What is a demat account? : Instead of having shares in paper, investors can have it in electronic form. The account for holding shares electronically is Demat account, short term for dematerialised account. Earlier, shares existed only in the paper format and people used to receive the share certificates after purchase of shares. Demat is not necessary for all kind of investments. example mutual funds.

Why it is needed? : Demat account is needed to operate online shares.


Advantages : Demat account makes pledging/hypothecation of shares easier. Demat enables quick ownership of securities resulting in increased liquidity. Easy receipt of shares in IPO. Demat relieves the investors from the fear of duplicate share documents.

How to open demat account? : Usually demat and trading accounts can be open together from a Broker.It can also be opened through one of the authorized banks.

Things needed

A copy of PAN card.


A copy of Residence Proof. (Passport/Voter ID/ Ration card)

A copy of Identity Proof.

You should have a three months bank statement.

Personalized cheque

Copy of the bank passbook

Duly completed account opening form.

Passport size photos.

Fee

Account opening fee

Annual maintenance fee

Transaction fee

Besides the above, depository participants also charge service tax as applicable.

Clarification

Many banks are also DP participants, as are brokers. To buy or sell shares you have to open a Trading Account with a broker. A broker is separate from a DP. A broker is a member of the stock exchange, who buys and sells shares on behalf of his clients. A DP will just give you an account to hold those shares.