Share Trading requirements for Beginners in India
There are a few basic requirements that need to be in place before an individual can start the process of buying, holding and selling shares. The 3 basic things needed for getting started are:
* Trading Account
* Dmat Account
* Bank Account
Trading Account
A Trading account is essential if an individual needs to buy and sell shares in the stock exchange. The 2 main stock exchanges in India are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). A Trading account can also be opened with most banks and financial institutions, after filling up the required forms and providing identity and address proofs. The actual trading can be done by phone, internet. There are options to specify the price at which to buy or sell and it is easy to track the online status. In addition, there is a brokerage charge that is incurred for both buying and selling of shares. This charge differs across different trading houses. Also, government levies like the Securities Transaction Tax will be incurred on such transactions.
Dmat Account
A Dmat account is like a Bank Account. A Dmat account holds shares. So, if shares are bought, they are deposited into the buyers Dmat account and if shares are sold, they are reduced accordingly from the Dmat account. The electronic shares are deposited to or reduced from the Dmat account. Dmat shares have many advantages.
With the help of most banks and financial institutions you can open a Dmat account. For you need to fill up the required forms and submit the documents such as address proofs and identity proof. Let’s talk about the usual charges of this account below:
1. Opening charges of account
2. Yearly charges for maintaining the Dmat account
3. Recurring periodic charges for holding shares in the Dmat account
4. Other service charges based on transactions carried out. Usually, there are no transaction / service charges when shares are bought. The charges will be levied when shares are sold.
Bank account
A Bank account is where the money will be credited on sale of shares or money will be debited for buying shares. Undoubtedly, Bank account is required for carrying out a variety of financial transactions connected with trading of shares. It is a normal Savings Account and nothing additional needs to be done with the Bank account.
Trading process
Once the Dmat account, Trading account and Bank account are in place, an individual is ready to start trading. If you have the Dmat account, Trading account and Bank account with the same organization, then you can get offered additional convenience, especially for individuals trading using the internet. The following example of buying and selling using a Trading account on the internet illustrates the convenience of having the Dmat account, Trading account and Bank account with the same organization.
Buying shares: People log into the Trading account and state the details like the Company name, no. of shares to buy and the price at which to buy, when they want to buy a share. The required amount from the Bank account is kept aside for this trade relying on this information. The trade is executed and the amount is debited from the Bank account and the shares are credited into the Dmat account, when the desired price is reached.
Selling shares: When People want to sell a share, they logs into the Trading account and specifie the details like the Company name, no. of shares to sell and the price at which to sell. Relying on this information, the required no of shares from the Dmat account is set aside for this trade. When the desired price is reached, this trade is executed and the shares are debited from the Dmat account and the amount is credited to the Bank account.
There will be additional government taxes like STT and Service Tax, apart from the charges that are levied by the Bank. Please make sure to read all the terms and fee details of the service providers before opening any account.
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