Eligibility to Open a Demat Account

5paisa Research Team

Last Updated: 04 Jul, 2024 05:29 PM IST


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Eligibility Criteria to Open a Demat Account

Under the mandate of the Securities and Exchange Board of India (SEBI), all investors are required to carry out purchase and sales of bonds, mutual funds, exchange-traded funds (ETF), shares, government securities, initial public offerings (IPO) and systematic investment plans through Demat accounts. Any resident or non-resident of India can open a Demat account through a Depository participant (DP). However, the investor must meet the requirements set by SEBI to open a Demat account

Check: Documents Required To Open A Demat Account

Who is eligible to open a demat account?

To open Demat account, the registering individual must be atleast 18 years of age and have a valid PAN card. Individuals can register a Demat account in their name or even on behalf of their children. 
Opening a Demat Account

How to open a Demat account is a common question in the mind of every new investor. However, the process of opening a Demat account is simple and safe if an investor takes note of the following points:

1.    Contact a Depository Participant – Investors must contact a DP to know how to open a Demat account and the requirements. It is mandatory for DPs to act as intermediaries between the investor and the depositories (NSDL and CDSL).
2.    Choosing the Right Plan – Investors can consult the DP to pick the type of Demat account as per their preference, such as Indian resident account, NRI account, joint account, etc.

Who can hold a demat account

By law, any person above the age of 18 with valid documentation can open a demat account. However, there is a special demat account for minors and a demat account for multiple investors.

1.    Single Demat account holder – Individual can operate demat accounts on their own and choose to add a nominee as a future beneficiary.

2.    Joint Demat account holder – According to the rules SEBI, a demat account can have up to three account holders, i.e. one primary holder and two joint holders. All holders of the joint account must be of 18 years of age. 

3.    Minor Demat account holder – Minors can be the holder of a demat account as well. However, the account must be operated by the parent or guardian of the minor till he or she becomes 18 years old. After the minor becomes a legal adult, he or she is required to contact the DP to complete all formalities necessary to open a new account or operate the existing account.

4.    Demat account for Trust – A demat account can be opened for private or unregistered trusts as well. 

Check: Different Types of Demat Account

NRI Demat Account

NRIs can open demat account for their share transactions. NRIs are required to maintain separate demat accounts for Repatriable and non-repatriable transactions. 

1.    Repatriable Demat account – NRIs can open a Repatriable Demat account for transfer funds abroad. To operate a Repatriable Demat account, the investor must have an NRE bank account linked with their demat account.

2.    Non-Repatriable Demat account – The Non-Repatriable Demat account for NRI individuals does not allow the transfer of funds abroad. To operate a Repatriable Demat account, the investor must link their NRO bank account with the demat account.

Benefits of demat account

1.    Security – The biggest benefit of demat account is the high level of security associated with it. Transactions done through a demat account reduces risks such as bad delivery, theft, fake certificates, etc.

2.    Time-efficient – Due to the lack of paperwork involved, transactions through demat accounts are processed quicker.

3.    Transparency – Investors can check their investments anytime.

4.    Convenience – Investors can complete transactions directly from home or anywhere else.

Overall, there are both benefits and drawbacks of demat accounts. However, the benefits of demat account outweighs the minor drawbacks.

More About Demat Account

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