First-time investors are often in a state of confusion when it comes to where to begin investing in shares. Much homework is needed, from gaining an in-depth understanding of Demat accounts to investing in shares and securities and transitioning from a newbie to an expert in the trading market. And in the process, struggling to find the answers to many questions is an obvious situation for most first-time investors.
Case in point: what are the documents needed to open a Demat account, or whether we can open a Demat account without a PAN card? But, before we answer this question, let us begin with understanding what a Demat account means and what other fundamental information about a Demat account you must know.
What Is a Demat Account?
In 1996, the Securities and Exchange Board of India (SEBI) made it mandatory for investors to make a Demat account to invest and trade in the Indian stock market.
Thus, it is not possible for anyone to now invest in shares and securities without having a Demat account. So, if opening a Demat account is necessary to embark on the journey of trading, then the next question that may circle your mind is how to open one. Let us know how in the next section.
How to Open a Demat Account?
Opening a Demat account is easy and sometimes takes less than five minutes. One can open a Demat account online or offline by visiting a local stockbroker's office. Many brokerage houses allow three account facilities: Demat, trading, and savings.
Similarly, there are many online Demat account providers that one can option. See the list of popular online Demat account platforms here. Some of them are Upstox, ICICI Demat account, HDFC securities Demat account, Groww, Angel Broking, Zerodha, Axis bank Demat account, etc.
Documents Required for Opening a Demat Account
Opening a Demat account is a hassle-free experience. However, to reduce the risk of fraudulent customers and bad trading experiences in the future, broking firms usually require various documents and complete the Know Your Customer/KYC process. Here is the list of the documents you will need to submit to open a Demat account:
• Proof of Identity
• Proof of address
• A copy of the PAN card
Can We Open a Demat Account Without a PAN Card?
Opening a Demat account without a PAN card is not possible because the PAN card is recognized as the Official Valid List (OVD) of documents as per the official SEBI norms. SEBI has mandated that the PAN card be produced for account opening as an official document. The investors need to produce the original PAN card and have at least submit a self-attested copy of their PAN card.
If the single Demat account has joint holders, each investor holding the joint Demat account must also submit their PAN card. In others, a PAN card is a must for opening a Demat and trading account, and one cannot open a Demat account without a PAN card.
What Is a PAN Card?
PAN in the PAN Card is an acronym for Permanent Account Number, an officially important document that all Indian citizens must possess. A PAN card number lets the Indian Income tax department link all the financial transactions made under the name on the PAN card. As the Indian IT department highlights, the PAN card is the sole identification for all finance-related transactions in the securities and trading market.
According to government laws, a person can only possess an e-PAN card under their name. Moreover, regardless of the city or country where one currently lives, the PAN card number is not subject to change.
Can I Open a Demat Account Without a PAN Card?
Before being mandated by SEBI, there was a provision to make mutual funds investments up to the capacity of INR 50,000 without a PAN card number. However, the recent SEBI revisions do not allow investing in shares, stocks, and securities without a PAN card. This revision also applies to investments made before these revisions came into existence.
Thus, a PAN card is a prerequisite for Indian citizens and NRIs to enter the market of financial investments. However, the good news is that there is a small catch.
The prerequisite of having a PAN card is relaxed for Indian citizens who belong to scheduled tribes (STs) of North East India. New investors from Arunachal Pradesh, Manipur, Sikkim, Mizoram, Nagaland, and some Assam can open Demat accounts without this prerequisite. They are permitted to invest up to INR 50,000 in shares and securities.
However, this relaxation only applies to those who produce valid identification proof that is the official evidence that they belong to STs and are residents of one of these places. One can open as many Demat accounts against one card, and there is no particular limitation on the number of Demat accounts one can open. Keep in mind, however, that all these Demat accounts must be linked to the same PAN card.
Opening a Demat account without a PAN card is impossible, and one must submit a valid PAN card number against which they can link their Demat account. Investors can get exciting offers, such as trading across all segments, expert market analysis, and other unbeatable prices.