Can a Demat Account Be Opened Without a PAN Card?

If you’re a new investor, getting started with your investment journey may seem confusing or challenging at first. However, with a little patience and the right knowledge, you can make the journey easy and hassle-free.

The first step towards investing in the Indian financial markets is opening a demat account. It is a mandatory prerequisite for buying and selling stocks and other assets via the exchanges. One of the documents you need to submit as a part of the demat account opening process is the PAN card.

PAN, also known as the Permanent Account Number, is a unique 10-character alphanumeric number assigned by the Income Tax Department of India. Every tax-paying citizen is mandatorily required to apply for and obtain a PAN.

But what if you don’t have a PAN card? In this article, we’re going to look at whether you can open a demat account without a PAN card. But before we get into the specifics, let’s quickly skim through the concept of demat accounts.

What is a Demat Account?

A demat account is a unique digital account that’s used to store a wide range of securities like stocks, debentures, bonds and mutual fund units in an electronic format. When you purchase securities, they’re credited to your account, where it is stored safely and securely until you decide to sell them. And when you do sell them through the financial markets, they’re debited from your account.

How to Open a Demat Account?

According to the rules and regulations of SEBI (Securities and Exchange Board of India), a demat account is mandatory to purchase or sell securities in the Indian financial markets. Here’s a brief overview of the steps you need to follow to open one.

• Step 1: Choose A Depository Participant

  In India, only two depositories currently offer demat accounts - the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL). However, you cannot open a demat account directly through these entities.
  Instead, you need to approach a depository participant (DP). A DP is an entity that acts as an intermediary between you and a depository. Most stockbroking entities in India also act as depository participants.

• Step 2: Fill Out The Demat Account Opening Application

  Once you’ve selected a depository participant, fill out and submit the demat account opening application. When filling out the application, remember to enter all the relevant and mandatory details in the application to ensure that the account opening process goes smoothly.

• Step 3: Submit The Demat Account Opening Application

  After filling out the application, submit it with the depository participant along with all the necessary documentary evidence.
  That’s it. Once the application is submitted, a demat account will be opened in your name once the verification by the depository participant is complete.

Note: Most stockbrokers cum depository participants allow you to open a demat account online through a paperless process. The entire process is done online and takes only a few minutes to complete. You even get access to your account within a few hours.

Documents Required for Opening a Demat Account

Now, before we take a look at whether you can open a demat account without a PAN card, let’s go through the list of documents you need to submit as part of the application process.

• PAN Card

• Proof of Identity - Passport, Aadhaar, Voters ID or Driving Licence

• Proof of Address - Aadhaar, Passport, Driving Licence or Voters ID

• Proof of Bank Account - bank account passbook or bank statement not older than three months

• Proof of Income - latest salary slips or Income Tax Returns (ITR)

• Signed Power of Attorney (POA) document

Note: The documents required for opening a demat account may vary depending on the depository participant.

Can I Open a Demat Account Without a PAN Card?

Now, coming to the main part of the article, the Securities and Exchange Board of India (SEBI) is the authority that governs the Indian Financial markets. According to the rules enacted by SEBI, you cannot open a demat account without a PAN card.

Since a demat account should be linked to a PAN to enable the Income Tax Department to keep track of your financial transactions, SEBI rules mandate the submission of the PAN card at the time of account opening. Even Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO) are required to submit a valid PAN card to open a demat account in their name in India.

That said, certain individuals and entities are exempt from this requirement. Here’s a list of entities and individuals that can open a demat account without a PAN card.

• Entities that are exempt from paying taxes in India

• Individuals residing in the state of Sikkim

• Individuals belonging to a Scheduled Tribe (ST) located in Manipur, Mizoram, Arunachal Pradesh, Tripura, Nagaland and North Cachar Hills in Assam

Note: Scheduled Tribes belonging to the regions mentioned above may open a demat account without a PAN card only if their total investment value does not exceed Rs. 50,000. If the value of their investments exceeds Rs. 50,000 at any point after the opening of the demat account, they will be required to submit a PAN card to continue operating the account. Failure to submit the PAN card can lead to a temporary account freeze.

How to Open a Demat Account Without a PAN Card?

If you belong to any of the above-mentioned exempted category individuals or entities, here’s what you need to do to open a demat account without a PAN card.

Firstly, you will need to notify your depository participant that you belong to the exempted category. If you’re an entity exempt from paying taxes in India, you will be subject to verification of your tax-paying status before the demat account is opened. On the other hand, if you’re an individual located in Sikkim, the account will be opened subject to the verification of your residence proof.

Apart from the additional verification step, the process for opening a demat account for entities and individuals in the exempted category is largely the same.

Conclusion

With this, you must now be aware of the fact that opening a demat account without a PAN card is not possible unless you feature in the exempted category of investors. Therefore, if you’re interested in participating in the Indian financial markets, it is advisable to apply for a PAN (if you don’t have one) before opening a demat account. This way, you can ensure that the demat account opening process is seamless and hassle-free.