What is a demat account and how to get one?


What is a Demat  Account ?


for every investment you make you expect some kind of proof . like when you buy property you get papers of that property , which shows you are the legal owner of that property .when you are investing or trading in shares in the stock market, you must have some proof that you own such shares or securities.

When stocks were material, that is they were in paper format, there was risk because of paper work done by intermediaries. Sometimes agents pretended to be sebi registered stock brokers. Sometimes they do not process papers on time, Because of laziness and hardship on them.
 but they In order to keep the entire experience easy and streamlined and to avoid risk , a bank like account is there, which is called a demat account .Demat account is used to hold shares and securities in dematerialised or in electronic format. shares are converted from physical form to electronic form so as to increase their accessibility.that means now investors can buy or sell shares on their own by their demat account online.its a medium of online trading. .
With every Demat Account , Demat Account number is there to settle trades electronically. Demat Account allows you to buy shares, transfer shares and store them safely. 
just as in a bank account in which you hold deposits with the bank and the record of debit/credit balances are maintained in a bank passbook. In the same way, when you purchase or sell shares, it will be credited or debited to/from your Demat Account respectively. 
not just shares but a variety of investments like equity shares, exchange traded funds, invest in mutual funds, bonds, and government securities. opening Demat Account is free however you have to pay a nominal brokerage , only if you trade and you can maintain a zero balance in your account.

Difference between demat and trading accounts

Demat account is used to hold your securities in dematerialised form or electronic form. When you open a demat account it is maintained by depository participant dp.  however a trading account is just for trading in shares you place orders from trading accounts to buy shares and then those shares use to be kept in demat account.

Depository participants may open there accounts directly from NSDL (one of depositories)
Then they can provide you a demat account.or they may choose CDSL to open .An investor can hold almost all his securities in one account such as equities, bonds, units of mutual fund, government securities, commercial papers, certificate of deposit etc.
Just like in the case of upstox their depository participant name is RKSV securities private limited.

Types of demat account

There are mainly three types of demat accounts:

Regular demat account:

 such demat account which is used by people (resident of india), are regular demat accounts. 

Repatriable demat account

When NRI’s link an NRE bank account with their demat account,to transfer their money abroad and invest there. This kind or demat accounts are repatriable demat account

non-Repatriable demat account

Non repatriable demat accounts need to be linked with a NRO bank account . in this demat account NRIs can not transfer their fund abroad

Who provides your demat account.

For investing in stocks, a demat account is must and stock brokers provide you a demat account, in which you can hold your investment. a stock broker may be considered as a mediator between you and stock exchange and he must be registered with securities and exchange board of india. 
 Those sebi registered intermediary brokers are completely different from brokerage firms and depository participants. a broker is a person registered with the stock exchange . When such brokers come together and they form a firm, this firm is called a brokerage firm . and since it will be so difficult for the stock exchange to maintain data for every investor there are depository participants who hold shares on your behalf . 
Depository participants deposit huge amount with stock exchange.if you want to have a demat account you will have to contact a registered intermediary broker dp, who may be a member of brokerage firm (which usually he does ) and he will provide you with demat account 

open your demat account.

Types of brokerage firms

There are two types of brokerage firms . First is a full service brokerage firm and second is a discount brokerage firm. Full service brokerage firms provide you advisory and other value added services with account opening . Discount brokerage firms don't provide you advisory services for stock and derivatives etc.

charges in full service brokerage firm is usually higher than discount brokerage firm and because there service cost usually be more than discount brokerage firms ( you will complete details about charges below.) 

Charged by Discount brokerage firm

As our purpose is to make you know the basics of the stock market and make you capable of investing your small savings. We are providing you just discount brokerage firm charges. And at the starting point it would be better to start small so choosing a discount brokerage firm will be beneficial for you.

A person must read about these charges given below because most of the time brokers tell you only about brokerage charges. Because telling you complete details of charges might scare you or make you think if it's too difficult to understand the stock market. And you be paying charges which you would not be knowing in beginning.

primary

There are mainly three charges which a brokerage firm charge to you

opening charge -

brokerage firms charge some amount of money on name of account opening

annual maintenance (AMC)-

when you open a demat account you will be charged annually with some charges on name of maintenance. we compare various broker and cheapest amc is of RKSV securities (upstox) 

Brokerage-

Brokerage charges also differ on type of trade. Most of brokers charge different rate for intraday trading and different rate for Delivery trade 
difference between intraday and delivery 

other charges 


Dp charges.

Depository participant charge is charged by depository in return of holding your stock and shares in dematerialised form. Since you accept delivery of your shares only in delivery  orders, it will not be charged on intraday trading. This is also different for different brokerage firms. For example in upstox dp charge is approx 21 rupee only on sell side per script on per day basis.

auto square off charges

Auto square off charges may be considered as penalty. When you trade intraday you have to sell your shares before the end of that relevant trading session if you bought some. In intraday whatever the position you have made during the trade session  must be square off by you otherwise at the end brokerage houses will square it off on their own. No matter if you have profit or loss by that time. If you forget to square off your position or leave it as it is. Brokerage firms are providing you service by selling it, for that service they charge auto square off charge. In case you have an account with upstox  it is 23 to 24 rupee .

Charged by government

Mainly the government charges a certain amount of tax on your trading. By such taxes the government keeps a check on your transactions. Because such taxes are deducted by the brokerage firm directly and you can't hide those charges. Government may do a reverse calculation and can find out the amount of trading done by you. 

Charge of tax is differ state wise. Delhi gujarat, maharashtra, rajasthan, tamilnadu, karnataka, west bengal and others has different tax rates. Each state charges different amounts of tax for different types (intraday and delivery) of trade.
Some of charges by government are
STT/CTT
Transaction charges
Clearing charges
GST
State Stamp duty
Sebi turnover fees

It may look really difficult to calculate charges and brokerage after each trade. But it is not. Most brokerage firms provide a brokerage calculator by which you can calculate your brokerage and net profit or loss in each trade. Complete bifurcation of charges will be reflected to you. Say you are using upstox for trading all you have to do is search “upstox brokerage calculator”.

How to open your Demat account 

Here we are sharing the details of opening an account. by clicking on which you can open your Demat account with a brokerage firm named upstox. Which in terms of all above charges and provides you with the best interface to trade even by your mobile phone. 





Keep your documents ready such as pan card, your bank account number and other details and go to the link given below and update you mobile number and verify with OTP..