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Some important FAQ on demat account opening and demat charges

Published : October 17, 2018

faq demat account opening demat charges

There are lots of benefits of holding documents in electronic form than in physical form. And when it comes to matters relating to money then no other option is better than electronics form. In India, you need to open a demat account that facilitates keeping financial assets in electronic form.  So these faq demat account opening demat charges will help you understand the concept in a clear way. Let us start with the most frequently asked questions.

FAQ demat account opening demat charges

1. How can I open a demat account?

There are several steps that you need to follow in order to open a demat account. Firstly, you need to approach a DP. Then fill up a demat account opening form. You must support the account opening form with copies of documents as proof of identity and proof of address as per SEBI guidelines. Along with it you also need to show the original PAN card at the time of demat account opening.

All applicants should carry original documents for verification by an authorized official of the DP, under his signature. The investor has to sign an agreement with DP in a depository prescribed standard format, which gives details of rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference.

Afterward, the DP will open the demat account in their system. Subsequently, they will give you a unique account number. We call this unique account number BO ID (Beneficial Owner Identification number). This BO ID you use for all future transactions with your broker.

2. Can I open my demat account directly with the depository?

No, as per the law it is not possible to open the demat account directly with the depository like NSDL or CDSL. You always need to open through any of the depository participants of the depository.

3. Can anyone open the demat account in the name of joint holders?

Yes, it is possible to open a demat account in joint holders’ name as well. However, there is an upper limit on a number of holders in such joint demat account. A maximum of three account holders i.e. one main holder with two joint holders is only possible.

4. Whether a trust can open a demat account?

Yes, a trust can also open a demat account in its name. However, the trust needs to have a registration under any one of the following –

1. The Public Trust Act 1860

2. Societies Registration Act

3. Bombay Public Trust Act

4. Public Trust Act in force in the state.

Even if the trust is not a registered entity then also it is possible to open a demat account. But in this case, the account needs to be in the name of a trustee as an individual account, and not in the trust name. Further, if the trust has more than three trustees, then any one of the three can have the demat account in his name.

5. Can a HUF open the demat account in its name?

No, the demat account cannot be opened in the name of HUF. However, it needs to open in the name of the Karta on behalf of the HUF.

6. Does an NRI need the RBI permission to open a demat account?

No, an NRI does not need any permission in this regard from the RBI to open a demat account. However, credits and debits from the demat account may require general or specific permissions as the case may be, from designated authorized dealers.

7. Is nomination mandatory for a demat account?

As per SEBI guidelines, it is mandatory to file nomination form with every demat account opening form by an individual. If any individual does not want to give nomination then he must give a signed declaration for the same.

8. Can I open multiple demat accounts? 

Yes, an individual can open multiple demat accounts in his/her name.He/she has the option to open multiple accounts with the same DP and also with different DPs.

However, for all such individual account, the investor need to comply with all the documents requirements separately and individually. 

9. Can I open a single account for securities owned in different ownership patterns? 

No, it is not possible to do so. You must open a demat account in the same ownership pattern in which you own the securities. As for example if you own one share in the individual name and another jointly with somebody else then two different accounts you need to open. One in individual name and other as a joint name. 

10. How to dematerialize physical share certificates with multiple holders in a different sequence?

The investors need to open only one account but jointly. He/she can open with ‘A’ & ‘B’ as the account holders and lodge the security certificates with the different sequence of names for dematerialization. Such an investor need to submit an additional form “Transposition cum Demat” form. This will accomplish change in the sequence of names as well as dematerialize the securities. 

11. What are all charges I have to pay for the opening and maintenance of a BO account?

SEBI has rationalized the cost structure for dematerialization by removing account opening charges, transaction charges (for credit or buy transactions of securities), custody charges and account closing charges. Custody charges are now paid by the issuer companies. Broadly, investors are required to pay the charges towards-

1. Dematerialization and Rematerialisation of their securities 

2. Annual account maintenance charges 

3. Transactions fees (only for sale transactions)

The DP may revise the charges by giving 30 days notice in advance. Further, SEBI has also advised the DPs to submit to their Depository their tariff/charge structure every year latest by 30th April and changes made therein, along with the date of effect to enable the investors to have a comparative analysis of the tariff/charge structure of various DP’s. The information received by the depositories is put up on their websites.

