As per the rules notified by the Securities and Exchange Board of India (SEBI), it is mandatory to have a Demat account in order to trade in Indian securities. Apart from regulatory compliance, you must opt for a Demat account for the numerous benefits that it offers.

For instance, it allows you to trade in securities instantly and without any stamp duty charges. Moreover, if you choose a zero brokerage Demat account, you can save on the additional cost of maintaining it.

However, when choosing the best free online Demat and trading account, you need to consider a number of factors to get to the final decision. Read on for answers to the question, “What is a trading account?”, and how to choose the best account for yourself.

What are Demat and Trading Accounts?

To make the right decision when choosing a Demat or a trading account, you must understand their functions.

A Demat or dematerialised account allows investors to hold their securities in electronic form. Introduced in 1996 by the National Stock Exchange (NSE), this account facilitates online trading of securities and eliminates the threat of theft and loss of your shareholdings.

This account stores all your investments, be it shares, ETFs, government bonds, mutual funds, etc., in one place. On the other hand, a trading account serves as a link between your Demat and bank account.

Hence, while Demat accounts store your investments in electronic form, trading accounts facilitate the buying and selling of securities. The Demat account is the first prerequisite to trade in securities, but a trading account is also essential.

Many depository participants (DPs) also offer 3-in-1 and 2-in-1 accounts that offer services of both these accounts. A 3-in-1 account also includes a bank account.

How to Choose the Best Free Online Demat and Trading Accounts

With insight into the two account types, take a look at how you can find an account that best aligns with your financial requirements.

Since there are numerous DPs, it becomes a bit complex to choose the best free online Demat account. Hence, you must look at the following factors to find one that complements your needs.

Easy Account Opening Process

The first thing that you need to consider when choosing an online Demat and trading account is the ease of opening an account and operating it. Many DPs and brokerage firms use e-KYC processes to verify the details of their customers.

This eliminates the need for you to submit a long list of documents. The process is conducted online over a video call, and does not require you to visit any office physically. 

Basic Services Demat Account

As per SEBI’s rulings, DPs are mandated to provide a Basic Services Demat Account (BSDA) to investors. These accounts offer simple services to account holders at reduced costs as compared to regular Demat and trading accounts.

Also called a no-frills or a basic Demat account, it is best suited for retail and inexperienced investors.

Reasonable Demat Account Charges

Another key factor that you must assess when opting for a Demat and trading account are the charges. For instance, you will have to pay a fixed amount as the account opening fees.

If you choose a free online Demat account, there may be no transaction charges if you buy and sell securities. However, a DP charge may be levied on every transaction that you make using your account.

While a part of these DP charges goes to depositories for their services, the rest remains with the depository participants. There are two types of depositories in India: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

Apart from this, many DPs also charge an annual maintenance fee for the upkeep of your account. Hence, it is prudent to ensure that the charges associated with the account that you choose are reasonable and there are no hidden costs involved.

User-Friendly Interface

A crucial component that demands your attention when choosing the best account is the interface. There needs to be a seamless integration between your Demat and trading account as well as your savings account.

The interface, be it on your browser or your phone, if you choose the app, needs to be easy to navigate. You should be able to access all the key features easily, and it should be intuitive right from the main screen. If you find it hard to navigate the interface, consider another DP’s account.

Data Analytics

Access to data is crucial to investing wisely and efficiently. To determine the best investment options for yourself, you need insights into a scheme’s performance and the latest updates.

To help investors make better financial decisions, most DPs are expanding their operations and now provide deep data analytics. They also offer the following services:

  • Real-time valuation
  • Thematic concentration
  • Portfolio output
  • Analytics on inflows and outflows

Make sure to choose a DP that provides a host of data analytics services. This will assist you in determining the performance of shares and making informed decisions.

Hygiene Check of the DP or Brokerage Firm

When choosing a Demat and trading account, it is necessary to run a hygiene check on the DP. Look out for any negative news about that particular DP.

Also, see if there is any pending complaint against the entity with the authorities or the two types of depositories. In addition, assess the quality of their services before you open an account.

With a better idea about the features to look for, choosing the ideal option is much simpler. Do note that it is best to pick a DP that offers online provisions. This includes the option to digitally open your account, as it simplifies the process significantly.


Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice or a recommendation to open a Demat or trading account. Before making any financial decisions or choosing a Demat and trading account, it is essential to conduct thorough research and seek professional advice. The reader is solely responsible for their actions, and we do not assume any liability for losses or damages arising from the use of this information. Always carefully review the terms and conditions of any financial service or product before proceeding.

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December 2023