Trading Account and Demat Account | Meaning, Uses & Key Differences

Key Takeaways

• Residents of India can open a Zerodha demat account for free from June 29, 2024, which lowers the onboarding costs for new investors.

• Equity delivery trades at Zerodha have no brokerage, while intraday and F&O trades cost ₹20 or 0.03% per order (whichever is lower).

• HDFC Securities reduces the initial cost of holding securities by providing free first-year AMC and zero demat opening fees.

“Have you ever wondered why your shares don't appear in your trading account until they are transferred to your demat account?”

A demat account is the digital safe where my purchased securities are kept, while a trading account functions similarly to the cash register where I place orders. 

For example, I invested ₹100,000 in listed stocks, the shares that result are reflected in my demat account after the trade order is processed through my trading account. Let's go over each account's function, explain why it matters, compare sample fees, and help you select the best broker model in this blog.

What is a Demat Account?

“A Demat account allows you to buy, hold, and sell securities safely and conveniently,”  states the official HDFC Bank website. The demat account is the basis for holding securities. I can hold shares, bonds, ETFs, mutual funds, and other assets electronically rather than with physical certificates via a demat (dematerialized) account. 

For example, when I purchase shares of Company X, they are credited to my demat account upon settlement. I am not able to properly hold or transfer shares without a demat account. As a result, I must participate in delivery-based investing.

What is a Trading Account?

Money is transferred from your savings account to your trading account when you place a buy order. Within T+1 days, transfer credit to the associated Demat account. Money and securities transactions are managed by the trading account. 

I execute buy and sell orders in the stock market using a trading account. For this reason, it connects my bank and demat account. I am not capable of placing orders without it, and without successful trades made through the trading account, nothing can be stored in the demat account.

Difference between Trading and Demat Account 

Consider functionality, asset flow, and cost when comparing the difference between trading and demat account:

The trading account serves as the execution part. It keeps track of trade costs, registers orders, manages funds, and protects against institutional and regulatory fees at the transaction point. 

The demat account serves as the custodial part. It imposes holding and servicing costs, records ownership, and makes corporate actions (such as dividends, splits, and buybacks) easier.

Demat and Trading Account Charges Comparison

Here is a demat and trading Account Charges comparison table from three major providers to help you compare standard costs:

Use the table above. Your effective all-in cost is the sum of your trading and demat costs to calculate your cost base for both trading activity and holding portfolio.

Bonus Tip: Securities and Exchange Board of India (SEBI) has proposed new technology-based security measures that apply to both trading accounts and demat accounts. These include device/SIM-binding for trading account access and stronger authentication for demat accounts. 

Conclusion 

My demat account keeps what I own, while my trading account moves money and executes orders. We compared the cost side from brokers like ICICI Direct, HDFC Securities, and Zerodha to let you know what you should expect. Make your investing journey easier by checking both parts when you open accounts.

FAQs on Trading Account vs Demat Account 

What is the difference between a demat account and a trading account?

A demat account is used to store your securities (shares, ETFs, bonds, mutual funds) in digital form. A trading account is used to buy and sell securities in the stock market. The trading account executes the transaction, and the demat account holds the result of that transaction.

Is a different nominee for demat and trading accounts possible?

Yes, you can have a different nominee for your demat account and your trading account, because both are treated as separate accounts. Nomination is set individually for each account.

How do I open a “Demat account” and “trading account”?

You can open a Demat account and a trading account together with any registered broker. You only need to complete a simple online process:

1. Choose a SEBI-registered broker (like Zerodha, ICICI Direct, HDFC Securities, etc.).
2. Fill in your basic details such as name, PAN, mobile number, and email.
3. Upload KYC documents (PAN, Aadhaar, photo, and bank proof).
4. Complete e-sign and in-person verification through webcam or Aadhaar OTP.
5. Once verified, your trading and demat accounts are activated, and you can start investing.

 How do I know my trading account and demat account numbers?

You can find your trading account number and demat account number directly in your broker’s app or welcome email.

• Your demat account number (DP ID + Client ID) is usually shown under Profile, Account Details, or Demat Details in the app.
• Your trading account number is shown in the same section, often labelled as Client ID, Trading ID, or Login ID.

You can also check both numbers in the account opening confirmation email sent by your broker after your account was approved.

Can I use the same demat account with different trading apps?

Yes, you can link one demat account with multiple trading platforms, but it depends on the broker's policies. Some platforms require you to use their own trading account.

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.