Who Can Open a Demat Account?

The Securities and Exchange Board of India (SEBI) mandated the dematerialisation of all physical securities certificates after the introduction of the Depositories Act, 1996. If you are an investor, you must convert your securities and trade through a Demat account.

As an investor, you might be curious about who can open a demat account to trade in securities in India. Depending on the type of investor you are, you must meet certain criteria to open a Demat account. Read this blog to know all the eligibility factors in detail.

Detailed Eligibility Criteria to Open a Demat Account

If you are looking for who can open a demat account in India to trade or invest in securities, take a look at the following section:

• Resident Individuals of India
  If you are a permanent resident of India with valid ID proof, you are eligible to open a Demat account. The Indian law considers you an Indian resident if you have stayed for 182 days in the country in the preceding year of application. In addition, if you have resided in the country for 60 days in the previous year and 365 days over four years before that, you are eligible for a demat account.
• Non-Resident Indians (NRIs)
  If you are an NRI and want to invest in the securities market, you can open a Demat account. As an NRI investor, you must abide by the guidelines of the Foreign Exchange Management Act (FEMA) and comply with the Indian financial norms for investments. It is recommended to create separate accounts for non-repatriable and repatriable securities.
• Domestic Corporate Entities
  Domestic corporate entities also meet the requirements for a Demat account eligibility. As per Section 2 (22A) IT Act of India, 1961, a domestic corporation is an India-based company that is taxed as mentioned in the section. Thus, an Indian company can open a Demat account, trade and declare taxes on income from the market.
• Hindu Undivided Family (HUF)
  A Hindu Undivided Family (HUF) is also eligible for a Demat account. If you are a part of such a family, note that the head of the “Karta” can open a Demat account under their name. It enables a collective investment and management of the Demat account.

How to Choose the Right Demat Account for Investments?

Now that you know the criteria to meet for a Demat account eligibility, you must know how to choose the best Demat account for a better investment experience:

• Experience and Reputation of the DP
  Before opening your Demat account, you must choose a Depository Participant (DP). You must select a stockbroker, banking or financial institution with a good track record in investment. Such DPs can provide reliable investment services and assistance.
• Applicable Charges by the DP
  You should avoid choosing a certain DP without proper research. Look for brokers or DPs and compare the fee structure, account opening charges, maintenance and other incurred costs. However, most brokers do not charge you for opening a Demat account and provide a trading and Demat account for free.
• Ensure SEBI Registration
  If you are investing for the first time or looking for a better DP, you must choose a certified DP and open a Demat account. Therefore, before confirming a DP, ensure that it is registered with SEBI and facilitate quick investment services with efficiency.
• Customer Assistance
  Whether you are a new investor or an existing one, there is always a chance of facing issues that are hard to resolve. Now that you know who can open a demat account, all you need to do is confirm if they have dedicated, helpful and knowledgeable customer assistance.
• User-Friendly Investment Platform
  For a greater investment experience, you need an investment platform that is easy to understand and user-friendly. Before opening your Demat account, ensure that your DP has a trading platform with robust features and a user-friendly interface.
• Other Services
  Apart from just having a Demat account and investing, you must look for additional services that can help with investment decisions. When you open a Demat account with a DP, ensure that they have add-on support like investment advice, research insights and other resources to help in your investment journey.

Final Words

For an individual interested in investment or trading, it is important to learn who can open a demat account. Indians with valid residential and ID proofs are eligible to open an account without much hassle. NRIs, HUFs, domestic companies, etc., are also eligible for this account.

FAQs

1. What are the requirements for opening a Demat account without proof of income?

You can open a Demat account without income proof. However, you must provide your PAN card, Aadhaar Card, and digital signature as ID and address verification documents to open the account.

2. Can I open a Demat account for a minor?

Yes, you can open a Demat account for a minor. All you need to do is provide the PAN card of the minor and the PAN card of his/her legal guardian. The legal guardian will control the account until the minor turns 18.

3. Who cannot open a Demat account?

Individuals who do not fulfil the criteria specified for a Demat account cannot open one. Also, individuals who fail to produce a valid address or identity proof are not eligible for this account.

4. Is it possible to open multiple Demat accounts with the same DP?

No, once you have opened an account with a certain DP, you can open another one under the same name and other details. However, you can open other demat accounts with other brokers.