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Can a Demat Account be Opened Without a PAN Card?

  • Rudri Rawell
  • Mar 17 2022
  • 6 minutes
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Demat account is an important part of any stock market trading or investing activity. It is required for holding shares and other securities in dematerialised form. Any shares and securities bought by an individual can be stored in a Demat account in electronic format. An investor or trader cannot buy, sell, or hold securities without a Demat account. With rapid digitization in all aspects of life, opening a Demat account is a very easy process, as it can be entirely done online.

However, for opening a Demat account, there are some pre-requisites and documentation requirements that one has to follow. Many stock market aspirants apply for a Demat account, but some may not provide all the required documentation. 

Here, we will provide a guide for applicants who want to open a Demat account but do not have a PAN card. To begin, here’s the process to open a Demat account.

How to open a Demat account online?

To request a Demat account online, investors can download the Finity app on their smartphone. As part of the account opening process, the applicant must furnish certain key documents to complete the KYC.

Listed here are the commonly sought documents for Demat account opening:

  • Identity proof like UID, voter ID, PAN card, etc.
  • Address proof like Aadhaar card, passport, ration card, or voter ID.
  • Income proof like income tax returns is usually required for those who are applying for a derivative trading option in Demat account.
  • Bank account details through a cancelled cheque.
  • Passport-sized photographs.

The Demat account opening process can be initiated only after these documents are submitted by the applicant and verified by the broking platform.

Is PAN card essential for Demat account opening?

A PAN card is an important document that is sought by brokers from applicants who wish to open a Demat account. As per SEBI guidelines, one cannot request for a Demat account opening without furnishing a PAN card. Here are the pre-requisites surrounding PAN card details for Demat account opening:

  • As per a Securities and Exchange Board of India (SEBI) circular dated April 27, 2007, PAN cards are mandatory for Demat account opening. This requirement is irrespective of the investor’s objective or size of the stock market investment that one intends to make.
  • The applicant must furnish his/her original PAN card at the time of requesting a Demat account. 
  • It is also mandatory to submit a self-attested PAN card copy, along with other necessary documents.
  • For Demat account requested for multiple or joint account holders, all the applicants must furnish their PAN card. 
  • A person can apply for multiple Demat accounts, however, all the accounts must be linked to the applicant’s PAN card.

Why is PAN card required for Demat account opening?

PAN (Permanent Account Number) card is an important document that every Indian citizen must hold. This document is primarily used by the Income Tax department to consolidate and easily track all financial transactions of an individual. 

As per the Income Tax department, a PAN card is used as the sole identification proof of all transactions that an individual has entered in the securities market. The IT rules allow only one PAN card per individual. Once it has been generated, the PAN number cannot change even if one requests for a name change or address change.

Reasons why PAN card is a must for Demat account

  • A PAN card is a crucial document required for making a Demat account application.
  • Applicants must note that there are no alternatives to opening a Demat account without a PAN number. This is unless one is exempted from obtaining a PAN card under special circumstances. 
  • If an individual who has been exempted from having a PAN card applies for a Demat account, he/she can request for a ‘limited purpose beneficiary owner account.’ This will allow the individual to sell physical securities that he/she already possesses.
  • Applicants who belong to the scheduled tribes of northeast Indian regions such as Tripura, Manipur, Arunachal Pradesh, Mizoram, Nagaland, and some parts of Assam can request a Demat account without furnishing a PAN card. However, in such cases, they can only invest in securities up to a maximum limit of Rs. 50,000.
  • Those living in Sikkim need not furnish a PAN card for Demat account opening provided they furnish proof of residence. 
  • Entities that are mentioned under Section 12 of the SEBI 1992 act need not submit PAN cards while requesting Demat accounts. Such accounts can remain active for a month and are frozen in case a PAN card is not furnished after completion of such period.
  • If a UN agency and similar other bodies that are exempted from the country’s tax payment system applies for a Demat account, they need not produce a PAN card. 

In circumstances other than the above-mentioned, it is mandatory to submit a PAN Card for Demat account opening. 

Conclusion

PAN is an important document in India and a must for those who want to enter the securities and financial investment space. For Indian citizens and NRIs, a PAN card is, therefore, an essential document for opening a Demat account. One can apply for a Demat account without a PAN card if eligible under any of the exceptions mentioned above. 

FAQs

Can I trade in the stock markets without a Demat account?

Yes, you can do intraday trading in stock markets if you do not have a Demat account. This is because intraday trading does not require delivery of securities and therefore does not require a Demat account. However, for any delivery trading in stock markets, a Demat account is essential.

Can a Demat account be opened in a minor’s name?

Yes, a Demat account can be opened in a minor’s name. This is also possible since a minor is allowed to hold a PAN card.

Is trading account same as Demat account?

No, a trading account is not the same as a Demat account. A trading account acts as a bridge between broker and bank, whereas a Demat account holds securities in dematerialised form.

Do I need to submit a physical copy of my PAN card for Demat account opening?

No, you need not submit a physical copy of your PAN card while opening a Demat account online. This is because most online broking platforms allow online KYC that can be completed by uploading soft copies of documents.

Can I request for a Demat account if I have lost my PAN card?

If you have lost your PAN card, you can apply for a duplicate copy before requesting for a Demat account. This is because a PAN card is mandatory for Demat account opening.

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