How Many Demat Accounts One Can Have?
Demat account is very essential for every person who wants to trade in the financial stock market. Some traders get confused between a trading account and a demat account. Both the accounts are required to successfully accomplish a trade. While a trading account aids you to buy and sell shares in the market, the demat account holds these shares in the digital mode as long as the trader wants to keep them. All types of trades are executed using the trading account, and the delivery of the shares or underlying securities is witnessed in the demat account.
If you are a trading enthusiast, you must have a demat account for yourself. You can open one with TradeSmart here. All the demat accounts are regulated by two major depositories in India, namely, National Securities Depository Ltd (NSDL) and Central Depository Services India Ltd (CDSL). Demat account mimics the characteristics of a bank account. The moment you purchase a share by using your trading account, your demat account gets credited, and vice-versa. You can open both accounts at the same depository or a stockbroker. A lot of traders wonder whether they can open more than one demat account or not. So, let’s dive into the specifics.
Can A Person Have More Than One Demat Account?
In India, a trader is allowed to have more than one demat account but should open with multiple stock brokers. Also, opening more than one demat account is not illegitimate in India. You can open as many demat accounts as you want. There are no limitations for holding multiple demat accounts by you. However, you have to link your PAN account number to every new demat account you open with a different stockbroker. One thing you must note is that you cannot open more than one account with the same depository or a stockbroker. Now, if you are planning to open multiple demat accounts, there are certain things you must keep in mind.
Key Things To Remember
- You cannot open multiple trading and demat accounts with one depository participant or a stockbroker. But you can open as many trading and demat accounts with different stockbrokers or depository participants.
- When you open a demat account, all your traded shares are held with these two regulators – CDSL or NSDL. All the depository participants register themselves with these regulatory authorities. Moreover, both CSDL and NSDL are registered with the Securities and Exchange Board of India (SEBI) as well.
- Having multiple demat accounts with different depository participants gives traders a leeway to expand and diversify their portfolios.
- You have to pay an annual maintenance charge (AMC) for every demat account you open with a depository participant or a stockbroker. The fee ranges from Rs 300 to Rs 1000 annually.
- If you open multiple demat accounts with different depository participants, you have to be active on these platforms. Or else, the account gets frozen or dormant by the brokers if unused for a very long period.
- You can link one demat account with different trading accounts. Stockbrokers prefer you to have both trading and demat accounts with them for smooth processing of trades. Otherwise, the mapping and trading would become hectic and cumbersome on the part of traders to execute as and when they want.
- If your demat account gets frozen by the depository participant, you cannot use it until you get your KYC official procedures done with them.
- By opening multiple demat accounts with multiple brokers, you’ll get access to various research reports, suggestions, and advice from each of them. Although the services they offer differ from each other, you can enjoy the experience of trading on multiple platforms at once, and eventually, score your luck.
- If you have more than two demat accounts, go for integrating them. Not only does it save you from the hassle you endure every time by checking different demat accounts, but it also manages everything orderly by saving you from paying extra costs like stamp duty and capital gain tax. The first demat account can be used for daily trading activities. And the second demat account can be used for the investment portfolio. You can transfer all the shares from one demat to another by using the Delivery Instruction Slip (DIS).
- If you have multiple demat accounts, it’s important to keep an eye on your transactions and balances regularly to avoid any future problems.
How To Open A Demat Account?
If you are an investor who wants to trade, you should have a trading account and a demat account. So, here are the steps on how to open a new demat account.
- First, you need to find a valid depository participant. You’ll find all the lists of legit depository participants on CDSL and NSDL web portals.
- After finalizing the depository participant, connect with them directly, and fill up all the necessary details in the demat account opening application form. You can do this either offline by approaching the depository participant office, or can go online, at your convenience.
- Once you finish filling the form, duly submit/attach your self-attested documents like PAN card, identity proof, and address proof to the demat account opening form.
- The depository participant cross-checks all the enclosed documents followed by your demat account opening form. If everything is fine, the DP opens your new demat account.
- As and when the new demat account is opened, the owner of the respective account is given a Beneficial Owner Identification Number or BOID. The Demat account has a 16-digit numeric code for CDSL, and a 14-digit numeric code for NSDL.
