What is the minimum amount required to open a Demat account?

 

The Demat account is an abbreviation for the dematerialized account. It is a facility that lets you hold company securities and shares electronically. In Demat accounts, users can even store securities like mutual funds, stocks, exchange-traded funds, bonds, etc. in dematerialized format. Whenever an individual places an order for buying a stock his shares are automatically credited to the Demat account. In the same way, if he opts for selling the shares, then the shares get debited from the Demat account. 

Many top brokers in India offer 3-in-1 Demat accounts that substantially link an individual’s bank and trading accounts. This rewarding facility helps an individual in trading effortlessly without the requirement of physical share certificates. The best demat account in India act not only as a safe house for your investments but also immensely speeds up the transactions and greatly reduces trading costs.

Traders mandatorily need to have a Demat account for trading in the stock market. The accounts act as a medium for facilitating trade by storing the securities in the same way as the bank account holds money. Now with the advent of technology and the availability of top brokers in India on their respective trading apps, people can trade effortlessly. From buying-selling of shares to trading in mutual funds, owning a Demat account can soften your trading ordeal. But in the modern world, nothing is free of cost, same is the case with Demat accounts where you need to pay a specific amount for trading seamlessly.

Below is the list of charges that an individual is liable to pay for efficient handling of Demat accounts-

1.      Account Opening Charges - Most of the time, traders need to pay a nominal account for Demat account opening which is even exempted in some cases. Top brokers in India have provisions for free Demat accounts if traders open a 3-in-1 account. This 3-in-1 account offers the cumulative services of a trading account, savings account, and a Demat account.

2.      Safety Charges - Previously, traders had a hard time protecting their share certificates. But with Demat accounts, there’s no such provision. These shares cannot be stolen as they are in dematerialized format. The depository participants and banks charge an amount annually for protecting the shares.

3.      Annual Maintenance Charges - When an individual opens a Demat account, then he needs to pay an amount every year. Generally, the brokers have no provisions of AMCs for basic Demat accounts having a balance up to Rs. 50,000. Accounts having a balance in the range of Rs.50,000 to Rs. 2 lakhs need to pay an AMC ranging between Rs.100 to Rs. 750. This AMC is also dynamic sometimes, depending on the volume of transactions made by the trade. Many depository participants levy a quarterly fee, with some charging a lifetime amount of Rs. 2000 as AMC. If the transaction amount exceeds Rs. 2 lakhs then the annual charges scale up to Rs. 2,500.

4.      Transaction Charges - Some depository participants charge traders based on transactions made. These rates widely differ depending on the depository participant you go ahead with.

5.      Demat and remat expenses - The depository participants levy charges to materialize and dematerialize the shares. The dematerialization process can amount to Rs. 5 per share certificate, whereas an amount of Rs. 25 per certificate is levied while materializing the shares.

Many times, in addition to the above-mentioned charges an additional GST of 18% is levied on the transactions made through the Demat account. Let’s have a look at the benefits of the Demat account-

1.      Security of shares - This is one of the most important factors for switching to the Demat account. The physical shares can bear damage, might get lost, or be stolen, but with Demat accounts, traders need not worry about any such mishappenings.

2.      Seamless transfer or trading - Unlike the problems in transporting physical certificates, Demat accounts let traders transfer shares securely and quickly. This has also lowered the order processing times.

3.      Lower costs - Owning share certificates levies extra charges in the form of stamp duty. With Demat accounts, all these extra charges are eradicated. Users also get access to their Demat accounts in no time.

4.      Multiple access points - A Demat account’s entire modus operandi is electronically operated. This gives traders an advantage as they can operate the Demat account from multiple devices including mobiles, desktops, and tablets.

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FAQs

Q. What are Annual Maintenance Charges for Demat accounts?

A. The AMC are the charges levied by the brokers for maintenance of Demat accounts depending on the volume of transactions made.

Q. Do all the broker's levy account opening charges?

A. No, not all brokers levy account opening charges. Interestingly, traders opening a 3-in-1 account are exempted from account opening charges.

Q. What are safety charges?

A. The safety charges are levied by the brokers for providing immunity against theft, forgery as compared to the physical format.