Why Do I Need A Demat Account?

This is a look into the basics of a Demat account, why you need it, and how it helps you invest easily and seamlessly.

Careful and intelligent investments in stocks involve lengthy processes, paperwork, and weighing the risks of misrepresentation. To indulge in the financial world of stocks and shares successfully and seamlessly, one of the most revolutionary methods in India is the simple and effective Demat account (dematerialisation account)

Demat accounts are used to store stocks and shares in a non-physical or electronic format when trading online. As part of the dematerialisation, an investor’s share certificates are converted from physical to electronic format for easier access. A Demat number is required to process transactions electronically.

Facilities offered by a Demat Account

Dematerialisation into different forms

If you have a Demat account, you can easily convert your stocks and securities into different formats. You can ask the depository participant (DP) for specific actions, including turning physical share certificates into electronic formats. A DP is an agent or the registered stockbroker of your depository.

Several login options

You can access your account through various media given its digital and electronic nature. You can use the internet to invest, trade, monitor and perform other stocks-related activities on your PC, smartphone or other mobile devices.

Credit facility

This account allows you to withdraw additional securities deposited into your account and receive interest from your bank. You can give these securities as collateral for loan obligations with your bank.

Stock transfer

It is used to transfer investor shares. An account holder can do this utilising a Delivery Instruction Slip (DIS) for stock trading.


Brokers, either digital platforms or the traditional ones, are needed for opening a Demat account.

How to open a Demat Account?

First, select the Depository Participant (DP) with whom you want to open a Demat account. Once you have opened your Demat, be sure to attain the POA number, Demat Account number, and the Depository Participant (DP) ID. 

The account number is called the ‘beneficiary ID’. You can open this account without deleting or having any shares or securities under your portfolio. In addition, a minimum balance does not have to be observed for Demat.

Necessary documentation

The opening process and documentation requirements for Demat are the same as for all financial organisations. 

Income proof: Copy of income tax return (ITR), current payslip, or form-16

Proof of Identity: PAN card / Aadhar card / Voter ID / Driving license / Passport

Address proof: Passport / Identity Card / Utility (Ration) card / Driving license / Insurance / Bills (such as telephone bill, electric or gas bill)

When is it compulsory to have a Demat Account?

If you want to indulge in the share market, investing and trading, it is essential to have a Demat account. Possessing it makes the stock trade safer and faster. You can buy and hold shares in your account. In simple words, Demat is just like a bank account, where you can make deposits, and the debit/credit balance is kept in the registered account.

When you buy or sell stock units, expenses or gains are invoiced via Demat after your approval. It can further be used for a wide range of investments, such as stocks, securities, mutual funds, government bonds, etc. And the best part is, you can open a Demat account without possessing any claims and with zero balance in your account.

Aakash Sharma
Aakash Sharma
Aakash writes on Startup Ecosystem, Policies, Legal and Regulatory aspects of business planning. An alumnus of Delhi University, he is assistant editor at Dutch Uncles.

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