Pros Of Multiple Demat Accounts
- Have Access To Multiple Reports: Traders opening/having multiple demat accounts have the advantage to various research reports from different brokers/depository participants. Not only you’ll enjoy getting services from various brokers, but also having access to multiple reports in hand serves you the purpose of seamless trading.
- Useful For Research and Analysis: Although each broker/depository participant delivers their share of services in different ways, the research reports and background analysis shared by each of them offer an inimitable view on buying and selling shares. It helps traders to make informed decisions rather than single biased judgment while trading.
- Building Your Portfolio: Having different demat accounts facilitates traders to have multiple profiles followed by multiple portfolios. It helps traders to maintain trading portfolio accounts and investment portfolio accounts individually. Additionally, it helps traders to enhance reputation in the market in case they wish to use it as collateral. Also, your chances of getting a lot in IPOs are better when you apply for them with different demat accounts.
- Segregate long term and short term investments: For demat accounts with low transaction fees, you can use them for short term trades like intraday and F&O trades and those with low account maintenance fees can be used for long term trades since you will transact less.
Cons Of Multiple Demat Accounts
- Additional Charges: If you open multiple demat accounts, you have invited yourself to pay extra charges for maintaining those accounts. It’s called annual maintenance charges (AMC). Woefully, these extra charges would hamper your overall gains in trading.
- Account Gets Freezed: Although having multiple demat accounts gives you an upper hand in trading, your inactiveness in any one of your demat accounts would lead to account freezing. Meaning, the broker/depository participant freezes your demat account if it’s not running actively for a long time.
- Tedious Task in Hand: If having multiple demat accounts is one thing, then monitoring all the trades done via each demat account is another. Initially, it looks exciting for traders to see multiple demat accounts running successfully, but later, the process to keep a track of all the trades and financial changes becomes cumbersome.
Things to Keep in Mind While Opening Multiple Demat Accounts
- There is nothing that legally stops a person from having more than one Demat account, just like he can have more than one bank account or more than one trading account.
- With every new Demat account, there will be a charge
- A client cannot open more than one account with the same Depository Participant.
- Generally, a client likes to keep their trading and investing accounts separate, which makes them easier to monitor.
- One will need to keep the accounts active in order to prevent the Depository Participant from declaring the account as dormant. Re-opening a dormant is at times a cumbersome process.
- More than one Demat account can be mapped with the broker however, these Demat accounts cannot be opened with the same broker or Depository Participants.
- There is a cost involved in opening an account and maintaining it.
- At the time of filing of taxes, all accounts will have to be disclosed to tax authorities.
Demat accounts are an integral part of investing, just like a bank account and a trading account. Opening multiple accounts is not a necessity, but those who trade and invest frequently keep multiple accounts. This helps them to track their performance and maintain an arm’s length distance between the two strategies.
The main issue with having more than one Demat account is that they will need to be active, a dormant account is generally frozen by the Depository Participant and may require some paperwork to reopen it. Tracking multiple Demat accounts may also be cumbersome to a new participant in the market and can occasionally lead to confusion.
Frequently Asked Questions
The share certification of a company is now stored in an electronic format after going through a process called dematerialisation. These shares are stored in what is known as a Demat account. Just like a bank account where money is stored, a Demat account stores financial assets like shares. Each investor has his personalized Demat account.
There is nothing that stops one from having more than one Demat account. The only condition is that they cannot be at the same broker or depository participant.
Opening multiple accounts is not a necessity, but those who trade and invest frequently keep multiple accounts. This helps them to track their performance and maintain an arm’s length distance between the two strategies.
The main issue with having more than one Demat account is that they will need to be active, a dormant account is generally frozen by the Depository Participant. Tracking multiple Demat accounts may also be cumbersome to a new participant in the market and can occasionally lead to confusion.
If a trader doesn't have a demat account, he/she is not eligible to participate in the IPO. Because all the allocated shares will be transferred to the trader’s demat account. So, it’s pivotal to provide the correct details of your demat account.
If your PAN name doesn’t match your demat account, kindly approach your depository to get it corrected as per your PAN card. As and when the correction gets finished, you can submit a re-validation request to your depository to witness the new changes.