Who Can Open Demat Account?

When investing in stock markets, new entrants are often at a loss as to where to begin. The process of investing in stocks is fairly simple. All you need is a bank, a 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 the sale of securities, the stocks get debited from your account. But who can open a Demat Account? Let's find out.

1. Resident individual

You can apply for a Demat Account if you are a resident. According to the laws, an individual is a resident if he or she stays in India in the relevant previous year for 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.

2. 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. A 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.

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.

3. Domestic corporate 

According to Section 2 (22A) of the Income Tax Act 1961, a 'domestic company' is an Indian company or any other company taxed under the abovementioned Act. Such a company will declare its income and payment of dividends out of this income, within India.

4. Non-resident Indians 

An NRI is an Indian citizen or a Person of Indian Origin (PIO) living outside India. A person of Indian origin is someone from any country except Bangladesh and Pakistan who has held an Indian passport or is a child or spouse of someone who has.

Many wonder, can NRIs open a Demat Account in India? The answer is yes. They can trade in Indian capital markets by opening a Demat Account with a DP or depository participant.

They need to specify that they are opening an NRI Account on the broker or DP's account opening form. While NRIs do not require special permission from regulators like the Reserve Bank of India or the Securities and Exchange Board of India to open a Demat Account, they must set up separate accounts for repatriable and non-repatriable securities.

5. 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.

Opening a Demat Account is accessible to various individuals and entities, including resident individuals, HUFs, domestic corporates, and NRIs. Each category has specific requirements, such as providing proof of residency or setting up separate accounts for repatriable and non-repatriable securities for NRIs.

To open a Demat Account, you need to approach a depository participant or broker authorised to open a Demat Account on your behalf as an investor.

You can read more about how to open a Demat Account here.

Looking to open a Demat Account? Click here to get started!

* 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.