How to Open a Joint Demat Account?

Written by Jainam Resources

Last Updated on: December 2, 2024

Introduction

We all know about a demat account, but what is a joint demat account? Ever thought about Opening a joint demat account? In this article, you will understand everything about a joint demat account. 

Managing your investments efficiently is crucial, and opening a joint demat account can be a great way to streamline the process and share investment responsibilities with a partner or family member. Whether new to investing or looking to diversify your portfolio, a joint demat account offers a convenient and secure way to hold and trade securities.

Let’s understand what a joint demat accounts is, how to open a joint demat account online, and the factors associated with it. 

What is a Joint Demat Account?

A Joint Demat Account is similar to a regular Demat account but is held by more than one person, typically up to three individuals. This type of account allows multiple account holders to hold and trade securities together. It’s beneficial for families, spouses, or business partners who want to manage investments collectively.

Types of Joint Demat Accounts

1. Joint Demat Account with Equal Rights (Joint Holding):

In this type of account, all account holders have equal rights and can operate the account independently. Any Demat Account joint holders can initiate transactions, such as buying or selling securities, without needing approval from the other holders. This setup is often preferred by spouses or business partners who trust each other and want seamless management of their investments.

2. Joint Demat Account with Conditional Rights (Either or Survivor Holding):

This type of account can be operated by any one of the account holders during their lifetime. After the demise of one holder, the surviving holder(s) can continue to operate the account. This is beneficial for ensuring continuity in managing investments without the need for legal formalities after the demise of an account holder.

3. Joint Demat Account with Designated Rights (Former or Survivor Holding):

In this type of account, the first holder (former) has the primary right to operate the account. The second holder (survivor) can only operate the account after the demise of the first holder. This setup provides a clear hierarchy and is often chosen when one person wants to maintain primary control during their lifetime.

Read More: Basic Service Demat Account

Features and Benefits of Joint Demat Accounts

• Shared Ownership: All demat account joint holders have a shared interest in the securities held in the account.
• Convenience: It simplifies the process of managing investments collectively, avoiding the need for multiple individual accounts.
• Flexibility: Depending on the type of joint account, it can offer flexibility in terms of operation and continuity.
• Succession Planning: Joint accounts, especially “Either or Survivor” and “Former or Survivor,” facilitate the smoother transfer of holdings in case of the demise of a holder.

Steps To Open a Joint Demat Account

Joint account opening online involves several steps to ensure that all account holders are properly registered and comply with regulatory requirements. Here’s a detailed guide to the process:

1. Choose a DP & Fill The Form:

• The first step is to select a depository participant (DP) with whom you want to open the joint Demat account. DPs are agents of the depositories (like NSDL or CDSL) that offer Demat services. Consider factors like service quality, fees, and convenience.
• Obtain the joint account opening form from the chosen DP. This form will require details of all joint holders.

2. Complete KYC Documentation:

Each joint holder must submit Demat account KYC documents, which typically include:

• Proof of Identity: PAN card (mandatory).
• Proof of Address: Aadhaar card, passport, voter ID, utility bills, etc.
• Photographs: Recent passport-sized photographs of each holder.

Some DPs might also require income proof for certain types of accounts.

3. Provide Bank Account Details:

• Submit a canceled cheque or a copy of the bank statement/passbook to link your bank account with the Demat account. This is necessary for smooth fund transfers during transactions.

4. In-Person Verification (IPV):

• All demat account joint holders must undergo In-Person Verification (IPV). This can be done either physically by visiting the DP’s office or virtually through a video call, depending on the DP’s process.

5. Nomination Form:

• You have the option to fill out a nomination form to nominate someone who will inherit the holdings in case of the demise of all account holders.

6. Sign the Agreement:

• All demat account joint holders must sign the agreement that outlines the terms and conditions of holding and operating the joint Demat account.

7. Submit the Application:

• Submit the completed application form along with all required documents to the DP.

8. Verification by DP:

• The DP will verify all the provided documents and information. If everything is in order, they will process your application.

9. Receive Account Details:

• Upon successful verification, the DP will provide you with your Demat account details, including the account number (also known as Beneficiary Owner ID) and other relevant information.

10. Activate the Account:

• The joint Demat account is now active and ready for use. You can start transferring securities and buy & sell shares through this account.

Important Considerations

• Ensure that all joint holders are fully informed and consent to the opening and operation of the joint Demat account.
• Understand the rights and operational procedures, especially if opting for “Either or Survivor” or “Former or Survivor” types of accounts.
• Be aware of the charges associated with the Demat account, such as annual maintenance fees, transaction fees, and any other applicable charges.
• The form must be signed by all joint holders.
• A nominee can be appointed for the account to ensure the transfer of securities to a designated person in case of the demise of all joint holders.

