Over the past few decades, the options available for investors have drastically evolved. Gone are the days when post office deposits and bank deposits were the only feasible investment options. Market-linked investment instruments have been steadily gaining popularity, owed largely to the streamlining of the investing process through electronic and demat trading and the robust performance of the Indian securities market.
It is easy to participate in the country’s securities market. Should you wish to invest in the market, one of the prerequisites is to open a demat account and a trading account.
In this article, we shall delve into the process of opening a demat account and the documents required for it. We shall particularly explore whether it is possible to open a demat account without a valid Permanent Account Number (PAN) card.
Process To Open A Demat Account
A Demat account is a digital account designed to store market-linked instruments in a dematerialized form. When you purchase, say, shares through a trading account, they are stored in the linked demat account after the transaction is settled.
You can open a demat account online in two ways – by either directly choosing a depository participant (DP) and visiting their official website to open the account or by selecting a DP from the website of the National Securities Depository Limited or the Central Depository Services Limited.
In order to open a demat account, you shall require
- A valid PAN card
- A valid proof of identity
- A valid proof of address
- Latest passport-size photographs
What Is A PAN card?
A PAN card is a document bearing your Permanent Account Number (PAN) issued by the Department of Income Tax, Government of India. Your PAN serves as an integral part of your financial identity and must be quoted for various financial transactions, including opening a demat account.
Individuals & Entities That Can Open A Demat Account Without A PAN Card
According to the Securities and Exchange Board of India (SEBI) regulations, one must furnish one’s PAN to open a demat account and subsequently engage in any transactions in the securities market. This requirement is essential from a regulatory standpoint and also makes the entire process of securities trading transparent.
Therefore, a PAN is one of the documents you need to open a demat account and a trading account, and without a valid PAN, you cannot open either account. However, there are some exceptions to the rule.
The following entities/ individuals can open a demat account without a PAN card.
Residents of one of the following states
1. Manipur
2. Tripura
3. Arunachal Pradesh
4. Nagaland
5. Mizoram
6. Sikkim
Specific regions in North Cachar Hills in Assam
Note: The total planned investment in market-linked securities for demat accounts opened under the aforementioned exception shall not exceed Rs. 50,000.
- Entities mentioned in Section 12 of the Securities and Exchange Board of India Act, 1992 and registered with the board.
Note: A valid PAN card must be furnished within a month of the opening of a demat account under the above exception
- Entities not required to file taxes in India, including United Nations agencies.
To Sum It Up
A PAN card is considered a unique identifier for an individual or entity in India. Therefore, it is required to be quoted for all major financial transactions, including opening a demat account and a trading account.
Aside from the exceptions mentioned above, all individuals and entities intending to open a Demat account in India must have and furnish a valid PAN card.
