Opening and managing a Demat account has become more convenient with the widespread availability of mobile trading applications. The Demat account opening process by a depository participant is very easy and similar to the opening of a bank account.
A dematerialized account is an electronic safe for the financial securities of an investor. This type of account dematerializes the financial securities of the investor and holds them in electronic form. This account helps investors store and manage their financial securities with ease and accessibility.
The eligibility criteria for opening a demat account in India are flexible. For example, there is no minimum age requirement for investors interested in trading and opening a demat account. Parents or legal guardians can open a Demat account for their minors.
The requirement to trade in the Indian stock market necessitates having a demat account. An individual demat account is held by one person, while a joint demat account can be opened by one or several members.
In this article, we shall discuss what is a joint demat account; advantages, and opening one in greater detail.
What is a joint demat account?
A joint demat account is a shared investing account in which all the account holders have equal rights and liabilities concerning the securities contained within their account. This can include equities, bonds, and mutual funds, among others.
Joint demat accounts are generally opened by spouses, family members, or business partners who look to combine their investments for collaborative management.
Several specific regulations govern joint demat accounts compared to individual demat accounts.
Firstly, a joint demat account can accommodate a maximum of three account holders, with one designated as the primary holder and the others as secondary holders. Additionally, all account holders must be at least 18 years old, and once a demat account is opened, the names of the account holders cannot be altered.
The account holders bore the AMC of a joint Demat account. The personal details and respective documentation for every account holder are to be mandatorily provided before setting up an account.
The main account holder bears the tax liability generated by the profit from any transactions executed using the joint demat account.
In case an account holder dies, the ownership automatically goes to the surviving account holder(s). This mechanism helps in maintaining continuity and smoothly operating investments through the joint demat account.
How to open a joint demat account
Step 1: Apply with a depository participant
The first step in opening a demat account is to choose a reliable and reputed DP. Just like selecting the right bank account is important for smooth banking transactions, selecting the right depository participant is equally important for your demat account.
A depository participant acts as an intermediary between the investors and the depository. They are responsible for managing the accounts and handling all the transactions. In India, scheduled commercial banks, registered financial institutions and stock brokers offer DP services.
Step 2: Submit KYC documents
Submit all the necessary KYC documents, including the Aadhar card and PAN card, to the depository participant. It is to be noted that every account holder needs to submit his respective KYC documents for verification purposes.
Step 3: In-person verification
In a joint demat account, in-person verification is essential for all the account holders. In-person verification is aimed at confirming that all details of the account holders agree with the data they supplied to the DP.
Step 4: Activation of accounts
When all the previous steps have been completed successfully, your demat joint account will be activated, and ready to be used for trading.
Step 5: Trading can now begin
Once you get your account details, you can start trading securities without any further delay.
Advantages of a joint demat account
Shared Ownership: A joint demat account allows multiple individuals to share ownership of securities held within the account, fostering collaborative investment decisions.
Convenience: Joint account holders can collectively manage and monitor their investments, streamlining the decision-making process and reducing the administrative burden.
Estate Planning: In case one of the account holders dies, the account automatically transfers to the surviving account holder(s), which makes estate planning and asset distribution easier.
Cost Efficiency: Joint demat accounts might be cost-effective compared to an individual account because the cost of maintaining the account along with other charges can be divided among multiple account holders.
Access to Diverse Investments: Joint account holders can pool their resources to access a wider range of investment opportunities, diversifying their portfolio and potentially enhancing returns.
