The term DEMAT stands for dematerialization. A dematerialized account is an online account that holds all the securities like shares, bonds, FDs, Mutual Funds, exchange, traded funds, etc., of the individual in a dematerialized form.
Until the year 1996, all the traders and investors used to hold their security in the form of paper. After the invention of the internet and technological advancement, traders and investors started holding their securities in digital form. Once the internet became accessible to all people, the situation changed, and now, they do not need to keep their investments in paper.
What is a DEMAT account for NRIs in Cape Town, South Africa?
In simple words, a dematerialized account is an electronic account open with the purpose of holding all the securities like stock, shares, bonds, etc. of the individual in an electronic form.
Like a normal bank account that holds your money, a DEMAT account holds your securities. The shares and stocks of the individual at transferred electronically to the DEMAT account of the individual. The transition from paperwork to dematerialization in India started in 1996. In 1996 the depository act passed and allowed for the setting up of depositories like National Security Depository Limited(NSDL) and Central Depository Services Limited (CDSL) that will hold DEMAT accounts. Many people do not know that the National Stock Exchange was India’s first fully automatic stock exchange. National Stock Exchange officially started in 1994, and DEMAT share trading on National Stock Exchange started in 1996.
NRIs in South Africa
The term “South Africa” comes from the country’s location at Africa’s southernmost point, formally known as the Republic of South Africa (RSA). The country was given the names Union of South Africa in English and Unie van Zuid-Afrika in Dutch upon its inception, reflecting its origins as the union of four formerly independent British colonies. The full formal name in English has been “Republic of South Africa” since 1961, and in Afrikaans, Republiek van Suid-Afrika. Each of the country’s 11 recognised languages has had an official name since 1994.
Capital – Bloemfontein (judicial), Cape Town (legislative), & Pretoria (executive)
Largest city – Johannesburg
Official languages- Afrikaans, English, , debele, Sepedi, Sesotho, Setswana, Swazi, Tshivenda, Xhosa, Xitsonga, Zulu
Population – 60,142,978 (2021 Estimate)
Area – 1,221,037 Sq. km
For much of the 20th Centuary, South Africa remoteness—it is thousands of miles from major African cities like Lagos and Cairo and more than 6,000 miles (10,000 km) from most of North America, Europe, and eastern Asia, where its major trading partners are located—helped to reinforce the official apartheid system.
With around 60 million inhabitants, the country ranks as the world’s 23rd most populous. Pretoria, Bloemfontein, and Cape Town are South Africa’s three capital cities, each housing the executive, judicial, and legislative branches of government. The largest city is Johannesburg.
The South Atlantic and Indian Oceans border South Africa on the south, Namibia, Botswana, and Zimbabwe on the north, and Mozambique, Eswatini, and the enclaved republic of Lesotho on the east and northeast. It is the most populous country south of the equator and the continent of the Old World’s southernmost country. With a diverse assortment of biomes, plants, and animals, South Africa is a biodiversity hotspot.
South Africa is a multicultural country with many different cultures, languages, and faiths. The constitution recognises 11 official languages, the fourth-highest number in the world, reflecting the country’s multicultural nature. According to the 2011 census, Zulu and Xhosa are the two most commonly spoken first languages (16.0%). The following two are European in origin: English (9.6%) symbolises the history of British colonisation and is widely used in public and business life.
Throughout the twentieth century, the black majority attempted to gain more rights from the country’s dominating white minority, which had a significant impact on the country’s recent history and politics. Apartheid was established in 1948 by the National Party, which formalised racial segregation. The repeal of discriminatory legislation began in the mid-1980s, after a lengthy and often violent campaign by the African National Congress (ANC) and other anti-apartheid activists inside and outside the nation.
In the country’s liberal democracy, which includes a parliamentary republic and nine provinces, all ethnic and linguistic groups have had political representation since 1994. South Africa is frequently referred to as the “rainbow nation” to represent the country’s multicultural richness, particularly since apartheid ended.
