What Is A Zero Brokerage DEMAT Account?

Mutual funds

Usually, brokers charge a specific brokerage amount per lot. However, a Zero brokerage Demat account provides the same facilities without a brokerage charge or a flat fee for small orders.

It functions similarly to a bank account and simplifies holding investments such as stocks, bonds, government securities, mutual funds, insurance, and transfer funds (ETFs) by eradicating the hassle of physical handling and trying to maintain paper shares and related documents. 

This post discusses the benefits, how to open and use a zero brokerage demat account. Read on!

How does the Zero Brokerage Demat Account work

Zero cost brokerage is a part of the discount broking concept. Certain types of transactions are subject to zero or little brokerage charges under this business model. Zerodha, for example, does not charge any fees on delivery deals. These are trades in which you take physical possession of equities in your Demat account or sell stocks in your Demat account. Retail investors are the most common participants in these deals. Discount broking relies heavily on technology since it lowers costs and allows brokers to provide free services.

While the strategy involves little or no brokerage, cheap brokers do impose fees for some trades, such as futures and options (F&O) or intra-day trades. You acquire and sell shares on the same day and hence do not take delivery. They also try to sell you other services like stock screener tools or replicable thematic portfolios. Brokerage fees are a category that might vary from one participant to the next. For example, Kotak Securities Ltd recently introduced a zero brokerage intra-day plan, as well as a $20 per order plan for all other F&O trades.

Documents required to open a  zero brokerage Demat Account 

A checklist of documents needed to open a Demat account with a financial institution, such as a broker or a bank, would be as follows:

• Proof of Identity (POI): A driver’s license, a voter’s ID, a UID or Unique Identification Number, and other similar documents will be accepted as proof of identity.
• Proof of Address (POA): A passport, voter’s ID, Aadhaar, ration card, or other document proving address is used to open a  zero brokerage Demat account.
• Proof of Income: It is necessary when trading derivatives like F&O. A copy of the ITR acknowledgment, for example, can be provided.
• PAN Card: A PAN card is required to open a  zero brokerage Demat account with any bank or broker (except those who are expressly exempt from obtaining a PAN, as listed in the ‘Exemptions/Clarifications’ to PAN section).
• A canceled cheque leaf can be offered as proof of bank account.

How to Open a Zero Brokerage Demat Account

With the technological advancement in today’s day and age, opening a Demat account online is an easy task; here’s how: 

• An online request can be issued with your preferred DP to open a  zero brokerage Demat account.
• Go to the website of your preferred DP.
• Click the ‘Open Demat Account’ tab and enter the following information. – Name, Email ID, Phone Number, and City. 
• You will get a one-time password (OTP).
• Your DP will initiate communication with you to complete the process and open a  zero brokerage Demat Account. 

Also Read: What Is Expense Ratio In Mutual Funds? How Is It Calculated?

Zero Brokerage Demat Account Details

Your  zero brokerage Demat service provider must provide you with the following information:

• Power of Attorney (POA) number DP ID Beneficiary ID or  zero brokerage Demat Account number
• These are particularly useful if you intend to apply for an initial public offering (IPO).

How to use a Zero Brokerage Demat Account

To begin, the user must have internet access. Then it would help if you choose a Depository Participant (DP) to act as an agent for the depository. Aside from the online application form, you will need to have identity proof, address proof, a PAN card, and a passport-sized photograph on hand. 

On agreeing to the terms and charges, an in-person verification will begin. Following successful application processing/verification, a client ID or account number and a transaction password are provided. Your zero brokerage Demat account can be accessed online, which serves as a safekeeping facility for your shares, stocks, bonds, mutual funds, equities, and other derivatives.

Benefits of  Zero Brokerage Demat Account

This brokerage approach has a lot of advantages. 

• You don’t have to worry about the magnitude of your trade with a zero brokerage model. 
• Your break-even point is lower under a zero brokerage model. This raises the likelihood of a profitable trade. 
• You’ll never have to worry about how big or small your trade is again. 
• Zero brokerage has that kind of power! Don’t be afraid to question your broker how much brokerage you’re paying, since you might want to consider moving to a broker that doesn’t charge any.

Also Read: What Are Fund Of Funds?

How to select the Best Zero Brokerage Demat account

When it comes to your zero brokerage Demat account, you can not accept mediocrity. On the other hand, choosing the best one necessitates some research and meticulous planning. To open a  zero brokerage Demat account – you must first select the depository that best meets your requirements for trading on stock exchanges. 

As a result, you must choose the best zero brokerage Demat account for trading before embarking on your stock investment journey. Many financial firms offer investors an opportunity to open a bank account. Some private brokers assist prospective investors. However, for investment purposes, the best option must be selected.

Benefits of Making a Zero Brokerage Demat account

Navi makes the account opening procedure easy and hassle-free for its users. It lays down grounds that are favorable for its users in; 

1. Easy Fund Transfer: With the help of a  zero brokerage Demat account, users can quickly transfer their shares in no time. As a result, having a  zero brokerage Demat account simplifies and expedites the entire process.
2. Easy Dematerialization of Securities: If an investor has physical certificates, they must provide detailed instructions to the depository participant (DP) to be converted to electronic form.
3. Easy Access: The main advantage of having a  zero brokerage Demat account with Navi is that it provides fast turnarounds and easy access to all of their investments and statements via net banking. Furthermore, these details are easily accessible from any location using a smartphone, computer, or other electronic devices.

Final word

Opening a  zero brokerage Demat account is now required for every Indian to begin their trading journey. Users with a  zero brokerage Demat account can benefit from the capital market by investing in equities, mutual funds, and commodities. In general, having a  zero brokerage Demat account provides a user with benefits and guaranteed profits on their shares. 

FAQs on Zero Brokerage Demat Account

1. What is the minimum balance for Demat Account?
   Because a  zero brokerage Demat account is used to store shares rather than money, there is no minimum balance that must be maintained. Before you open a  zero brokerage Demat account – you should learn about the various types of charges levied when you open a  zero brokerage Demat account.
2. Does Demat Account Charges Daily?
   Transaction fees for zero brokerage Demat accounts As transaction charges, your DP charges a small fee for its services in assisting you to earn money. You must pay this per transaction fee each time financial securities enter or exit your zero brokerage Demat account. However, the majority of DP’s charge it every month.
3. What is Stock DP?
   Depository Participant (DP) charges are levied by CDSL (depository) whenever you sell shares from your zero brokerage DEMAT account. It’s similar to how exchanges charge transaction fees or brokers charge brokerage. On the day you place your sell order, the stock will be removed from your zero brokerage DEMAT account.

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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.