Documents Required to Open a Trading Account
Along with a Demat account, a trading account is necessary to participate in stock market trading in India.
SEBI (Securities and Exchange Board of India) brought a revolution in the stock market by popularising digital trading. Today, you can open a Demat and a trading account by submitting only a few basic documents for verification.
If you are planning to open a trading account, keep scrolling to learn about the necessary documents.
What Is a Trading Account and How Does It Work?
Every individual planning to invest in the stock market must necessarily have a trading account with a stockbroker. This account acts as a bridge between your savings account and your Demat account. Trading accounts allow you to actively participate in the stock market by facilitating the buying and selling of stocks.
A trading account also provides an interface which lets you place buy or sell orders for securities. There is no limit on the number of trading accounts a person can have.
Every trader must link their trading account, savings account and Demat account to allow a seamless trading experience. You can buy or sell shares using a trading account. The shares you buy are held in a Demat account and their cost gets deducted from your savings account at the same time.
A trading account also allows you to sell securities from a Demat account. At this time, the proceeds of your sale are credited to your savings account at the time of sale. All these processes take place at the same time the trading account performs any transaction. That’s why it is necessary to link your trading account with your savings and Demat account.
What Are the Documents Required to Open a Trading Account?
To open a trading account online, you should present scanned copies of certain documents. These documents act as evidence of your identity, address and income. Here is a list of all the documents that you need to open a trading account in India.
Documents for Proof of Identity (POI)
- PAN card (mandatory document)
- Voter ID card
- Valid passport issued by the Government of India
- Aadhaar card
- Driver’s licence
- Any ID card issued by State or Central Government
Documents for Proof of Address (POA)
- Aadhaar card
- Ration card
- Utility bills like gas and electricity bill
- Voter ID card
- Driving Licence
- Your bank account number or passbook
Proof of Income
- Copy of Income Tax Return (ITR)
- Salary slips and a copy of Form 16
- A stamped bank account statement for the last 6 months
- Your annual income audit certified by a credible CA
- Demat account holding statement
What Are the Differences between a Trading and a Demat Account?
Many people confuse Demat accounts with trading accounts. Although you need to link both these accounts, there is a significant difference between their meaning and function.
A trading account is a platform that allows you to purchase and sell shares to and from the stock market. This account acts as the intermediary between a savings and a Demat account.
On the other hand, a Demat account acts as a reservoir to hold the securities that you have purchased with your trading account. A Demat account stores the securities in electronic format. Therefore, with a Demat account, you can leave behind any worries regarding the theft of securities.
With both trading and a Demat account, you can invest in the stock market online at your convenience. With every purchase or sale, your trading account will credit or debit money from your savings account and credit or debit securities from your Demat account.
Therefore, for a safe trading experience, SEBI requires that traders and investors compulsorily open a Demat and trading account.
What Are the Features of Trading Accounts?
The following features enable trading accounts to provide a seamless trading experience to traders and investors.
- A trading account ensures instant trading with real-time transactions to and from stock markets.
- A trading account offers detailed insight into all kinds of additional charges that are associated with every transaction. This makes tracking the charges and returns from your investments much easier.
- A trading account also allows you to trade conveniently anytime you want from anywhere. You can access your trading and Demat account from any device that has stable internet access.
- Trading accounts also come with various add-on services that include insights, investment advice, tax returns, retirement planning and growing wealth.
The above sections have covered all the documents required to open a trading account online. Like a savings account or a Demat account, you must consider researching the additional charges and the reputation of the broker before opening a Trading account online.
Frequently Asked Questions
Who can apply for a trading account?
Any individual can apply for a trading account. Unlike savings accounts, there is no age limit for applicants to open a trading account in India. Furthermore, both resident Indians and NRIs can apply to Depository participants for a Demat and a trading account in India.
Can I submit documents for a trading account online?
Yes, by opting for the Aadhaar KYC method, you can complete your KYC verification online. Here, you do not need to worry about the self-attestation procedure as long as your phone number and Aadhaar card are linked.
What can we trade with trading accounts?
With a trading account, you can purchase or sell currencies, ETFs, futures, options and equities.
Do I need both a trading and a Demat account?
For an instant and hassle-free trading experience, traders must possess both trading and Demat accounts. Demat accounts act as a reservoir for your securities whereas trading accounts facilitate trading in the stock market.