Documents for Opening a Demat Accounts

Documents Required for Demat Accounts

The extent of documentation required to open a Demat account may vary according to your relationship with the institution.  If you plan to open a Demat account with a bank, a savings account holder has an
edge over the non-account holder.  In fact, banks usually offer additional incentives to customers who open a Demat account with them.

Along with the application form, your photographs (with co-applicants) and proof of identity / residence / date of birth have to be submitted.  The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper.

In addition to the other fees (see box), the DP also charges a fee for converting the shares from the physical to the electronic form or vice-versa.  This fee varies for both Demat and remat requests.  For Demat, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only Rs.25 as the request fee and Rs.3 per certificate as the variable fee.  However, SBI charges only the variable fee, which is Rs.3 per certificate.  Remat requests also have charges akin to that of Demat.  However, variable charges for remat are generally higher than Demat.

Some of the additional features (usually offered by banks) are :

• Some DPs offer a frequent trader account, where they charge frequent traders at lower rates than the standard charges.


• Demat account holders are generally required to pay the DP an advance fee for each account which will be adjusted against the various service charges.  The account holder needs to raise the balance when it falls below a certain amount as prescribed by the DP.  However, if you also hold a savings account with the DP you can provide a debit authorization to the DP for paying this charge.


• Finally, once you choose your DP, it will be prudent to keep all your accounts with that DP, so that tracking your capital gains liability easily.  This is because, for calculating capital gains tax, the period of holding will be determined by the DP and different DPs follow different methods.  For instance, ICICI Bank, uses the first in First Out (FIFO) method to compute the period of holding.  The proof of the cost of acquisition will be the contract note.  The computation of capital gains is done account-wise.

Opening Cost and Other Charges.

The cost of opening and holding a Demat account. 

There are four major charges usually levied on a Demat account:

• Account opening fee, 
• Annual maintenance fee, 
• Custodian fee and 
• Transaction fee. 
  

All the charges vary from DP to DP.

Depending on the DP, there may or may not be an opening account fee.  Private Banks, such as ICICI Bank, HDFC Bank and UTI Bank, do not have it.  However, players such as Karvy Consultants and the State Bank of India change it.  But most players levy this when you re-open a Demat Account.  Though the Stock Holding Corporation offers a lifetime account opening fee, which allows you to hold on to your Demat account over a long period.  This fee is refundable.

Annual Maintenance Fee

This is also known as folio maintenance charges, and is generally levied in advance.

Custodian Fee

This fee is charged monthly and depends on the number of securities (international securities identification numbers – ISIN) held in the account.  It generally ranges between Rs.0.5 to Rs. 1 per ISIN per month.

DP will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the depository.

Transaction fee

The transaction fee is charged for crediting / debiting securities to and from the account on a monthly basis.  While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to the transaction value, subject to a minimum amount.

The fee also differs based on the kind of transaction (buying or selling).  Some DPs charge only for debeting the securities while others charge for both.  The DPs also charge if your instruction to buy/sell or is rejected.

In addition, service tax is also charged by the DPs.

How To Open a Demat Account

Demat Account

A Demat Account allows you to buy, sell and transact shares without endless paperwork and delay’s  It is also safe, secure, convenient and a must for trading in the share market.

The Demat account reduces brokerage charges, makes pledging / hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipt of public issue allotments.

Demat Account Holders

It also helps you avoid bad deliveries caused by signature mismatch, postal delays and loss of certificates in transit.  Further, it eliminates the risks associated with forgery, counterfeiting, and loss due to fire, theft or mutilation.  Demat account holders can also avoid stamp duty (as against 0.5 per cent payable on physical shares), avoid filling up of transfer deeds, and obtain quick receipt of such benefits as stock splits and bonuses.

Around 200 “Depository Participants” (DPs) offer the Demat account facility.  A comparison of the fees charged by different DPs is detailed below.  But there are three distinct advantages of having a Demat account with a bank – quick processing, accessibility and online transaction.  Generally, banks credit your Demat account with shares in case of purchase, or credit your savings accounts with the
proceeds of a sale on the third day.

Opening a Demat Account

Banks are also advantageous because of the number of branches they have.  Some banks give the option of opening a Demat account in any branch, while others restrict themselves to a selected set of branches.

Some private bank also provide online access to the Demat account.  So, you can check on your holdings, transactions and status of requests through the net banking facility.  A broker who acts as a DP may not be able to provide these services.

Opening an individual Demat account is a two step process :

You approach a DP and fill up the Demat account-opening booklet.  The Web sites of the NSDL and the CDSL list the approved DPs.  You will then receive an account number and a DP ID number for the account.  Quote both the numbers in all future correspondence with your DP.

How Many Demat Accounts ?

• If your shares are held in Joint names, be sure to open the account in the same order of names.  If A, B and C jointly hold 100 shares in a company and have three share certificates all listing A,B and C as the first, second and third holders respectively, one account will suffice.


• For different combinations of names, open separate account for each combination.  If the three certificates are held as ABC, BAC and CBA three different account are necessary.


• There is no limit to the number of accounts you can open.


• There is no limit to the number of DPs you can have accounts with. 


• You can even open a multiple-sign Demat account, which can be operated by multiple holders, like a joint savings bank account.


• You can open a Demat account even before you acquire your first security.