Often there is a state of confusion when it comes to pioneer investors on how to initiate investing in shares and much research work is needed to acquire in-depth knowledge and understanding of Demat accounts to make an investment in shares and securities to become an expert in the trading market.
What is a Demat Account?
A Demat account or dematerialized account is just like a bank account when it comes to its functioning. It keeps records of all the activities performed by an investor in the stock market and financial instruments in an electronic manner. The SEBI (Securities Exchange Board of India) in the year 1996 make it a mandate for investors to hold a Demat account to make transactions of trading and investing in the stock market of India. Hence it is impossible for any investor to invest in shares and securities without a Demat account.
How to open a Demat account?
A Demat account can be opened in a few simple steps with some key documents and sometimes it might take less than five minutes. Demat accounts can be opened both in online mode and offline mode. For offline mode, one needs to visit a regional stock broker’s office. There are three account facilities brokerage houses offer Demat, trading, and savings. Similarly, there are multiple online Demat account providers that one can opt for. Opening a Demat account is a no-hassle process. To avoid bad trading experiences and minimize risks of fraudulent customers in stock broking companies. There are some requisite documents one needs to submit to complete the Know Your Customer/KYC process.
Requisite Documents to open a Demat account are:
- Identity Proof
- Address Proof
- A copy of the PAN Card
- Bank Account with a canceled cheque
What Is A PAN Card?
PAN acronym for Permanent Account Number is a formal principal document all Indians must have in possession. The unique number on the PAN enables the Income Tax Department of India to link all the financial transactions made under the name of the PAN card. PAN Card is the unique identification for all finance-related transactions in the trade market highlights the IT Department of India.
How To Open a Demat Account Without A PAN Card?
A PAN Card is a crucial document every citizen of India should hold as it consolidates your financial transactions in one place. A critical document to open a Demat Account is a PAN Card. Anyone looking for an alternative to open a Demat Account without a PAN number should make a note that you will be unable to open a Demat Account without a PAN number. However, there are some exemptions due to some circumstances. In these exempted cases you are allowed to open a Demat account without a PAN Card with a ‘Limited Purpose Beneficiary Owner Account’. In this account, you are allowed to sell any physical securities you already have in possession.
The requisite document of having a PAN Card to open a Demat account is exempted to Indian citizens who belong to the Schedule Tribe (ST) communities of the North East region of India. Fresh investors from Arunachal Pradesh, Sikkim, Manipur, Mizoram, Nagaland, and some parts of the North Cachar hills of Assam can open a Demat account without PAN Card if they project to invest less than 50,000 insecurities. However, this modification applies only to those who are able to produce a valid ID that they belong to the ST community and also a residency proof of that place.
Apart from these, entities falling under section 22 of the 1922 Act of SEBI are exempt from opening a Demat account without a PAN card. These accounts can remain active only for a month and thereafter they are frozen if the PAN card is not present.
In India, the UN agencies and other bodies that are exempted from tax payments are not required to present a PAN number to open a Demat account
In all other situations except those that are mentioned as exceptions, it is impossible for any aspiring investor to open a Demat account without a valid PAN card. It is only through the PAN card number one can link their Demat account. Investors can then trade across all segments, become expert market analysts, and might get exciting offers on other commodities.