is demat and trading account?
difference between demat and trading account is that the demat account is a
stock while trading account is a flow. The trading account is used to execute
buy and sell transactions in the stock markets. The demat account, on the other
hand, holds securities that signify ownership. So a demat account can hold
equity shares, ETFs, mutual funds, government bonds, gold bonds, Fixed Deposits
etc. However, futures and options being contracts, are held in the trading
account and not in the demat account. Similarly intraday trades do not impact
the demat account since the net position at the end of the day is zero in these
is the difference between demat account and trading account?
There are some
basic points of difference between a demat account and a trading account:
you buy shares in the trading account, the same shares are actually held in the
demat account. The demat account is therefore ownership account while the
trading account is a transaction account.
account is always evaluated over a period of time while the demat account is
evaluated at a point of time. That is because the trading account is a flow
while the demat account is a stock.
shares are purchased in the trading account, they are credited to the demat
account on T+2 day. At the same time, when shares are sold in the trading
account, they are debited to your demat account on or before T+2 day. The
relationship between the trading and demat account is built through the Debit
Instruction Slip (DIS). Alternatively, you can also execute a Power of Attorney
agreement with your broker to seamlessly debit and credit your demat account.
purchased from secondary market through trading account are directly credited
to the demat account. However, demat account can also receive credits from
other than the above. For example,
purchase of IPOs, bonds, mutual funds, corporate actions etc are not executed
in the trading account but are directly credited to the demat account.
Can one have a trading account without a demat
In case you only wish to trade in futures and
options, then you do not require a demat account as trading account alone will
suffice. However, in case of cash market transactions (even if it be intraday)
demat account is a must as per SEBI regulations.
Is it permissible to have a demat account without a
is also possible. In case you want to receive shares as a gift from your relative
or if you want to apply for an IPO, then demat account alone is sufficient.
However, in case you want to sell these shares, then trading account is a must.
actions like dividends, bonus, splits etc are only executed on the demat
account and not on the trading account.
trading account opening steps
process for opening an online trading account is the same as any normal trading
account. However, there are a few additional processes that you need to keep in
mind for online trading account:
filling up the account opening form, specifically tick on the online trading
account activation box so that it is opened simultaneously.
that you sign a power of attorney agreement with your broker for automatic
debits to your demat account. This will save you the hassles of giving DIS each
time you sell shares from the demat account.
the online trading account is activated, the user name and password is sent to
you securely. You can login to your trading account by using the user name and
password. You will be asked to change your password immediately before putting
you start trading ensure some basic security measures that the online trading
site opens in https:// format only. Ensure that your computer / mobile
are secured from virus and malware so that your trading account does not get
compromised at any point of time.
these basic issues are in place, you will have to fund the account. You can
fund the account via online bank transfer (Payment gateway/NEFT/RTGS/IMPS), UPI
and DD/Cheque. Ensure that all such transactions are only made from the bank
account mapped to the trading account.
How to trade using demat account?
cannot directly execute transactions in your demat account. Transactions can
only be executed in the trading account and the ownership is automatically
recorded in the demat account mapped to the trading account. Direct selling
from demat is not permitted, although account to account transfers are
Can you transfer shares
using demat account?
are two types of transfers that are done from the demat account. Firstly, there
is the routine market-transfer that is done when you buy or sell shares in the
trading account. The demat account gets debited or credited accordingly.
Secondly, there is an off-market transaction wherein you can transfer shares
from one demat account to another demat account. You need to fill up the DIS
mention that it is an “Off Market Transfer” with target DP ID. The shares are
Are there capital gains
implications in an off market transfer?
It depends on whether the transfer is to a relative or not. In case
the transfer is to your own demat account with another DP or to a relative (as
defined in the Income Tax Act), there is no incidence of capital gains tax. All
other transfers attract capital gains tax at the extant rates.