A Demat account is a type of digital account that can safely store securities in an electronic format. The securities may include equity shares, debentures, bonds, and mutual fund units. Currently, there are four different types of Demat accounts that you can open with a Depository Participant (DP) in India.
If you’re planning to invest in the Indian stock market, you must be aware of the various types of Demat accounts. In this article, we take a closer look at the different types of demat accounts available.
The types of Demat accounts
The four types of Demat accounts you can currently open in India are regular demat accounts, Basic Service Demat Accounts (BSDA), repatriable demat accounts, and non-repatriable demat accounts. Check out the details of these four types offered by depositories through DPs.
- Regular Demat account
Regular Demat accounts are the type of accounts that depositories like the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) offer by default. They are meant for investors who reside in India.
With a regular Demat account, there is no limit to the number or value of securities you can hold. To hold a regular Demat account in your name and keep it active, you are liable to pay an Annual Maintenance Charge (AMC) ranging from Rs. 500 to Rs. 999 every year to your Depository Participant.
- Basic service Demat account (BSDA)
As the name implies, a Basic Service Demat Account (BSDA) is a more basic version of the regular Demat account. It is also meant for investors who reside in India. It is advisable to open a BSDA if you don’t invest or trade frequently and if the total value of your Demat account holdings is unlikely to cross Rs. 2 lakhs.
One of the major advantages of the Basic Service Demat Account is its low Annual Maintenance Charge (AMC). Depository Participants don’t levy any AMC on BSDA accounts if the total value of holdings is Rs. 50,000 or lower. However, if the value of your holdings is between Rs. 50,001 and Rs. 2 lakhs, you will be liable to pay a nominal AMC of just Rs. 100 per year.
That said, there’s also a limitation of BSDA accounts that you need to be aware of. You cannot have more than one BSDA linked to your PAN.
- Repatriable Demat account
Meant for Non-Resident Indian (NRI) investors, a repatriable Demat account can be opened only if you have a Non-Resident External (NRE) bank account. With this type of Demat account, you can transfer the proceeds from the sale of securities to your country of residence (outside India). Due to this benefit, the repatriable account is one of the most popular types of Demat accounts among NRI investors. However, it is important to note that you can repatriate only up to $1 million per year.
- Non-repatriable Demat account
Also meant for NRI investors, a non-repatriable Demat account requires a Non-Resident Ordinary (NRO) bank account. The proceeds from the sale of securities held in your non-repatriable Demat account cannot be transferred to your country of residence (outside India). However, you’re free to transfer the funds to other domestic bank accounts held with Indian banks.
Is a Demat account mandatory?
Yes. According to the regulations of the Securities and Exchange Board of India (SEBI), a Demat account is one of the mandatory prerequisites for trading or investing in the Indian stock market. Without the account, you cannot purchase or sell equity shares or other securities electronically on the stock exchange. However, if you plan to invest in mutual funds, having a Demat account is not mandatory. Instead, you can hold your mutual fund units in the physical format.
A Demat account is important if you wish to invest in the stock market. Although you don’t need one to invest in mutual funds, opening a Demat account before you start investing in them is always advisable. This way, purchasing and redeeming mutual fund units becomes easier and hassle-free.
If you’re an Indian resident, you can open a regular demat or a BSDA account, depending on your trading volume. On the other hand, if you’re an NRI, you can either open a repatriable or a non-repatriable demat account, depending on whether or not you wish to repatriate your Indian investments back to your country of residence.