Demat Account Types Explained

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Demat Account Types Explained

Curious to know about types of Demat account options are available to start investing into the stock market.

Opening a Demat Account is the first essential step before venturing into investment markets. Nowadays you can opt for opening a Demat Account online easily. There are several different types of entities that can open the various types of Demat accounts based upon their customized needs. Demat accounts can be classified into different types which have distinct significance, and they all are meant to achieve specific goals. In this article, we will have a close look at these different types of Demat accounts and how they affect the investment decisions in the stock markets.

Types of Demat Account in India

Following are three major criteria based on which we can categorize the Demat account types in India:

  • Age-Based
  • Citizenship Based
  • Ownership Based

Let's take a look at each of these characteristics and categorize the various Demat accounts based on them.

Based on Age Criteria

Demat accounts can be classified into two categories based on the legal age of the investor

  • Major Demat Account (Regular)

A major Demat Account is commonly known as a Regular Demat Account. Anyone above the age of 18 years old can open a regular Demat Account. All you require to have is a valid PAN card. The investors opening a regular Demat Account have access to all of the features that a typical Demat account offers.

One of the most significant advantages of having a regular Demat Account is that it provides an ease to all of its users. Additional fees such as market stamps and limits on selling shares have also been eliminated, allowing investors to keep their hard-earned cash.

  • Minor Demat Account

A minor Demat account is one that can be opened by someone under the age of 18, hence the term minor is used. There is no such thing as an age limit for a Demat account. To open a minor Demat account, the person must provide valid identification proof and provide proper identity verification of his/her parent or the legal guardian.

In comparison to a conventional Demat Account, the features of a minor Demat account are limited. A minor Demat account, for example, can be used for trading solely in Delivery Trading under the supervision of a parent or guardian. As a result, no intraday trading is permitted on a Minor Demat account.

  • Based on Citizenship Criteria

The citizenship of applicants is another factor for categorizing Demat account kinds. In India, there are two types of Demat accounts that can be opened based on different types of citizenships -

  • Repatriable Demat Account

A special Demat account, known as the Repatriable Demat Account, is available for Non-Resident Indians (NRIs) to trade. Because a standard Demat account is exclusively open to Indian citizens and residents, this Demat account is beneficial to NRIs.

NRIs can also transfer their wealth abroad via a Repatriable Demat account, but only up to a yearly limit. So, when you sell shares housed in your Demat account, you can receive funds in your Non-Resident External (NRE) savings account, with a maximum yearly limit.

  • Non-Repatriable Demat account

A non-Repatriable Demat account, in contrast to a Repatriable Demat account, does not allow NRIs to transfer funds into a foreign country. Since the word "Repatriable" means "to send back home," the term non-Repatriable is self-evident in terms of its utility.

You must link your NRO bank account to this Demat Account. This is one of the main reasons why money can't be transferred out of these accounts.

  • Based on Ownership Criteria

The concept of ownership as a means of categorizing Demat accounts is rather simple. There are only two types of Demat accounts that meet these requirements. These are the following

  • Demat Accounts for Individuals

An Individual Demat Account is a typical Demat account that is used for day-to-day stock market trading by the individual traders/investors and is registered using the individual's PAN card.

This does not imply that a single person can’t have shared ownership rights to this Demat Account. A Demat Account holder can add two extra joint account holders. Overall, three people can access an Individual Demat account: One Primary and Two Joint Holders.

  • Demat Account for Non-Individuals

The possibility of creating a Demat Account as various entities other than individuals is available to Indian investors and traders. It's worth noting that the types of documentation needed to open a Non-Individual Demat Account will vary depending on how the account will be used. They are as follows:

  • Corporate Demat Account

To open a Corporate Demat for a firm, one must provide vital documents such as a copy of a corporate firm's PAN card as well as the PAN cards of all involved partners.

  • HUF Demat Account

The acronym HUF stands for Hindu Undivided Family. You can save money on taxes by forming a family unit and pooling assets to form a HUF. The members of the HUF are taxed separately. A HUF Account is created when a Hindu family works together financially as a single entity. Buddhists, Jains, and Sikhs can all form HUFs. HUFs have their own tax identification number (PAN) and file separate tax returns from their members.

CONCLUSION

Nowadays investors are preferring a smooth and easy Demat account opening online process. In the context of their respective utilities, one can open various types of Demat accounts online. The major types of Demat Accounts include Regular Demat Accounts, Repatriable Demat Accounts, and Non-Repatriable Demat Accounts.

In addition to understanding what a Demat account is, investors should be aware of their needs and expectations. To determine which NRI Demat account, an experienced broker like Choice India is suitable for them. NRIs must evaluate their long-term investment goals and choose to open a single or several Demat accounts. The vast majority of NRIs own Demat accounts that are both repatriable and non-repatriable in nature. With all types of Demat accounts, the nomination is possible.

You can easily select a Demat Account Suitable for your needs based on your age, nationality, and type of ownership. By selecting the desired and accurate type of Demat Account you can increase the chances of gainful investments.