Can you open a demat account without a PAN card? MintGenie answers
Investors generally cannot open demat accounts without PAN cards in India. Market regulator Securities and Exchange Board of India (SEBI), through its circular dated April 27, 2007, has mandated the requirement of PAN cards for individuals engaging in securities transactions in India.
A demat account is a must if you want to trade in stocks. It functions much like a bank account for stock market transactions. It digitally records all activities in the stock market and maintains electronic records of various financial instruments. These accounts offer numerous advantages to individuals interested in trading shares, bonds, ETFs, and mutual funds.
One of the key benefits of demat accounts is their ability to streamline trading processes and reduce the risks associated with paper-based transactions such as loss, damage, or theft. Opening a demat account is typically a straightforward and swift process, with uniformity across brokerage firms, banks, and other financial institutions that facilitate online trading.
Read here: How does a demat account facilitate trading in derivatives?
However, many investors wonder whether a demat account can be opened without a PAN card.
The clear answer is NO. A PAN card is a MUST if you want to open a demat account as well as a trading account.
What is a PAN card?
Possessing a PAN (Permanent Account Number) is paramount for every Indian citizen. This unique identifier consolidates all financial transactions in one central record. The Income Tax department identifies PAN as the sole identification of all your transactions in the securities market, regardless of the amounts. The law allows a person to hold only one PAN card. Once generated, your PAN number does not change throughout your lifetime, even when you move to other cities or countries.
Read here: Demat account: 9 best ways to track your stock portfolio efficiently
Can you open a demat without a PAN card?
Investors generally cannot open demat accounts without PAN cards in India. Market regulator Securities and Exchange Board of India (SEBI), through its circular dated April 27, 2007, has mandated the requirement of PAN cards for individuals engaging in securities transactions in India. As per the circular, it's imperative to furnish a PAN card while opening a demat account, irrespective of the investment's purpose or size.
PAN is essential for conducting financial transactions, including buying and selling securities, and is used for tax purposes as well. This regulatory measure aims to enhance transparency and accountability in the securities market by ensuring proper identification of investors and facilitating tax compliance.
During the account opening process, the applicant is required to present the original PAN card. Additionally, they must provide a self-attested copy of the PAN card along with other necessary documents. In cases where there are multiple holders for a demat account, all joint account holders are obligated to submit their PAN details. While there's no restriction on the number of demat accounts an individual can open, all accounts linked to an individual are associated with a single PAN card.
Read here: What are the latest features available in demat accounts?
The PAN card serves as a unique identifier for individuals engaging in financial transactions. It helps in tracking financial transactions to prevent tax evasion and ensure compliance with regulatory requirements. Therefore, to open a demat account with any registered depository participant (DP) in India, you must have a PAN card.
Exemptions
When it comes to opening a demat account, a PAN card is an indispensable requirement. While some seek alternatives to open a demat account without providing their PAN number, it's crucial to note that a PAN card is typically mandatory unless certain exemptions apply.
For instance, individuals exempted from obtaining a PAN due to specific circumstances may open a 'limited purpose beneficiary owner account,' allowing them to sell existing physical securities. Residents of select regions like Arunachal Pradesh, Manipur, Mizoram, Tripura, Nagaland, and certain areas of Assam's North Cachar Hills can open demat accounts without a PAN if their investment in securities remains below Rs. 50,000.
Read here: Demat account: Forgot your password? Here's what to do next
Additionally, entities falling under section 12 of the SEBI Act of 1992 are exempt from providing PAN cards for demat account opening. However, these accounts are subject to freezing after a month if a PAN card isn't furnished.
Certain organisations, such as UN agencies and tax-exempt bodies, are also exempt from PAN card submission for demat account verification. Similarly, residents of Sikkim can open demat accounts without a PAN if they furnish proof of residence. In all other circumstances, obtaining a demat account without a PAN card is typically not feasible.
Ultimately, a PAN card is a prerequisite for opening a demat account for both Indian citizens and NRIs, except in cases where exemptions apply. PAN remains a vital document in India, particularly for those venturing into securities trading and other financial activities.
Read here: Demat Accounts: All you need to know about the charges associated and how to reduce them
FAQs
What is a PAN card?
A PAN (Permanent Account Number) card is a unique 10-digit alphanumeric identifier issued by the Income Tax department of India to individuals, firms, and entities. It serves as a key identity and reference number for various financial transactions.
Who needs to obtain a PAN card?
Any individual or entity engaged in financial transactions, including earning taxable income or investing in securities, requires a PAN card. This includes Indian residents, non-residents, and foreign nationals conducting business in India.
How can I apply for a PAN card?
You can apply for a PAN card online through the NSDL (National Securities Depository Limited) or UTIITSL (UTI Infrastructure Technology and Services Limited) websites, or offline by submitting Form 49A (for individuals) or Form 49AA (for entities) along with required documents and fees at PAN application centers.
Read here: Can you open a demat account in India as an NRI?
Is it possible to have multiple PAN cards?
No, it is illegal to possess more than one PAN card. Each individual or entity is allowed only one PAN card, which serves as a unique identifier for all financial transactions.
Is there an expiry date for PAN cards?
No, PAN cards do not have an expiry date. Once issued, a PAN card remains valid for a lifetime and does not require renewal.
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