Who Can Open Demat Account?
When it comes to investing in stock markets, new entrants are often at a loss in as to where to begin. The process of investing in stocks is fairly simple. All you need is three things- a bank, Demat and a Trading Account. A Demat account is much like a bank for your shares, an account that holds your securities when you buy shares and on sale of securities, the stocks get debited from your account. But who can open a Demat Account? Here we tell you all about who can open a Demat Account for trading in stocks, Mutual Funds, Bonds and other commodities. You can open a Demat Account by approaching a depository participant or broker who is authorized to open a Demat Account on behalf of you as an investor.
- Resident individual
If you are a resident individual then you can apply to open a Demat Account. According to the laws, an individual is a resident if he or she stays in India in the relevant previous year for a period of 182 days or stays in India for at least 60 days in the said previous year and for at least 365 days during the 4 years that precede the year in question.
- Hindu Undivided Family (HUF)
HUF is an entity in the form of a single family unit with pooled assets that belong to the family lineage. An HUF acts as a single entity for all tax purposes. It will have its own PAN and fill out tax returns as a single entity. So HUFs can open a Demat Account for trading purposes.
A Demat account for HUF is opened in the name of the leader or the oldest male member of the family or karta who becomes the signatory authority unless otherwise mentioned for all the trading and demat account transactions.
- Domestic corporate
Another category of investors who can open a Demat Account are domestic companies. According to Section 2 (22A) of Income Tax Act 1961, a ‘domestic company’ is an Indian company or any other company that is taxed under the above mentioned Act. Such a company will declare its income and payment of dividend out of this income, within India.
- Non-resident Indians
Can NRIs open Demat Account in India? Yes, NRIs can also trade in Indian capital markets by opening a Demat Account with a DP or depository participant of their choice. They just need to specifically mention that theirs is an NRI Account to the broker or DP in their account opening form. Though NRIs do not need any special permission from regulators like Reserve Bank of India or Securities and Exchange Board of India for opening a Demat Account, they do need to open separate accounts for repatriable and non-repatriable securities.
Non-Resident Indian (NRI) is a ‘person resident outside India’ who holds Indian citizenship or is a person of Indian origin.
A person of Indian origin is a citizen of any other country except Bangladesh and Pakistan who at any point of time held an Indian passport or is a child of a parent or grandparent or is a spouse of someone who held Indian passport at any point of time.
- Clearing Member (Pool Account)
A pool account is a broker’s account where the broker holds the securities of his/ her clients. It is also the account where the broker receives the securities from the central depositories.
You can read more about how to open a Demat Account Click here.
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* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.