How Can You Open a Demat Account Without a PAN Card?

A Dematerialised (Demat) account is an online account used for investing in securities, enabling investors to seamlessly trade and manage financial instruments in one place. A Demat account also helps you to trade in securities like shares, ETFs, mutual funds, and bonds.

However, a common question among new investors is: ‘Can I open a Demat account without a PAN card?’ In this blog, we explore the significance of a PAN card and whether it is mandatory for opening a Demat account.

Is a PAN card Mandatory to open a Demat Account?

Yes, a PAN card is essential for opening a Demat account, as it centralises all your securities transactions, regardless of the investment amount. Since a PAN number remains constant throughout an individual’s lifetime, it acts as a dependable identifier for financial activities.

On April 27, 2007, the SEBI announced that PAN cards are mandatory while opening a Demat account. Applicants for a Demat account must submit copies of their original PAN card along with other required documents..

Before the regulation, investors did not have to use PAN for making mutual fund investments up to ₹50,000. However, SEBI removed this provision, making a PAN card mandatory for all securities investments. This ensures greater transparency, prevents fraudulent activities, and strengthens financial compliance.

Are There Any Exceptions?

If you are asking ‘How can I open a Demat account without a PAN card?’, then the answer is partially no, but there are still some exceptions: 

• Indian citizens belonging to Scheduled Tribes (ST) from certain North-Eastern states are not required to provide a PAN card to open a Demat account.
• In addition, new investors can open a Demat account without a PAN card, who reside in Manipur, Sikkim, Arunachal Pradesh, Nagaland, Mizoram, and Assam. 
• Investors from these regions are allowed to invest a maximum of ₹50,000 in shares and other securities.
• To qualify, these individuals must provide valid identification proof of being ST and residents of these specific regions. 

Other Documents Needed to Open a Demat Account

The SEBI has made regulations claiming that a PAN card is a required document for opening a Demat account. There are other documents which are essential to open a Demat account:

• Identity Proof Documents: Documents for identity proof are required to open a Demat account. You must submit your passport, Aadhaar card, and voter ID along with your PAN card.
• Address Proof: You must submit proof of address using documents like a passport, Aadhaar card, driving license, or voter ID.
• Documents for Bank Account Verification: You must verify your bank account by providing documents like a cancelled cheque or bank statement.
• Proof of income: You must submit proof of income, such as your Income Tax Return (ITR), salary payslip, or other relevant financial documents. These documents help verify your financial eligibility, especially for trading in derivatives or high-value investments.
• Photographs: Do not forget to have a few passport-size photographs that are recently captured.
• Signature: Opening a Demat account requires you to submit a white document with your official signature.

How to Open Demat Account Without PAN Card: A Comprehensive Guide

The regulations of SEBI made it mandatory to submit your PAN details while opening a Demat account. You can also open a Demat account without a PAN if you fall under the above-mentioned exempted category. Here is the guide you must follow to know how to open a Demat account without a PAN card:

• You need to find a depository participant (DP) that lets you open a Demat account without a PAN. This could be a bank or a broker.
• Fill out the application form by entering your contact details and complete your e-KYC.
• You have to inform your DP that you fall under the exempted category.
• If your entity is exempt from paying taxes in India, your tax-exempt status will be verified before your Demat account can be opened.
• If you are a resident of Manipur, Sikkim, Arunachal Pradesh, Nagaland, Mizoram, or Assam, you must submit proof of residence.
• Once all the documents are verified, your Demat account will be activated and you can trade securities.

What are the Drawbacks of Using a Demat Account Without a PAN Card?

There are some limitations to opening a Demat account without a PAN card. Some of them are described below:

• Restricted Transactions: You will face problems in high-value trades if your Demat account has not been linked with a PAN card. This restriction will hamper your activities, including active or large-scale trading.

• Problems in Linking Demat Accounts with Trading Accounts: Linking a trading account with your Demat account can be challenging, as PAN card verification is required for both buying and selling transactions.

• Complications in Tax Compliance: You might face some problems in terms of tax compliance without a PAN. Since a PAN is essential for filing returns, problems can arise in calculating capital gains or high-value transactions.

Final Thoughts

The answer is partially no if investors ask, ‘Can I open a Demat account without a PAN card?’ SEBI mandates strict regulations requiring a PAN card for opening a Demat account.. However, an exception applies to residents of certain North-Eastern states of India. These individuals can open a Demat account without a PAN card by providing valid identity and address proof for verification.

Do you want to open a Demat account? Download the Torus Digital application and open a Demat account just within six minutes. 

No account opening fees and zero annual maintenance charges make Torus Digital the ideal choice for seamless investing.