Understanding the meaning and Demat account full form now let’s know about the different Demat account types? Based upon certain criteria, Demat accounts can be distributed into various types.
Each of these types has an associated significance and these types also aim at fulfilling certain objectives.
But what are these Demat account types and how are they relevant to the stock market world? Read ahead and find out.
Types Of Demat Account In India
In India, Demat account types can be categorized under these three main criteria:
- Citizenship Based
- Ownership Based
Now let’s check out each of these criteria and enumerate the various Demat account accordingly.
On the basis of “age”, Demat accounts can be divided into two types:
Major Demat Account (Regular):
A major Demat Account is a regular Demat account that an individual can access if they are above the age of 18 years. They get access to all the functionalities that a regular Demat account has to offer.
A minor Demat account is such an account that can be opened by an individual under the age of 18 years, hence the word minor. There is no age limit for demat account per say. To open a minor Demat account, the individual will have to prove their age and must also attach valid identity proof of parents or legal guardians.
The functionalities in a minor Demat account are minimal compared to a regular Demat account. For example, a minor Demat account can be used for trading under the supervision of a parent or guardian but only in Delivery Trading. So, no intraday trading is permissible through a Minor Demat account.
Another criterion for categorizing Demat account types is the Citizenship of applicants. We have two such types of Demat account in India:
Repatriable Demat account
For the Non-Resident Indians (NRIs) to trade, a special Demat account has been formed, known as the Repatriable Demat Account. Since a regular Demat account is only available for use to an Indian citizen/resident, hence for NRIs this type of Demat account comes in handy.
With a Repatriable Demat account, NRIs can transfer their wealth abroad too however with a constraint of a maximum of 1 Million USD per year. So effectively, you can receive funds in your Non-Resident External (NRE) savings account when you sell shares held in your Demat account, with the upper limit as 1 Million USD per year.
Non-Repatriable Demat account
Quite opposite to the Repatriable Demat account, a non-Repatriable Demat account will not allow NRIs the transfer of funds into a foreign land. Since the word “Repatriable” stands for “sending back home”, hence the phrase non-Repatriable is pretty self-evident of its functionality.
In this demat account, you have to link your NRO bank account. This serves as the major reason why the transfer of funds is prohibited in such accounts.
The concept of ownership as a mode of classification Demat accounts is pretty straightforward. Under these criteria, there are just two Demat account types. These are:
Individual Demat Account
An Individual Demat Account is a regular Demat account registered using the said Individual’s PAN card and is used for everyday stock market trading.
However, this doesn’t mean that only one single individual will get all the ownership rights of a regular Demat Account. On the contrary, a Demat Account holder can add two more joint account holders. So all in all, an Individual Demat account can be accessed by three holders: one primary and two joint holders.
Non-Individual or Corporate Demat Account
Investors and Traders in India have been provided with the option of opening a Demat Account as a Corporate Entity. Such a Demat account is known as a Non-Individual or Corporate Demat account.
To open such an account one needs to furnish important documents like the PAN card copy of a corporate firm as well as of all the associated partners. Note, that the types of documents required to open a Non-Individual Demat Account will also depend on the type of usage of such an account.
Here’s a list of different Non-Individual Demat account types:
|Types Of Non-Individual/Corporate Demat Account|
|Limited Liability Partnership(LLP)|
|HUF Demat Account|
|Foreign Portfolio Investor (FPI)|
The various Demat account types can be understood only in the context of their specific utilities. And for a regular trader, to be bothered about various types of Demat Account is not too necessary.
Therefore, for regular trader a regular Choice Demat Account is more than enough. Don’t stop, just open one today.