The advantages of opening multiple demat accounts are:

    • Categorization: Multiple Demat accounts will allow the investors to categorize their demat accounts according to their investment strategies. For example, you can use one account for long-term investments and another for short-term trading. This separation helps manage the risk more effectively and keeps your portfolios organized based on your financial goals.
    • Access to Different Platforms: Each additional Demat account must be opened with a different broker or Depository Participant (DP), which gives you access to the best stock trading platforms with different features. Some brokers may offer low-cost trading while others might provide superior research tools and customer service. 
    • Cost Optimization: While each Demat account comes with its own set of charges, investors can take advantage of promotions, discounts, or special pricing models across different brokers. By comparison of the fee structures of multiple platforms, you can choose the accounts with lower charges for specific types of orders, which can help you save on costs.
    • Risk Management: Multiple Demat accounts help diversify risk across different brokers. If there are operational issues with one trading platform, you can continue to trade using the other account without disruption. 
    pros and cons of multiple demat accounts

    Read Also: Features and Benefits of Demat Account

    Cons of Opening Multiple Demat Accounts

    The advantages of opening multiple demat accounts are:

    • Higher Costs: One of the most significant downsides of having multiple demat accounts is the increased cost. Each Demat account comes with its own set of annual maintenance charges (AMC), transaction fees, and brokerage costs. These can add up even if you’re not an active trader. Hence, managing multiple accounts can be expensive unless you are making substantial returns.
    • Complex Portfolio Management: With multiple Demat accounts, tracking your investments across the different platforms can become a complicated task. This can lead to confusion, making it difficult to maintain an organized portfolio. You may miss out on opportunities or fail to notice critical issues like underperforming stocks if you’re not constantly monitoring each account.
    • Tax Reporting Complications: When you execute buy and sell transactions from different Demat accounts, it can complicate the tax reporting process. You will need to consolidate all your transactions for capital gains calculations, which can be time-consuming and prone to errors. Tax reporting becomes complex if you are using multiple platforms that do not integrate your data automatically.
    • Account Deactivation: One must be cautious as brokers can deactivate your demat accounts if you don’t use your demat account for a specific period of time.

    Read Also: Types of Demat Accounts in India

    Tips to Manage Multiple Demat Accounts

    Managing multiple Demat accounts can be challenging, but with proper strategies, you can stay organized and make the most of your investments. Here are some tips:

    • Use Different Accounts for Different Goals: Separate your long term and short term investments across the different accounts. This makes it easier to track performance and manage risk without confusing your trading objectives.
    • Choose the Right Platforms: Select the best stock trading platforms based on your specific needs. Some may offer low brokerage fees while others provide advanced research tools or better customer service. Match each account to its intended purpose.
    • Keep Track of Fees: Ensure you are aware of all charges such as annual maintenance fees (AMC), transaction costs, and taxes. Compare brokers and platforms to minimize unnecessary fees and avoid duplication of services.
    • Consolidate Statements: Regularly download and consolidate statements from each account. This helps is tracking your overall portfolio and simplifies the tax reporting process.

    Read Also: NSDL Demat Account: Open, Manage & Understand Charges

    Conclusion

    In conclusion, managing multiple Demat accounts can provide flexibility and better control over your investment strategies, but it requires careful planning. By using different demat accounts for specific goals and keeping a regular track of fees and portfolio performance, you can avoid unnecessary complications. 

    Regularly consolidating account statements and staying updated on regulations will also help investors smoothly navigate the markets. With these tips, you can efficiently manage multiple Demat accounts, ensuring that the benefits outweigh the challenges while optimizing your investment growth. 

    Frequently Asked Questions (FAQs)

    1. Can I have more than one Demat account in India?

      Yes, an individual in India can legally open and maintain multiple Demat accounts with different Depository Participants (DPs). However, you cannot have more than one account with the same DP.

    2.  Is there a limit to how many Demat accounts I can open?

      No, there is no limit to the number of Demat accounts you can open as long as you comply with the KYC regulations set forth by SEBI for each demat account.

    3. Аre there any charges for maintaining the multiple Demat accounts?

      Yes, each Demat account comes with its own set of annual maintenance charges (AMC), transaction fees and other costs. It’s essential to consider these charges before opening multiple accounts.

    4. Can I use multiple Demat accounts for different purposes?

      Yes, many investors use multiple Demat accounts to separate their long-term investments from short-term trading or different financial goals, making the process of portfolio management easier.

    5. Do I need a different PAN for each Demat account?

      No, a single PAN (Permanent Account Number) is sufficient for opening multiple Demat accounts. However, the PAN must be linked to each account to comply with regulations. 

     

  • What is a Demat Account? Meaning, Types & Benefits

    What is a Demat Account? Meaning, Types & Benefits

    If you are serious about your financial freedom and want to allocate your money to stocks, mutual funds, bonds, ETFs, etc., the first step you need to take is to open a demat account with a broker. 

    In this blog, we will discuss what a Demat account exactly is, its various benefits, and the process of opening one. 

    What is a Demat Account?

    Demat account is simply an account where all of your securities, such as shares, ETFs, bonds, etc., are held in digital or electronic format. In this digital world, having a demat account or dematerialized account replaces the old system of shares trading in physical forms.

    The government of India realized the need for dematerialization in 1996, as physical share certificates involve massive paperwork and can be stolen. Demat accounts have become game changers for various security holders as they are easy to open online or offline, are trustworthy, and offer a more secure way of trading and investing. The SEBI mandates that a stock market investor have a demat account. 

