Demat account FAQ
Is it mandatory to have a Demat Account to apply for an IPO?
Yes, it is mandatory to have a Demat Account to apply for an IPO. A Demat Account is required to hold the shares once they are issued after the IPO. It serves as a digital repository for your shares, ensuring secure storage and easy transferability. Without a Demat Account, you will not be able to receive and hold the shares allotted to you during the IPO. Therefore, having a Demat Account is a prerequisite for participating in an IPO.
How much interest do I get on the Demat account?
A Demat Account is similar to a bank Savings Account. A Savings Account allows you to store and protect your money, while a Demat Account allows you to hold your securities. However, a Savings Account pays you interest for the money you save in it. The reason is that banks utilise your funds to provide loans to borrowers, enabling them to generate interest income.
On the other hand, a Demat Account is solely for the purpose of holding the securities you own. As there is no lending taking place, the depository participant does not provide any interest payments to you. The only profit you make is by buying shares and selling them at a higher price than your purchase price
What are the maintenance changes for a Demat Account? Are there any hidden charges or processing fees on the transactions I do on the Demat Account?
Demat account maintenance charges, processing fees, transaction charges, and other costs vary between Depository Participants. At Axis Direct, the annual maintenance charges are nil for the first year for Axis Bank customers and ₹ 350 for the first year for non-Axis Bank customers. After that, they must pay ₹ 750 per year. For debit transactions on debt securities, account holders must pay 0.01% of the transaction value subject to a minimum of ₹ 50 and a maximum of ₹ 500 per transaction. Other than these, there are additional charges like Dematerialisation and Rematerialisation charges, Ad-hoc statement charges, closure charges, etc.
Can a person have more than one Demat Account in his name?
Yes, you can open multiple Demat Accounts in your name. However, all of them will be linked with your PAN card, and the income tax department will use the same to evaluate your tax obligations
How many Demat Accounts can I open?
There is no limit to the number of Demat Accounts you can open. You have the option to open accounts with different Depository Participants. However, at the time of account opening, they will require your PAN details, a mandatory document for opening a Demat Account. That means all your accounts will be linked with your PAN card.
What are CDSL and NSDL?
CSDL (Central Securities Depositories Ltd) and NSDL (National Securities Depositories Ltd) are depositories responsible for keeping ownership records of investors’ securities. The depository participant or stockbroker you open a Demat Account with is linked with one of these depositories to hold your securities under SEBI guidelines.
NSDL is India's largest and oldest depository, having commenced operations in 1996. It has over 2.4 crore active investors with over 36,000 DP service centres across 2000 cities. CDSL began operations in 1999 with over 5.2 crore active investors with over 21,000 DP service centres.
Is a Demat account required for SIP?
No, SIP involves investments in Mutual Funds at regular intervals. It does not require holding, buying, and selling securities using a Demat and Trading Account. Therefore, a Demat account is not a mandatory requirement for SIP investment plans.
How do I transfer shares from one Demat account to another Demat account?
To transfer shares from one Demat Account to another, you must fill out a delivery instruction slip and submit it to your current broker. The depository will receive and process the request placed by you and transfers your existing shares to the new Demat Account. After process completion, you can view the shares in your new Demat Account and start managing them your way.
I do not have a Demat account. Can I apply for an IPO?
You need a Demat account to hold your IPO shares once allotted. You can apply in an IPO without a Demat Account, but you will need a Demat Account to store the shares in case of allotment.
Conclusion
Here we have tried to answer every Demat account FAQ you may have in your mind while planning to invest in shares. This information will help you gain a more comprehensive understanding of the investment process, enabling you to make well-informed decisions.