What is a Demat Account? How is buying and selling of shares done?

To start investing in the stock market, you need three accounts. These three accounts are demat account, trading account and bank account. Each account has its own function, but all three depend on each other to complete the transaction. These three accounts should be there for trading in the share market.

What is a Demat Account?

Demat account is similar to a bank account. Just like a savings account protects money from theft and any disturbance, a demat account does the same thing for investors. Demat account or dematerialized account provides facility to hold shares and securities in electronic form. These accounts store the physical shares in dematerialized form. The process of converting physical shares into electronic form is called dematerialisation. These shares are either credited or debited to the demat account whenever trading is done.

Types of Demat Account

While opening a demat account, investors should carefully choose a demat account as per their profile. Any Indian can open a demat account online in minutes. Investors can open a demat account with a Depository Participant (DP). 5Paisa https://bit.ly/3RreGqO is one such platform where you can open your demat account easily and start your trading journey. There are four types of demat accounts.

1)- Regular Demat Account

A normal demat account is meant for Indian resident investors who want to buy and sell shares and deposit securities only. When you sell the shares, the shares will be debited from the account. Similarly, when you buy, you will get credit. If you are trading in Futures & Options then there is no need of Demat account as there is no storage requirement for such deals.

2)- Basic Service Demat Account

This is a new type of demat account, which has been introduced by the market regulator SEBI. Keeping in mind the small investors, this account has been started. There is no maintenance charge to be paid for holding stocks and bonds of less than Rs 50,000. A charge of Rs 100 is levied for keeping security of Rs 50,000 to Rs 2 lakh.

3)- Repatriable Demat Account

Repatriable Demat account is for NRIs i.e. NRIs. Through this they can invest in the Indian market and can also send money abroad. However, the demat account has to be linked with the NRE (Non-Resident External) account to transfer funds.

4)- Non-repatriable Demat Account

Non-repatriable Demat account is also available for Non-resident Indians (NRIs). However, money cannot be transferred abroad through this account.

Benefits of Demat Account

Demat account allows for faster transfer of shares without any hassles. Shares or other securities certificates are held electronically in a demat account. In such a situation, the chances of their theft, forgery and loss are very less. Trading activities can be easily tracked. Demat accounts can be accessed anytime and everywhere. Bonus stock, rights issue, split shares are automatically credited to the account.

How to open Demat account

Opening a demat account is mandatory for trading in the share market. You can open a demat account through a financial institution or a broker. First of all you have to choose a depository participant (DP) for this. This can be a financial institution, authorized bank, or broker. You can open a demat account with them. DP should be chosen on the basis of brokerage charge, annual charge and leverage. After selecting DP, you have to fill the account opening form, KYC form and submit it. You also have to give some documents with it. They include PAN card, residence proof, ID Proof and passport size photo. Keep the original copy with you for the verification process. Besides this you need to submit a canceled check for giving bank details. After this, you have to sign the agreement in which there will be all the details regarding rules and regulations as well as your rights. You should read the rules and regulations carefully. Nowadays many platform also provide the facility to open demat account online. After fulfilling simple process your demat you can open your demat account