South Africa is a global upper-middle power with major regional influence and membership in both the Commonwealth of Nations and the G20. It is a developing country, with a Human Development Index of 114. It is a recently industrialised country, according to the World Bank, with the second-largest economy in Africa and the 33rd-largest in the world. In Africa, South Africa has the most UNESCO World Heritage Sites. South Africa’s government accountability and quality of life have significantly improved after the end of apartheid. However, violence, poverty, and inequality persist, with about a quarter of the population unemployed and living on less than US$1.25 per day in 2008.
Constitutional Framework of South Africa
The South Africa Act of 1909, enacted by the British Parliament, merged the Cape of Good Hope and Natal, two former British territories, with the Transvaal and Orange Free State, two former Boer (Dutch) republics. The new South African Union was built on a parliamentary system, with the British queen serving as the head of state. The Republic of South Africa Constitution Act of 1961 made the nation an independent republic from a British Commonwealth dominion.
South Africa’s political evolution has been affected by its colonial past and the white minority’s adoption of apartheid policies. A new nonracial interim constitution was ratified in 1993 and took effect in 1994, following massive protest and social instability. In 1997, the interim text necessitated a new, permanent constitution, which Parliament prepared in 1996.
Cultural life Of South Africa
South Africa is a study in contrasts, blending Western technology with indigenous technology, Western customs with African and Asian cultures. It also teaches about how cultures can sometimes blend, sometimes clash; for example, the villas of South Africa’s white elite and the tar-paper shacks of Black day labourers, office buildings with the most sophisticated electronic wiring and one-room houses without electricity are all within a short distance of one another. In terms of education and economic opportunities, there is still a significant divide between the white minority and the black majority. Nonetheless, South Africa is steadily removing some of these historical inequalities and their repercussions.
Eligibility criteria to open a DEMAT account for NRIs in Cape Town, South Africa
Following are the eligibility criteria that an individual is strictly required to meet while opening a DEMAT account for NRIs in Cape Town, South Africa.
Age
You need to know that there is no restriction on age. There is no minimum age to invest in the Indian stock market, so there is no need to be 18 years old in order to open a DEMAT account. A minor and an adult are equally eligible to invest in stocks. After submitting the required documents, one can open a DEMAT account in a minor’s name through the parents or the guardian. Here you need to remember that the guardians will be the incharge of the account until the minor or children reach adulthood. Once the minor turns 18, the depository participant will send the advisory to the individual and obtain the Know Your Client (KYC) documents to transfer details to a new account.
Verification of PAN and KYC of NRIs in Cape Town, South Africa
A Permanent Account Number (PAN) card is a must-have thing that an individual should possess to open a DEMAT account. You need to submit a copy of your Permanent Account Number (PAN) card with Know Your Client (KYC) documents for opening or DEMAT account. The Know Your Client (KYC) process is shifting to the online platform that uses the Aadhaar card of the individual to verify the details.
How does a DEMAT account works for NRIs in Cape Town, South Africa?
DEMAT account holds all the security of the individual in electronic forms, so one cannot trade in the stock market without a DEMAT account. To use a DEMAT account as an NRIs in Cape Town, South Africa, you need to know how it works.
There are some basic things that you need to know in order to understand the working of DEMAT accounts: –
Central depository: – They are of two types: Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL). These two depositories hold the stock account of the individuals for them.
Unique ID: – Every DEMAT account is allotted a unique ID for identification. The unique ID is necessary for transactions and helps the companies correctly identify the individual to credit shares into their account.
Depository Participants (DP): – Depository participants provide access to the individual stock account held by the central depository. Depository participants are also called brokers who act as intermediaries between the central depository and investor. Depository participants can be traditional banks, financial institutions, or discount brokers.
Portfolio holding: – Portfolio holding carries all the details of the account’s transaction, and those details are automatically updated every time a transaction happens.
Different types of DEMAT accounts for NRIs in Cape Town, South Africa
By having a broad understanding of different types of DEMAT accounts for NRIs in Cape Town, South Africa, you will be able to choose the ideal account for you. The DEMAT accounts are classified into three categories for NRIs in Cape Town, South Africa given below.