You may also want to know 3 in 1 Demat Account

Joint Account Holder Rights and Responsibilities

Demat Account Joint holders have shared ownership and operational rights, which vary based on the type of joint account. They are collectively responsible for compliance, account maintenance, and resolving disputes.

Rights

1. Ownership Rights:

All joint holders have a shared ownership of the securities held in the joint Demat account. This means each holder has an equal claim to the securities unless otherwise specified.

2. Operational Rights:

Depending on the type of joint account, operational rights vary:

• Joint Holding: All holders can independently operate the account.
• Either or Survivor Holding: Any holder can operate the account independently during their lifetime. After the demise of one holder, the survivor(s) can continue to operate the account.
• Former or Survivor Holding: The primary holder (former) operates the account. The second holder (survivor) can only operate it after the primary holder’s demise.

3. Voting Rights:

A joint holder in demat account can exercise voting rights for the securities held in the account. Usually, the first holder exercises these rights unless specified otherwise.

4. Access to Statements:

All joint holders can access account statements and transaction details.

5. Nomination Rights:

Joint holders can nominate a person to inherit the securities in the event of their demise.

Responsibilities

1. Compliance with Regulations:

Joint holders must ensure compliance with all regulatory requirements, including KYC norms and other documentation.

2. Account Maintenance:

Joint holders are collectively responsible for the maintenance of the account, including paying any fees or charges associated with the account.

3. Transaction Authorization:

Depending on the account type, demat account joint holders may need to coordinate to authorize transactions. In some cases, consent from all holders may be required.

4. Tax Liabilities:

Joint holders must manage and report their tax liabilities associated with the account. This includes capital gains tax on the sale of securities.

5. Dispute Resolution:

Joint holders should have an agreement or understanding of how to resolve disputes that may arise in the operation of the account.

Read More: Corporate Demat Account

Tax Implications of a Joint Demat Account

Joint holders must manage and report tax liabilities related to income and capital gains from the account. The primary holder typically bears the tax responsibility unless income and gains are shared proportionally. TDS and gift tax may also apply.

1. Income Tax:

The income generated from securities (like dividends or interest) is taxable. The tax liability for this income generally falls on the first holder. However, if all joint holders share the income, it should be divided based on their respective shares and reported accordingly.

2. Capital Gains Tax:

When securities are sold, any profit made is subject to capital gains tax. The responsibility to pay this tax usually falls on the first holder, but if the gains are shared, each holder must report their share of the gains and pay tax accordingly.

3. Gift Tax: Ted at Source (TDS):

TDS may be applicable on dividends or interest earned on securities held in the Demat account. This TDS is usually deducted in the name of the first holder.

5. Filing Tax Returns:

Each joint holder must include their share of the income, capital gains, and any other earnings from the joint Demat account in their tax returns.

6. Double Taxation Avoidance Agreement (DTAA):

If any of the joint holders are non-resident Indians (NRIs), they may benefit from DTAA between India and their country of residence to avoid double taxation on income from securities.

Joint Account Rules in India

In India, there are specific rules and regulations governing joint demat accounts, including guidelines issued by the Securities and Exchange Board of India (SEBI). It is important to keep yourself updated with SEBI and its rules to ensure compliance and smooth operation of your joint demat account.

Advantages & Takeaways: Joint Trading Account

A joint trading account enables joint holders to participate in stock trading activities collectively, benefiting from shared decision-making and resource pooling. This can be advantageous for couples, family members, or business partners looking to invest in the stock market together.

Selecting the right firm for a joint brokerage account is crucial for managing a joint trading account efficiently. Consider factors such as brokerage fees, trading platform features, research tools, and customer support when choosing a brokerage that meets your investment needs and preferences.

Given the importance of security in online trading, it is essential to implement robust security measures for every type of joint share trading account. Utilize features such as two-factor authentication, secure passwords, and regular account monitoring to safeguard your investment holdings from unauthorized access.

The Bottom Line! 

A joint account opening online can be a strategic move for investors looking to secure their investment journeys. A Joint Account or a Demat account is a gateway to hassle-free share transfer after the demise of the primary account holder. There’s no need to go through all the complicated processes to get the money back in a joint demat account. 

So, will you create a joint demat account and safeguard your investments for the future? If yes, then don’t look any further! 

Open Demat Account with Jainam Broking Limited Now!