What Is a Demat Account?
A demat (dematerialised) account holds your shares and other securities in electronic form. In India you need one, along with a trading account, to invest in the stock market.
Demat account meaning
'Demat' is short for dematerialised. Shares used to be issued as paper certificates; today they are held electronically in a demat account, much like money is held in a bank account.
When you buy shares, they are credited to your demat account. When you sell, they are debited from it.
How a demat account works
- Depositories hold securities electronically. India has two: NSDL and CDSL.
- You open your account through a Depository Participant (DP), usually your broker or bank.
- Each account has a unique ID, linked to your PAN and bank account.
Demat account vs trading account
| Demat account | Trading account | |
|---|---|---|
| Purpose | Stores your shares and securities | Used to place buy and sell orders |
| Works like | A locker or bank account for shares | A gateway to the stock exchange |
| Holds | Shares, ETFs, bonds, mutual fund units | Nothing; it only processes trades |
| Needed for | Holding investments | Buying and selling on the exchange |
What you can hold in a demat account
- Shares
- ETFs
- Mutual fund units
- Government securities and bonds
- Sovereign gold bonds
Documents usually needed
- PAN card
- Aadhaar or other address proof
- Bank account details (cancelled cheque or statement)
- Photograph and signature
- Income proof, if you want to trade derivatives
How to open a demat account
- 1Choose a SEBI-registered broker or bank that acts as a DP.
- 2Fill in the online form and complete e-KYC.
- 3Upload your documents and link your bank account.
- 4Sign the agreement digitally.
- 5Receive your demat and trading account details and start investing.
Charges to compare
- Account opening charge
- Annual maintenance charge (AMC)
- Brokerage per trade
- DP charges when you sell shares
Frequently asked questions
What is a demat account in simple words?
A demat account is an electronic account that holds your shares and other securities, the way a bank account holds your money.
Is a demat account the same as a trading account?
No. The demat account stores your shares, while the trading account is used to place buy and sell orders. Most brokers open both together.
Can I have more than one demat account?
Yes. You can hold demat accounts with different DPs, all linked to the same PAN.
What are NSDL and CDSL?
NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) are India's two depositories. They hold securities electronically; you access them through a Depository Participant such as your broker.
Do I need a demat account for mutual funds?
Not necessarily. You can invest in mutual funds directly with fund houses or through platforms without a demat account, though you can also hold units in demat form.
Educational information only, not investment advice. Market data may be delayed.
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