12. Can I get the refund of AMC when I close my BO account?

Yes, when you close your demat account or shift it from one DP to another, the AMC collected upfront shall be refunded by the DP. As for example suppose annual AMC is collected by BO, the BO closes/shifts his account in the 1st quarter. In this case, he shall get a refund of the amount of balance 3 quarters i.e. 3/4th of the AMC that was collected upfront collected. Likewise, if a BO closes/shifts his account in 3rd quarters, he shall get a refund of the amount of balance 1 quarter i.e. 1/4th of the AMC collected.

13. Whether all DPs are required to refund the AMC collected upfront for the balance quarters?

No, it will not be applicable to the DPs who collect quarterly/monthly AMC.

14. How is DP consider the beginning of the year for calculating AMC?

For the calculation of the AMC, the year begin from the date of opening of the account in rest of the quarters.

15. What charges do I need to pay for account closure and securities transfer to another account?

As per SEBI guidelines, brokers shall not collect any charges on a BO, when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account/s at transferee DP and at transferor DP are identical in all respects.

In case the BO Account at transferor DP is a joint account, the BO account at transferee DP should also be a joint account in the same sequence of ownership. All other transfer of securities consequent to the closure of the account, not fulfilling the above-stated criteria, would be treated like any other transaction and charged as per the schedule of charges agreed upon between the BO and the DP.

16. Is demat account compulsory to apply for an IPO in India?

Yes, a demat account number is mandatory to apply for an IPO in India. Companies route money through stocks market by issuing shares for the first time by an IPO. Similarly, they may source the stock market for the second or third time through FPO. IPO stands for initial public offering while FPO for follow-on public offer.

While applying for IPO or FPO you always need to give your demat account information. This includes DP ID and client ID. Else, you bidding application will not be held for the share allotting.

17. Can I apply for an IPO if I do not have a demat account? 

It is not possible to apply for an IPO in case you do not have the demat account in your name. As per SEBI guidelines, it is mandatory for all public issue to be in demat form. Therefore, you first open a demat account with any of the depository participants before applying to any IPO or FPO. Also, you are personally responsible to quote correct DP-ID and client ID in any of the IPO or FPO application form.

18. What is “standing instruction” in a demat account opening form?

There is a “receipt in” form, that you need to submit along with the other depository opening form. When you buy any stock your broker needs to credit your demat account with that number of shares within the stipulated time frame. Every time you buy a new security, you need to perform this process of filling “receipt in” form. So, to make the process easier there is a “standing instruction” as well. If you tick yes for the standing instruction column in the demat account opening form then you need not have to fill this “receipt in” form every time you make a purchase.

19. Do I require a demat account for SIP?

SIP stands for the systematic investment plan. It a convenient means of creating wealth through mainly mutual funds. For this, you do not require to hold a demat account. However, if you wish to keep your purchases of units of mutual funds scheme in electronic form then you will need to have a demat account. Yes, along with shares you can also keep mutual funds schemes in your demat account.

20. I don’t need dividend payments through cheques. What do I need to do? 

For this, you need to receive dividends directly into your bank account and not through cheque. Link your demat account with your bank account and follow the following instructions to receive dividends directly into your demat account.

i.) Contact your stockbroker.

ii.) Submit the requisite form after filling it and sent an email request as well.

iii.) Attach a canceled cheque of the bank account.

Once received, your information will take at least two working days to get updated. After updating you will start receiving the dividends directly into your bank account for the shares held in that demat account.

About Author

Naresh Kumar Sharma
Naresh Kumar Sharma

Naresh is the head of Research at Raghunandan Money. When it comes to studying the markets, Naresh is someone loves decoding prices, data, trends & charts. Naresh carries an equal flair for both technical and fundamental analysis and that makes him truly one of the reliable experts in the market. Naresh writes informative articles & blogs for equity, commodity, traders and investors.

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