As investing and trading becomes more popular in India, many banks, fintech companies and brokers are offering Demat accounts with attractive features. Depository Participants (DPs) may offer things like advanced trading platforms, top-notch customer services, easy account opening and nominal charges. To take advantage of these features, investors may consider getting two Demat accounts. But, is this feasible?
In this blog, we will explain how many Demat accounts one can have and the applicable rules for owning multiple Demat accounts in the country. Keep reading to know more.
How Many Demat Accounts Can Be Opened by One Person?
You can open multiple Demat accounts in your name if you have a valid PAN card without any restrictions. This means you can own 1, 2, 3, 10 or even more Demat accounts with no upper limit. However, just because you are not restricted does not mean you should own as many accounts as possible. Having many Demat accounts can be both difficult and costly.
Instead of getting many accounts, make your life easier by getting a single Demat account from Torus Digital. With lifetime-free annual maintenance charges, low DP charges and easy account opening, you will no longer need any other Demat account.
Requirement for multiple Demat accounts
An investor can open multiple demat accounts with different brokers, provided each account is linked to the same PAN. People may prefer this to separate long-term holdings from short-term trades or to explore different platforms. While there is no restriction on the number of accounts, each one must be managed carefully to avoid confusion and missed updates.
How to manage multiple Demat Accounts?
To manage multiple demat accounts effectively, keep a clear record of holdings and transactions in each account. Use portfolio tracking tools or spreadsheets to avoid duplication. Regularly check statements and contract notes to stay updated. Also, ensure your contact details and bank information are correct across all accounts. Closing inactive accounts can further reduce oversight risk and improve clarity.
Rules Regarding Owning Multiple Demat Accounts
If you want to know how many Demat accounts one person can open, go through the following rules first:
- According to regulations of the Securities and Exchange Board of India, there are no restrictions on the number of Demat accounts a person can own.
- Although there are no restrictions on multiple Demat accounts, you can open only one trading account with a single broker.
- You can open a single Demat account and link it to multiple trading accounts to access various trading-related services. However, note that most brokers require you to open both a Demat account and a linked trading account by default.
- One account holder with a PAN can open only one Demat account from a Depository Participant. To open multiple accounts, you must open them with different DPs.
- If you own multiple Demat accounts, you will have to pay separate charges for each account if you do not use them all. This can include annual maintenance charges (AMC) for holding each account and brokerage charges for placing orders.
Reasons to Open More Than One Demat Account
Now that we have discussed how many Demat accounts one can have, let’s discuss the primary reasons why investors often own multiple Demat accounts. The most common reason is that long-term investors often separate their investments using multiple Demat accounts. For instance, one account can be used to invest for long-term goals, while the other is used for short-term goals.
Another common reason to open multiple Demat accounts is having a personal account and several joint accounts with your spouse, parents or children. Thus, joint accounts can simplify your family’s investments. There are more situations when you need to own multiple Demat accounts, including:
- For dematerialising physical securities into a jointly-held account
- For transferring shares/securities to a jointly-held account
- Transferring shares/securities from one broker to another
Advantages of Owning Multiple Demat Accounts
Here are some of the benefits associated with owning more than one Demat account:
- Firstly, having multiple Demat accounts allows you to access different types of brokerage services. One account can be with a full-service broker that offers customised investment advice, while the other could be a discount service broker offering lower costs.
- As mentioned before, investors can segregate their investments with multiple Demat accounts. Since a single Demat account shows all assets/trades undertaken with a DP, multiple accounts can separate portfolios based on types of assets, risk profiles or investment strategies.
- It reduces your dependency on one broker. If one broker’s platform experiences a server issue or glitch, the other can help you monitor and make investments.
- Different DPs may specialise in different things. For instance, one account could provide more advanced charting and technical analysis tools while the other offers better prices.
- You can open new Demat accounts to take advantage of discounts, promotional offers and cashback within the limited period of their availability.
- You can get research reports and recommendations from various brokers. Having multiple accounts lets you get multiple reports you can use to formulate your investment strategy.
Disadvantages of Owning Multiple Demat Accounts
Here are some common problems and limitations associated with having multiple Demat accounts:
- The biggest disadvantage of owning multiple Demat accounts is the high charges you are likely to face. While some Depository Participants may offer lower charges, others levy higher fees, resulting in higher overall costs for multiple accounts.
- You will need to keep paying various charges, such as AMC, transaction charges, etc., to simply hold a Demat account. These charges will apply even if you haven’t used them for transactions.
- Tax filing can get very complicated and time-consuming if you have to report multiple transactions from multiple Demat accounts. This can lead to mistakes and penalties.
- Each Demat account will require its own time and attention. If you own many Demat accounts, you need to open and track your investments in these accounts. You may even need to spend time consolidating statements.
Final Thoughts
By reading through this blog, you should have an answer to the question “How many Demat accounts can one open”. With this, you should know in which situation you should apply for new Demat accounts and when to avoid unnecessarily adding more accounts. While getting more accounts may be unavoidable if you already have joint accounts, a single good Demat account can also meet your needs.
