Difference between Demat and trading Account is that a Demat Account holds the shares and securities (Bonds, ETFs, Mutual Fund units, etc.) in digital mode, while a Trading Account provides the interface to buy and sell shares in the stock market. Despite the different roles they play, Demat and Trading Account work together to make online trading possible.
The functionality of a Demat Vs a Trading Account
Today, shares are traded in digital mode, that is when you buy a share, you do not have to worry about safekeeping physical share certificates. The shares can be stored and transferred in digital mode with a Demat Account. Similarly, you do not have to be physically available on the trading floor to place your buy or sell order, this can be done through a trading account which can be accessed on mobile or laptop.
The nature of the two accounts
At any point of time, your Demat Account will show the shares and securities that you are currently holding. A Trading account will show you the transactions that you carried out in the stock market.
The role of the two accounts
There are two parts to the trading process. First, you need an interface to buy and sell shares from the stock market, and next, you need to have a storage space to keep those shares.
Demat Account is only a repository. It helps you take the delivery of shares when trading in equity delivery or when you apply for an IPO and get the allotment of shares. It does not help you transact in the stock exchange. For that, you need a Trading Account.
Trading Account is linked with your bank account. You can add money from your bank account to your Trading Account and vice versa. You can trade in Futures and options if you only have a trading account, since it does not involve taking delivery of shares.
Both Demat and trading account perform different functions in the online trading process. Nonetheless, they are closely integrated they make the entire trading process swift and convenient.
Additional Read: What is Demat Account
Can I have a Demat account without a Trading account?
You can open a Demat Account without a Trading Account. Sometimes an investor just want to hold the shares over long term without the intention to sell it in near term, they can open a Demat Account and store the shares. Also, while applying for IPO, a Demat Account is a necessity to take the delivery of shares on allotment, a trading account is not compulsory to apply for IPO.
Can I have a Trading account without a Demat account?
You can have a Trading Account without a Demat Account. With just a trading account, you will be able to trade in Futures and Options, which do not require you to take delivery of shares.
Charges for Demat and Trading accounts
Demat and Trading Account brings the convenience of share trading right at your fingertips. There is a backbone of technology and other resources responsible for maintaining the services and provide necessary support. Consequently, some charges are levied for availing the services of Demat and Trading Account. The key charges associated are:
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Demat Annual Maintenance Charge (Demat AMC): It is a recurring cost associated with Demat Account to be paid annually. It is the cost for maintain your Demat Account.
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Demat/Remat Charges: The charges levied on converting a share in physical form to digital mode (Dematerialization) and for converting shares in digital mode to physical certificate (Rematerialization)
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Off market Transfer: Charges for transfer of shares from one demat account to the other without involving stock exchange. This can be done for gifting shares to a family member or transferring shares from one Demat Account to the other.
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Brokerage charges: The charges levied by stockbroker for the services offered and is levied on the transactions you do in the share market. It can be a percent of the transacted value (charged by full-service broker) or a flat fee per order, independent of the transaction value (charged by discount broker).
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Demat and Trading Account opening charge: it is the fee for opening a Demat and Trading Account. Some stockbrokers provide the option to open free account. However, Demat AMC will be applicable. For example, you can open a free* Demat & Trading Account with Bajaj Financial Securities through its Freedom Pack subscription plan, where Demat AMC is Rs.0 in 1st year and Rs.365+GST from 2nd year onwards.
Additional Read: How to Start Trading Online
Open Demat and Trading Account
You will need both Demat and Trading Account to invest and trade in the stock market. Bajaj Financial Securities Limited provides a quick and paperless way to open your Demat and Trading Account online in less than 15 minutes. You have an option to open Demat and Trading Account online for free* and start trading in share market with savings on brokerage up to 99%**. Follow the below steps to open an account:
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Visit the online account opening form
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Fill your basic details, such as Name, Phone Number, PAN number, etc.
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Upload your documents – Photograph, PAN Card, Signature, Proof of address, Cancelled cheque
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Perform an In-Person Verification (IPV) – To confirm your identity
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E-sign the documents online through Aadhar linked mobile number
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Review and submit your application
That’s it! Once your account is activated you will receive the login details and details of your Demat and Trading Account. Without leaving the comfort of your home, you can get your own Demat and Trading Account and start investing in share market.
*Account opening is free for Freedom Pack, with zero Annual Maintenance Charge (AMC) for 1st year & Rs. 365+GST from the 2nd year.
**99% savings calculated as brokerage of ₹10 (approx) charged in BFSL vs brokerage of ₹1000 calcuated at 0.10% on 5 buy & sell orders each of a volume of 2 lakh.
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