Demat Account is basic requirement for investing in indian stock market. Demat account is just like a bank account where actual money is replaced by shares. A demat account facilitates buying and selling shares, precluding cumbersome paperwork and meaningless delays. You have to approach the DPs (Depositary Participants), to open your demat account.
Documents Required To Open Demat account
Opening a demat account for trading in the Indian share market is as simple as opening a savings bank account. You can open a demat account with a bank or a depository participant (DP). Along with the application form, following documents are required to open a demat account:
Duly filled application form.
Photocopies of passport, pan card (mandatory), driving license for identity proof.
Photocopies of passport, telephone bill, driving license, voter ID card for residence proof.
Photographs of the respective person of passport size.
Details of the bank account which is to be linked with the Demat account.
Demat Account Opening Fee
Demat account opening fees can be divided into four main categories.
Demat Account Opening and Documentation Cost
This is one-time fee to be paid when opening a demat account. It depends on depository participant whether he takes demat account opening fee or not. Most of the banks and Stock Trading Brokers do not take any fees to open demat account, but some may charge a nominal fee for the stamp paper on which you must execute the contract with the broker.
Annual Maintenance Costs
Annual maintenance cost is required to pay at the beginning of the year. However, some banks and brokers may charge a fee for each month or quarter.
The custodian fee is charged on a monthly basis and it depends on the number of securities held in the account.
Transaction fee is the fee for the debit of shares from your DP account. As per SEBI not a broker or bank may charge fees for Credit of Shares. So, do not be fooled by the agents who claim to offer "free credit of shares. The transactions costs are in the range from 0.02% to 0.04% of transaction value subject to a minimum charge of Rs.12 to Rs.25 per transaction.
Some important points:
* In addition to the basic fees, as explained above, you must pay the service tax and education cess.
* Many banks waive the fees annually to keep the first year.
* You may have to pay additional for physical account statements, but if you opt for e-statements, you need not to pay any costs.
* If you already have a Trading and DP account with the same broker, you can save significant amounts on AMC and transaction charges.
* Many online brokers offer lower fees at first, but they can charge again it later. Therefore, when choosing a broker or bank to open a new Demat account, you must consider all factors, such as service, convenience, and the frequency and volume of transactions, rather than make decisions based solely on cost.