Difference Between Demat and Trading Account

A Demat account stores the securities you buy in digital form, while a trading account is used to place orders and trade in the stock market.
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Difference Between Demat and Trading Account
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3 mins
20 March 2025

The difference between a Demat and a trading account is that a Demat account holds shares and securities like bonds, ETFs, and mutual funds in digital form, while a trading account allows buying and selling in the stock market. Though they serve different purposes, both work together to enable seamless online trading.

What is a demat account?

A Demat account, short for Dematerialisation account, is a digital account that holds financial instruments such as mutual funds, shares, and bonds in electronic format. It functions similarly to a bank account; however, instead of storing currency, it stores financial securities. This eliminates the need for physical certificates, ensuring security and convenience for investors.

What is a trading account?

A trading account is essential for conducting stock market transactions. When a company lists its shares on the stock exchange, investors can only trade these shares through a trading account. This account acts as an intermediary between an investor’s bank account and Demat account, enabling the buying and selling of securities in the stock market. While a Demat account stores securities, a trading account facilitates transactions.

Difference between Demat account and trading account

For beginner investors, understanding the distinction between a Demat account and a trading account is crucial, as both are prerequisites for participating in the Indian stock market. The table below outlines the key differences:

Particulars

Demat account

Trading account

Definition

A digital account that stores shares and securities electronically.

A digital account that allows investors to buy and sell shares and securities on the stock exchange.

Role

Primarily used for holding securities safely, preventing loss, theft, or damage.

Facilitates the execution of buy and sell orders on stock exchanges.

Issuing entity

Provided by a depository through a Depository Participant (DP).

Offered by a SEBI-registered stockbroker.

Unique identifier

Has a unique 16-digit number for identification.

Assigned a unique trading ID or number by the stockbroker.

Charges

Involves fees such as Account Maintenance Charges (AMC) and transaction fees.

Usually, no direct charges, but brokerage fees apply for trades executed.

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The functionality of Demat vs trading account

Today, you can trade shares digitally. So, when you buy a share, you do not have to worry about safekeeping physical share certificates. In other words, the shares can be stored and transferred in digital mode with a Demat account. You do not have to be physically available on the trading floor to place your buy or sell order. Instead, you can do it through your trading account using your mobile or laptop.

Can you open a Demat account without a trading account or vice versa?

Technically, it is possible to open a Demat account without a trading account. However, a Demat account alone serves no purpose unless paired with a trading account, as it only stores securities. On the other hand, a trading account is necessary for executing stock market transactions.

Recognising this, most stockbrokers provide both accounts together as a package. Some banks also offer a 3-in-1 account, which includes Demat, trading, and savings accounts for seamless financial transactions.

Charges for Demat and trading accounts

Demat and trading account brings the convenience of share trading right to your fingertips. There is a backbone of technology and other resources responsible for maintaining the services and providing the necessary support. Consequently, some charges get levied for availing the services of Demat and trading account. The key charges associated are:

  • Demat annual maintenance charge (Demat AMC): It is an annual recurring cost associated with Demat account. It is the cost of maintaining your Demat account.
  • Demat/remat charges: The charges levied on converting a share in physical form to digital mode (Dematerialization) and converting shares in digital mode to a physical certificate (rematerialization).
  • Off-market transfer: Charges for transferring shares from one Demat account to another without involving the stock exchange. This can be done by gifting shares to a family member or transferring shares from one Demat account to the other.
  • Brokerage charges: These are the charges levied by the stockbroker for the services offered. And are imposed on the transactions you do in the share market. It can be a percent of the transacted value (charged by full-service broker) or a flat fee per order, independent of the transaction value (charged by discount broker).
  • Demat and trading account opening charge: It is the fee for opening a Demat and trading account. Some stockbrokers provide the option to open free accounts. However, Demat AMC will be applicable.

Conclusion

Demat and trading accounts are integral components of stock market investing. Without these accounts, digital stock trading would not be possible. A Demat account ensures the safekeeping of securities, while a trading account enables transactions. Despite their distinct functions, they are seamlessly integrated through technology, allowing investors to engage in stock trading effortlessly.

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1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.

Standard Disclaimer

Investments in the securities market are subject to market risk, read all related documents carefully before investing.

Research Disclaimer

Broking services offered by Bajaj Financial Securities Limited (BFSL) | Registered Office: Bajaj Auto Limited Complex , Mumbai –Pune Road Akurdi Pune 411035 | Corporate Office: Bajaj Financial Securities Ltd,1st Floor, Mantri IT Park, Tower B, Unit No 9 & 10, Viman Nagar, Pune, Maharashtra 411014| CIN: U67120PN2010PLC136026| SEBI Registration No.: INZ000218931 | BSE Cash/F&O (Member ID: 6706) | DP registration No : IN-DP-418-2019 | CDSL DP No.: 12088600 | NSDL DP No. IN304300 | AMFI Registration No.: ARN – 163403|

Research Services are offered by Bajaj Financial Securities Limited (BFSL) as Research Analyst under SEBI Regn: INH000010043. Kindly refer to www.bajajfinservsecurities.in for detailed disclaimer and risk factors

This content is for educational purpose only.

Details of Compliance Officer: Ms. Kanti Pal (For Broking/DP/Research)|Email: compliance_sec@bajajfinserv.in/Compliance_dp@bajajfinserv.in |Contact No.: 020-4857 4486 |

Investment in the securities involves risks, investor should consult his own advisors/consultant to determine the merits and risks of investment.

Frequently asked questions

Do I need both - a Demat and a trading account?

To make the transactions seamless and convenient, a trading account and a Demat account are required. The Demat account is a repository of your financial securities but is not enough to trade. For transacting, you need to have a trading account with a brokerage house.

However, a trading account is sufficient if you are trading on futures and options which do not require delivery of shares. When an investor wants to hold the shares and is not interested in trading them, a Demat account is sufficient.

Who can apply for a Demat and trading account?

Regardless of age or residential status, anyone can apply for a Demat and trading account. Contrary to popular belief, age is not a criterion. When a minor investor has attained the age of 18, the depository participant may ask for know your client (KYC) form to create a new account. Essentially, your PAN card, along with the KYC form, is required to open a Demat and trading account.

Is a Demat account different from a trading account?

Yes, a Demat account and a trading account serve distinct purposes. A Demat account is a digital account that enables investors to store shares and other securities electronically, while a trading account allows investors to purchase and sell shares and other securities on stock exchanges.

What is a Demat and trading account?

A Demat account is used to hold shares and other securities in digital form, eliminating the need for physical certificates. A trading account, on the other hand, is used to execute buy and sell orders in the stock market. Together, these accounts form the foundation of stock market investing by ensuring that securities are securely stored and transactions are efficiently carried out.

Are trading account and Demat account the same?

No, a trading account and a Demat account are not the same. A Demat account holds securities in electronic form, whereas a trading account is used to place orders for buying and selling in the stock market. Additionally, a Demat account is provided by a Depository Participant registered with a depository, while a trading account is offered by a stockbroker registered with a stock exchange.

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