    Documents required to open Demat account

    Now that you understand that opening a demat account is a prerequisite for trading or investing in capital markets, you must want to know which documents you would need to open a demat account. The list of documents is as follows:

    1. PAN card
    2. Proof of Address proof like an Aadhaar Card, driving license, passport, voter ID card, etc.
    3. Proof of Income (for transactions in derivatives, futures and options)
    4. Proof of Bank Account 
    5. Photographs
    6. Signature
    Documents Required to Open the Demat Account

    Read Also: Types of Demat Accounts in India

    Process to open a Demat Account

    Now that you know what a demat account is and why you as an investor need to open one, you might be wondering how you can open a demat account and begin your trading journey. Opening a demat account is easier and less time-consuming than opening a bank account. Here’s the step-by-step guide that you need to follow:

    Step 1 – Select a Depository Participant

    The first step is to select a Depository Participant (DP) with whom you want to open your demat account.

    Step 2 – Complete the application form

    After choosing a DP, you will need to click on “Open demat account” and fill out the form with the required information, such as name, email, contact details, PAN, DOB, etc. 

    Step 3 – At this stage, you will receive an OTP to verify your contact details. Enter the OTP and proceed ahead. 

    Step 4 – Add your bank account

    In this step, you will need to add your bank account details, such as account number, account type, IFSC code, etc., to link your bank with your demat account.

    Step 5 – Submit the necessary documents

    Upload the scanned copies of the required documents, such as the PAN card, cancelled cheque, Adhaar card, etc.

    Step 6 – In-person verification

    You will also be required to complete in-person verification using a webcam or smartphone.

    Step 7 – E-Sign

    DPs provide this facility to applicants to E-sign the Demat account form using their Aadhaar-linked phone number. 

    Step 8 – Submit the form

    After finishing the above steps, DP verifies your details, activates your demat account, and gives you a confirmation via message or email. You get your demat account number, login credentials, etc., after verification.

    Read Also: Joint Demat Account: Meaning, Features, Benefits, and Steps

    Types of Demat Account

    There are mainly three types of demat accounts according to the requirements of an investor:

    • Regular Demat Account – Regular Demat accounts are meant for investors residing in India. Regular demat accounts are offered by depository participants (DP) with no limit on the number or value of securities you can hold. Investors just need to pay a small annual maintenance charge ranging from Rs. 500 to Rs. 999 to the DP.
    • Basic Service Demat Account – BSDA is a basic form of regular demat account as it imposes low AMC on investors. As per BSDA, if an investor has a holding of less than or equal to Rs. 50,000, he is not liable to pay any AMC, but in case his holdings are between Rs. 50,000 and Rs. 2,00,000, he will be liable to pay a nominal AMC of Rs. 100 annually. 
    • Repatriable Demat Account – As opposed to regular demat accounts, repatriable demat accounts are for non-resident Indians who want to invest in the Indian capital market or enable the transfer of funds outside India. The maximum amount you can repatriate is $1 million per year. NRI investors need to link their Non-Resident External (NRE) bank account to their demat account while opening a repatriable demat account.
    • Non-Repatriable Demat Account – As the name suggests, non-repatriable demat accounts are also meant for NRIs but it does not allow investors to transfer money received from the sale of securities outside India. Instead, they can transfer their proceeds to other Indian bank accounts. The NRI investor is required to have a Non-Resident Ordinary (NRO) bank account linked with the demat account.

    Benefits of a Demat Account

    Infographic Update

    Demat accounts have made the process of buying and selling securities very easy and quick. The frequency of trading and transferring of securities have increased since its implementation. Below are the benefits of having a demat account:

    • Easy Access – Investments through demat accounts are very easy. Investors can assess their demat accounts at any time and anywhere.
    • Reduced Risk – Before demat accounts were introduced, there were high risks of theft, forgery, loss, and tampering with shares in physical form. Problems like delays, extensive paperwork, and errors have also been eliminated after the introduction of demat accounts.
    • Automatic updates related to bonuses, and stock splits – Any events related to your stocks, such as bonus issues, stock splits, or reverse stock splits, are updated automatically.
    • Loan Facility – You can obtain secured loans from banks by pledging the securities held in your demat account as collateral.
    • Nomination Facility – Demat accounts offer a nomination facility, and in the event of an investor’s demise, all the holdings of the Demat account are transferred to the appointed nominee.

    Read Also: Features and Benefits of Demat Account

    Conclusion

    A Demat account is essential for everybody who is planning to invest in the financial markets. It makes the holding and trading of securities easier, safer, and more efficient. There are different types of demat accounts with different benefits. Setting up a demat account is an uncomplicated process, providing a range of benefits to the investors, such as loan facility, reduced risk, and easy access to investments.

    Frequently Asked Questions (FAQs)

    1. Why is there a need for a demat account?

      The key objective of a Demat account is that the securities are held in digital form, thereby reducing risks involved in the processes of buying and selling as well as managing the relevant investments.

    2. Is it possible to open a demat account online?

      Yes, it is possible to open a demat account online.

    3. What needs to be submitted to open up a demat account?

      Usually, a PAN card, any ID proof, proof of address, bank details, income proof, photographs and scanned signatures are required.

    4. Do you have to pay any charges for having a demat account?

      Yes, investors have to pay annual maintenance fees, which can vary depending on the category of the demat account being used.

    5. Can someone trade in stocks without a Demat account?

      An individual must have a Demat account in order to buy and sell shares in India.

    • Open Free Demat Account

    Join Pocketful Now

    You have successfully subscribed to the newsletter

    There was an error while trying to send your request. Please try again.

    Pocketful blog will use the information you provide on this form to be in touch with you and to provide updates and marketing.