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What is a Demat Account & How to DMAT shares online?

Posted by sandhyaravii on May 28, 2012

Earlier it was common in India to own sheaf of share documents, but that was before the electronic revolution. Primarily, demat is known as a dematerialized account that helps you to transform your papers into electronic form. You won’t have to carry share documents as they would be available on the computer screen once you click. Without a demat account you cannot trade in the stock market.


To get started in stock trading, you need to open a demat account at either a bank that is authorized to open a demat account, various financial institutions and some top drawer stock broking houses that are registered directly with the major stock exchanges. The broking houses are a conduit between you and the CDSL or the NSDL. You are the investor in this case as you would be buying and selling stocks. Many large broking houses are also known as depository participants or DP.


Your identity in the Indian stock market


A demat account works just like a social security number, but its scope is limited only to the trading in shares. By opening a demat account you are identified as a trader and all transactions made by you, are routed through the demat account for storage in electronic form. You may buy or sell shares and at the click of a mouse your account can be accessed and your holdings known. To begin with, you have to apply to a DP that could also be a bank or a financial institution apart from a broking house.


To open a demat account you need to provide proof of address, copy of the PAN card that is required for all income tax purposes, photographs, demat  forms filled out and also income tax returns to prove that you are a genuine tax payer. You need to open an account with the bank as a primary step to opening a demat account. It could be a savings and a demat account where the profits or losses from share trading can be credited or debited. You have to pay nominal charges toward your demat account.


Charges are not the same with all DP’s and they can change over a period of time. Primarily, you would be required to pay an account opening free, a transaction fee and an annual maintenance fee. Once the demat account is opened, the next step is very simple. You can get along with share trading instantly.




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