Benefits and Disadvantages of Having Multiple Demat Accounts

Introduction

If you are reading this article, chances are you are already familiar with the concept of a demat account. Perhaps you already own a Demat account and wish to open another one. However, having more than one Demat account can be a dilemma for many. Wondering if you can have more than one demat account? If the answer is yes, we are here to help. 

In this article, we answer your question “Can I have more than one demat account” and the benefits and disadvantages of having two demat accounts in India.

Things to Know While Opening Multiple Demat Accounts

“Can we have two demat accounts?” The answer is yes. It is legally permitted to have more than one demat in India. The only requirement is that you need to open it with a different broker. This way, you can also have more than two demat accounts. You can consider the below points before opening multiple demat accounts.

Single Account Per Broker

You can only open a single demat account with a broker. As a result, you need to have separate brokers if you wish to have multiple demat accounts. This involves navigating various fee structures, rules, and interfaces.

Organized Investment Management

Managing multiple demat accounts helps you better organise your investment strategies. You can use different demat accounts for different goals and purposes. For example, you can use one for intraday trading and invest in the long-term from the other.

Security of Stocks

Depositories such as the Central Depository Services Ltd (CDSL) and the National Securities Depository Ltd (NSDL) hold your assets in a digital format. This guarantees the security of your stocks regardless of the brokers you choose. Your investments are further safeguarded by the records kept by these depositories.

Requirements to Open Multiple Demat Accounts

Now that you know the answer to “Can I have more than one demat account”, let's cover the requirement aspect. You need to submit the following documents in order to open multiple demat accounts. If you are opening a second demat account with Sharekhan, we will ask you to share:

• PAN Card: This helps link your demat account to your financial records for seamless transactions. Additionally, it is also mandatory by SEBI.
• Address Proof: A recent utility bill, passport, or Aadhaar card helps us verify your residency address.
• Identity Proof: A valid passport, Voter ID, or Aadhaar card helps us confirm your identity.
• KYC: The Know Your Customer (KYC) process is a quick verification step that all financial institutions are required to follow.

Once done, your demat account opening process with Sharekhan is completed and we will mail you an onboarding mail.

Benefits of Having Multiple Demat Accounts

Having multiple demat accounts has several advantages as mentioned below.

Diversified Investment Opportunities

One of the primary benefits of having multiple demat accounts is the ability to diversify your investments. For instance, if you have two demat accounts you might use one account for investment and another for futures and options (F&O). This segregation helps you manage your portfolio efficiently and keep track of your holdings more effectively.

Access to Various Broker Services

Different brokers offer different services, insights, and market news. By having multiple demat accounts, you can benefit from several brokerage services, including diverse charts and stock analysis, which can enhance your trading experience and market knowledge. For instance, Sharekhan allows you access to its TradeTiger platform.

Ease of Tax Computation

Having two demat accounts can also help you compute taxes on your short-term and long-term gains easily and efficiently. For example, if you are using only one account for trading, you can request the account statement near the financial year to know the status of your short-term gains and your tax liability. This reduces the time needed to segregate STCG and LTCG and gives a clear picture in case you need to do a reconciliation.

Disadvantages of Having Multiple Demat Accounts

While there are benefits to having multiple demat accounts, they also come with certain cons. Here are some of the disadvantages that you must consider:

Increased Costs

The cost of managing multiple demat accounts is one of the main drawbacks. There are fees associated with each demat account, such as transaction fees and annual maintenance fees. For instance, the Demat account maintenance charge can range from ₹300 to ₹800 per account. These costs can mount up and reduce the profits of your investments.

Time and Effort

Multiple demat accounts can take your time to oversee different holdings in different demat accounts. Some investors, particularly those with limited time, may find it unnecessary to put in this extra effort.

Risk of Overtrading

Access to many brokers and accounts increases the possibility of overtrading. The temptation to make more trades than you can afford may result in increased transaction fees. To prevent this, you need to be disciplined and follow your investment or trading plan.

How to Manage Multiple Demat Accounts?

Here are two ways to manage demat accounts with ease.

Regular Monitoring of Holdings

To stay up to date on transactions and account status, review your demat accounts on a regular basis. Additionally, setting reminders to check each demat account can help you avoid missing essential updates or paying excessive fees.

Consolidate When Possible

If monitoring multiple accounts gets too complicated, consider consolidating them. Transferring holdings from one account to another can simplify your financial management while reducing the burden of Demat accounts you need to manage. 

Use Technology

Technology such as portfolio management software can help with handling multiple demat accounts. You can use such software or apps to combine data from all of your accounts into a single platform, making it easier to track investments and transactions.