In case the applicant is a minor, any of the above documents of the parents or guardian of such minor should be submitted as a proof of Identity.
So it is just like a where actual money is replaced by shares.
You have to approach the DPs (remember, they are like bank branches), to open your demat account.
Let's say your of shares looks like this: 400 Reliance , 250 of SBI, 75 of ITC and 200 of L&T. All these will show in your demat account.
It is, however desirable that you hold securities in demat form as physical securities carry the risk of being faked, forged or stolen.
Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, nowadays, you need to open a demat account if you want to buy or sell stocks.
A depository is a place where the stocks of investors are held in electronic form.
The depository has agents who are called depository participants (DPs).
Think of it like a bank. The head office where all the technology rests and details of all accounts held is like the depository. And the DPs are the branches that cater to individuals.
There are only two depositories in India -- the National Securities Depository Ltd (NSDL) and the Central Depository Services Ltd (CDSL). There are over a 100 DPs.
Once you approach your DP, you will be guided through the formalities of opening an account.
You must fill up an account opening form and sign an agreement with your DP.
The DP will ask for some documents as proof of your identity and address.
Check with them what they require. For instance, some may accept a driver's license, others may not.
Here is a broad list (you won't need all of them though):
• PAN card
• Voter's ID
• Ration card
• Driver's license
• Photo credit card
• Employee ID card
• Bank attestation
• IT returns
• Electricity/ Landline phone bill
While they only ask for photocopies of the documents; they will need the originals for verification.
You will have to submit a passport size photograph on which you sign across.
A demat account can be opened with no balance of shares.
Dividends from mutual funds are fully exempt from income tax under Section 10(33).