With the advent of electronic investing, paper share certificates are a thing of the past. Securities are now held electronically in dematerialized accounts, or demat accounts, considered digital lockers for shares, bonds, exchange-traded funds, and mutual fund units. On buying or selling, the account is credited or debited, just like a bank account. The maintenance of records is done by two depositories, the NSDL and the CDSL, all of which are enfolded within the role of demat accounts, their benefits to mutual fund investors, and the step-by-step process of opening a demat account online in India at no charge.
Demat accounts in brief
Demat accounts lend protection against risk to securities such as loss, theft, and forgery. Reduced paperwork and rapid settlement are the virtues of being able to hold securities in electronic form. One account can hold shares, bonds, government securities, exchange-traded funds, and mutual fund units. Mutual funds can indeed be bought without a demat account, but doing so synchronizes holdings and allows instant transactions. A regular account is what residents would generally be opening, while non-residents would choose either a repatriable (linked to an NRE account) or a non-repatriable (linked to an NRO account) demat account.
Why do investors use demat accounts?
Secure and paperless: Digital storage prevents loss or damage and consolidates all holdings in one place.
Speedy transactions: Buying, selling, or switching mutual fund units can be done instantly without paperwork.
Unified portfolio: The simultaneous holding of stocks, bonds, and mutual funds eases the monitoring of asset allocation.
Flexible nominee: SEBI has revised rules allowing investors to appoint up to 10 nominees starting September 1, 2025, who may operate the account in the event the holder is otherwise incapacitated.
Discounted incidental costs: Dematerialized transfers avoid stamp duty; many depository participants waive account opening fees, although annual maintenance fees apply.
Regulatory assurance: Demat accounts are regulated by SEBI and facilitate national efforts, such as making dematerialization of private companies’ shares compulsory by September 30, 2024.
How to open a free demat account online in India?
Choose a SEBI-registered depository participant: Compare the fees and features that are offered, and check if the service provider offers a 3-in-1 account, linking banking, trading, and demat services together.
Fill out the application online: Simply log on to the DP’s website/app, fill in the required basic details, and verify using a one-time password.
Upload personal information and documents. Important items needed will be PAN, Aadhaar, DOB, bank-related details, and scanned copies of PAN, address proof, bank statement or passbook, photograph, and signature. NRIs must also supply details of their NRE/NRO accounts and overseas address proof.
Complete e-KYC and electronically sign—many DPs conduct a video-based verification and allow electronic signing via Aadhaar OTP.
Wallet and credential basis will be given to you—after verification, you will receive your Beneficial Owner Identification Number and signing credentials, usually within one or two working days after verification.
Eligibility, documents, and costs
Any resident Indian can open a demat account by giving their PAN and proof of address. NRIs must complete the account application using either NRE or NRO accounts and must provide overseas address documents. A minor can open an account with a parent or guardian. Although opening an account is usually free, maintenance charges of around ₹300–₹600 and transaction charges will apply, so compare charges before you apply.
Using Demat Accounts for Mutual Funds
Mutual funds may be bought directly via fund houses or through distributors, but holding them in a demat account is more advantageous. All holdings are being displayed in one consolidated portfolio; electronic transactions allow you to buy, sell, or switch units during market hours or even set up Systematic Investment Plans. The physical units can be converted to demat upon a request to the registrar. When you wish to invest, log in, choose a fund, enter the amount or SIP details, and confirm. And also check the SEBI registration of your DP and clarify the costs.
Updates on regulations and nomination changes
Mandatory Dematerialization
Following Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2023, private companies (other than small companies) must dematerialize by 30 September 2024. According to this rule, companies must issue securities in electronic form and dematerialize existing certificates; the promoters and directors must dematerialize their holdings before issuing new ones.
New SEBI nomination framework
With a new circular released by SEBI in 2025, the existing nomination rules will be updated. Accounts will no longer be frozen for non-nomination. This new form, with the inclusion of ten nominees, shall give the investors the power to appoint nominees with authority to operate the account in the event of incapacitation as of September 1, 2025. The percentage shareholding figures for each nominee must now be tabulated along with their contact details. These changes, therefore, simplify estate planning while enhancing the flexibility available to investors.
Conclusion
In present-day Indian investing, demat accounts are the very foundation. By holding securities and units of mutual funds in electronic form, it offers safe and environment-friendly transactions, all the while giving a consolidated view of the complete investment portfolio.
The procedure of opening an account online would include selecting a SEBI-registered DP, filling out an application form, uploading documents for verification, executing e-KYC, e-signing, and waiting for some time until activation. However, it is free if maintained; one should consider annual maintenance and transaction charges before applying, though.