Know a little about demat account

Know a little about demat account

by Prasanth Menon Last Updated: Dec 11, 2022 - 07:06 pm 224.4k Views
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Indian share market is the ultimate platform for a person to build his/her wealth over time and earn unlimited profits without having to wait for a long period. But to be able to trade successfully, an investor must have a basic understanding of every aspect of the market. Before you go on and indulge yourself in learning about the techniques and theories of the market, you should know a little about the one thing that forms the basis of all the trade that has ever happened and will happen in the market, a DEMAT account.

Type of account

Before you start trading, you have to open a trading account with a Depository Participant or DPs, which can be a bank, a brokerage firm and a financial institution. Once the process goes through, you are given a Demat account number. All of the securities you buy in the market are credited to this account.

You can open your demat account in a single account name, joint account name or multiple account name. If the account is being opened for a minor who is not 18 years old yet, a guardian has to be appointed to look over all the transactions.

Keep in mind that you cannot change the name of the Demat account holder once the account is opened. The only thing which you can do in this case is to open a new Demat account with a new name.

Nomination

Nomination provides you an option to transfer your securities to someone else upon your demise. You can nominate any of your relatives, friends or even a person you don’t have a personal relationship with. Upon your death, every security in your Demat account is transferred to the Demat account of the person you have nominated.

Nomination in the Demat account is a better option than nominating a person for every company’s security you holds shares of, as you don’t have to avail nomination separately for every company. By availing nomination in the Demat account, all of the securities are collectively transferred to the nominee’s account irrespective of shares relating to different companies.

Demat account charges

A person having a demat account has to pay charges for the following facilities:

  • Transaction fee, only when you open your Demat account through a DP.
  • Annual fee for the maintenance of the Demat account.
  • For the dematerialization and rematerialization of the securities, you hold in your account.

Other things to note regarding Demat account

  • It is not compulsory that you hold a minimum number of shares in your Demat account.
  • If your DP chooses to increase the charges on your transactions, he is legally required to give you a month’s notice in advance.
  • If you choose to close your Demat account in between the year, you don’t have to pay the full annual charges. The charges are levied in proportion to each quarter.
  • There is no additional charge to close your Demat account.
  • You don’t have to pay any fee if you transfer you Demat account from one DP to another DP.

Power of attorney

You can authorize any person to handle your Demat account by executing an order called as Power of attorney by submitting the order to your DP. The person having a power of attorney has the legal right to operate your account whenever he/she wants to.

You also may grant power of attorney to your broker/DP which gives them the right to buy and sell shares on your behalf and credit or debit your Demat account. There is no obligation that you have to grant someone a power of attorney necessarily. If you have given a power of attorney to someone, you can revoke it at any time you deem fit.

5paisa allows you to open a Demat account and you can start trading in just one day. We charge a flat fee of Rs 10 which is the lowest you will find in the entire market.

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