Understanding can a Person Open multiple demat accounts in India: If a person already has a demat account and trading account with a stockbroker in India, the obvious question that comes to him before opening a new demat account is whether he can legally open multiple demat accounts in India.
Well, the short answer to this question is that you can open multiple demat accounts in India and there’s no limitation on the number of demat accounts a person can have. However, there a few things related to multiple demat accounts in India that you need to understand.
In this post, we are going to discuss the topic “Can I Open Multiple Demat Accounts in India?” and also look into some of the pros and cons of the same. Let’s get started.
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Can I Open Multiple Demat Accounts in India?
As mentioned above, the simple answer is that: Yes, it is okay to have multiple demat accounts in India. You won’t face any legal problems. Like you can have multiple savings accounts in different banks, similarly, you can have multiple demat accounts with different brokers in India.
A person can open as many demat accounts as he/she wants. You can have one demat account with Zerodha, another with ICICI direct, a third with Upstox, and others with any brokers that you prefer.
Why there won’t be any problem while opening multiple demat accounts?
Well, each demat account is mapped with one PAN Card. Obviously, you cannot have multiple PAN Cards as it is unique for every person. Therefore, as long as your PAN Card is correctly connected with your demat account, all the equities that you buy will be mentioned as your property. And hence, a person can open multiple demat accounts with different using the same PAN Card.
Fun Note: You have to open multiple demat accounts from different brokers. But, you cannot open two demat accounts with the same broker.
Can you open multiple ‘Trading’ accounts with the same demat account?
Yes, it is possible. You can open one demat account and link it with multiple trading accounts. Here are few other points that you should also know:
If you want to enjoy the facilities of both discount and full-service broker at the same time– you can open multiple trading accounts with different brokers mapped to a single demat account.
However, not all brokers allow opening only the trading account. Most brokers offer 2-in-1 account i.e. you have to open both demat and trading account at the same broker.
Pros and Cons of Multiple demat accounts
Although there isn’t any problem with opening multiple demat accounts, however, there are few significant advantages and disadvantages of doing so. Here are a few common Pros and Cons of having multiple demat accounts in India:
— Pros of Multiple Demat Accounts in India
Frankly speaking, there are not many advantages to having multiple demat accounts. One advantage is that you can enjoy using different interfaces offered by multiple brokers.
Another advantage worth mentioning is that you can segregate your traders or long-term investments & short-term/frequent trading in different accounts.
For example- You can keep the stocks that you’ve purchased with a long-term vision in one demat account (generally full-service broker) and your stocks with frequent trades or Short term in another account (Generally discount broker). This will help you to avoid confusions and bring discipline to your purchases.
— Cons of Multiple Demat Accounts in India
Having multiple demat accounts has more disadvantages compared to advantages. A few major ones are:
1. You have to pay Multiple Annual Maintenance Charges (AMC) for different accounts:
There’s no free lunch in this world. If you’re having a demat account with a broker, you have to pay the annual maintenance charge. This amount will vary depending on your broker, but almost every broker charges AMC. Therefore, if you have multiple demat accounts, then get ready for paying multiple AMCs.
For example- If you have a demat account with ICICI direct (AMC= Rs 600) and another with Share Khan (AMC= Rs 441), then you’ve to pay an annual AMCs on both (total of Rs 1,041 per year). The more the number of accounts you have, higher will be the total AMCs.
2. It is difficult to keep track of multiple demat accounts:
Let’s assume that you’ve 10 stocks in your first demat account and 8 in another, then it might be little difficult to continuously track both accounts. There may be cases that you completely forget about a stock that you’ve brought in a demat account to which you do not ‘login’ frequently.
3. Your account can get freezed if you remain inactive for a specific long period of time
Yes, it’s true. Many people forget the credentials (login and password) of their accounts when they are using multiple demat accounts. Moreover, they don’t even care to contact the customer care of that broker anymore.
Obviously, you’ll receive multiple notifications and alert from your broker before freezing your account. But if you remain inactive for a very long period of time, then they might freeze your account. And your stocks along with it (Relax your demat shares are with NSDL or CSDL and can be recovered). Still, to avoid any inconvenience, you should remain active on your accounts periodically.
Quick Explanation: The demat account is opened with your depository participant (DP) (i.e. your broker like HDFC Sec, ICICI direct etc), however, the shares actually remain in the custody of the depositories (CDSL or NSDL). When you open your account, you specify whether you’re opening your account with CDSL or NSDL. Therefore, even if your account gets freezed or your broker gets bankrupted, you can recover the stocks from the depository.
In this post, we discussed the pros and cons of having multiple demat accounts in India. As explained, the straight answer to the question- ‘Is it okay to have multiple demat accounts in India?’ is YES! It is okay to have multiple demat accounts in India.
However, before opening your second or third demat account, please reconsider about the advantages and disadvantages of having multiple accounts. Multiple demat accounts in India come with added costs. That’s all for today. Have a great day and happy investing!