Did you know that by 2023, only 8% of the Indian population had invested in mutual funds?
Compared to other developed countries, the number is staggeringly low. Much of the reluctance towards investing in mutual funds , equity, and other assets stems from the lack of awareness. Besides the perks of such investments, Indians are also widely unaware of how to go about them.
If you are to invest in mutual funds, bonds, or equity, one of the first things to do is set up a Demat account. It is essentially a specialised account that stores your material securities in a digital form and allows you to perform your transactions electronically.
While opening a Demat account isn’t too hard, beginners might find the process a little overwhelming. This blog is a comprehensive guide on the documents required for a Demat account. Read on for a better understanding of the requirements to open a Demat account and prepare the necessary documents accordingly.
Unsurprisingly, proof of identity is one of the basic criteria for opening a Demat account . The following documents for Demat account can be used to prove your identity.
Permanent Account Number (PAN) Card
PAN cards are issued by the Income Tax Department of India and carry a unique 10-digit unique alphanumeric code. Among the Demat account opening documents, your PAN is a mandatory proof of identity, with a few exceptions.
A Valid Aadhaar Card
Issued by the Unique Identification Authority of India (UIDAI), the Aadhaar card carries a 12-digit unique identification number. Its very purpose is to serve as a proof of identity.
Voter Identification Card
Issued to Indian citizens aged 18 years and older by the Election Commission of India, the Voter ID card is yet another popularly accepted document for identification. While its primary purpose is to serve as identity proof while casting votes, it has also found other purposes, such as being one of the acceptable documents for Demat account opening.
Valid Driving Licence
A driving licence is a legal permit authorising the holder to drive specific types of vehicles. However, the nature of the information it carries, including a photo ID of the licence holder, also makes it a valid proof of identity.
Passport
Yet another official document issued by the Government, a passport entitles you to travel to and from other countries under its protection. It also certifies your identity and citizenship and has thus become a credible identity proof.
Alternatively, you may also use other identification cards issued by the following bodies as Demat account opening documents:
1. The Government of India
2. State Governments
3. Statutory Bodies
4. Scheduled Commercial Banks and Non-Banking Financial Organisations (NBFCs)
5. Public Sector Undertakings (PSUs)
6. Universities
7. Professional Organisations
Besides your identity, you’re also required to present acceptable proof of your address among the documents required for Demat account. Here’s a list of valid documents you may use for the purpose:
Aadhaar Card
As a document issued by the government specifically for unique identification, your Aadhaar Card qualifies as proof of residence.
Voter Identity Card
This is one of the various additional purposes of your voter ID card mentioned earlier – you may use it as proof of residence alongside identity.
Driving Licence
The information on your driving licence includes your address. Since you’re already required to produce a valid proof of address when applying for a driving licence, you may also use it as one.
Passport
Like your driving licence, your passport carries your address too and requires you to produce an address proof at the time of application. This makes it a valid document to use as proof of residence.
Ration Card
State governments in India issue ration cards to households eligible to purchase food grains at subsidised prices from the public distribution system. However, you may also use it as address proof as well.
Alternatively, you could also use one of the following documents in case the above aren’t available:
1. Your Passbook or Bank Statement for the Last three Months
2. Your Spouse’s Address Proof (if applicable)
3. Documents issued by central or state governments, PSUs, scheduled commercial banks and NBFCs, Universities, and Statutory Authorities
4. An insurance policy is issued in your name, but only if it contains your address.
5. Electricity, landline, or gas bills for a period no earlier than the last three months.
6. Judges of the Honourable Supreme Court and High Courts may self-declare their addresses.
As you can see, several documents double as both proof of identity and residential address. In case you’re using an Aadhaar Card, Voter ID Card, Driving License, or Passport as ID proof, there’s no need for a separate document as proof of residence.
Lastly, the documents required for a Demat account also include proof of income. Here’s a list of documents that would serve the purpose:
A Copy of Your Income Tax Return (ITR) Form
Individuals are required to submit an Income Tax Return (ITR) form to the Income Tax Department of India, declaring their income and taxes payable during a fiscal year.
A Net Worth Certificate
Certified by a chartered accountant, a net worth certificate details an individual or organisation’s financial position and outlines all their liabilities and assets.
Bank Account Statement
You may also submit a current bank account statement that comprises the history of your income over the last six months before the date of application.
Demat Account Statement
A Demat account holding statement from an authorised depository participant detailing all the information regarding your Demat holdings.
Other acceptable documents required for the Demat account that you may use as proof of income include:
- Recent salary slips
- A Copy of a statement of audited annual accounts issued by a Chartered Accountant
- Form 16
You may also self-declare any assets you own, provided that the declaration is supported by relevant documents.
While producing your PAN card is usually mandatory among the documents required for a Demat account, here are a few exemptions
- Those residing in Sikkim
- UN entities that are exempt from filing taxes in India
- Transactions conducted for officials appointed by the court
- Transactions conducted for the Central or state governments
- Multilateral agencies that have been exempted from having to file taxes in India