All three of them are comprehensively explained below: –
Regular DEMAT account for NRIs in Cape Town, South Africa
First is a regular DEMAT account which is needed for investors who reside within India. A regular DEMAT account is used by Indian resident investors and is ideal for those who deal with equity shares alone. In a regular DEMAT account, the shares that an individual buys are safely stored in the digital format, and the shares that the individual sells are taken from it. If you are planning to invest in the future and options, then you don’t need to have a regular DEMAT account because the future and options come with expiry dates; therefore, they don’t need to be stored.
Securities Exchange Board of India (SEBI) has recently introduced a new type of DEMAT account called the Basic Service DEMAT Account (BSDA). Basic Services DEMAT Account (BSDA) is quite similar to the regular DEMAT account, but there is one difference between the two. No maintenance charges are imposed if the individual is holding the Basic Services DEMAT Account (BSDA) within rupees 50,000. If the individual is holding between 50,000 to 2 lakh rupees, then there will be 100 rupees charged per annum. The Securities Exchange Board of India (SEBI) wanted to financially include and aid the investors who are untouched by the stock market, need to open their DEMAT account, and wish to participate in stock markets.
Repatriable DEMAT account for NRIs in Cape Town, South Africa
The second is the Repatriable DEMAT account for NRIs in Cape Town, South Africa. These types of accounts are used for non-resident Indians. A repatriable DEMAT account allows the individual to transfer their wealth abroad. The investor needs to link the Non-Resident External (NRE) bank account. Once an individual is entitled as a Non-Resident Indian (NRI), they must close their regular DEMAT account. After closing the previous regular DEMAT account, the individual can transfer the shares into a Non-Resident Ordinary (NRO) DEMAT account. In case you are willing to sell the shares, you must know that a restriction on repatriation comes into force. Following the restriction on repatriation, you are allowed to repatriate a maximum of one million USD in a calendar year (January to December).
Non-Repatriable DEMAT account for NRIs in Cape Town, South Africa
These are the second DEMAT account option available to the Non-Resident Indians (NRI) in Cape Town, South Africa. Non-Repatriable DEMAT accounts do not allow Non-Resident Indians (NRI) to transfer their funds abroad. Non-Resident Indian (NRI) investors willing to hold a non-Repatriable DEMAT account need to link their Non-Resident Ordinary (NRO) savings account with a DEMAT account. Before becoming an NRI, the individual with a regular DEMAT account can transfer to the non-Repatriable DEMAT account category. One can do this without losing shares or even requesting to open a new account.
Things to remember while opening a DEMAT account as an NRIs in Cape Town, South Africa
You should always keep the below-given things in mind while opening a DEMAT account as an NRIs in Cape Town, South Africa: –
Follow the prescribed rules of SEBI by NRIs in Cape Town, South Africa
To open a DEMAT account, then individual needs to select a SEBI registered intermediary that offers a two-in-one service. Two-in-one service means that it works both as a DEMAT account and trading account. Registered brokers at SEBI need to adhere to the prescribed rules and regulations.
Hire a broker or a Firm by NRIs in Cape Town, South Africa
The individual needs to select a broker or a firm, and the broker must respond to the demands on time. Always remember that in the stock market, time is everything. In the world of finance, time is money, so having a good broker is a very mandatory condition. A broker can change the game; either he can make you or break you.
Always do detailed research by NRIs in Cape Town, South Africa
You should always compare the rates of the brokerage companies and firms as the majority of brokerage or firms charge processing fees. In contrast, some brokerages impose zero fees on certain financial products. Besides, some firms or brokerages have certain financial products for zero brokerage.
How to open a DEMAT account as an NRIs in Cape Town, South Africa?
Opening a DEMAT account is a two-step process for NRIs in Cape Town, South Africa. After submitting the documents, the individual must fill out the application form.
Step one: Fill out the DEMAT account opening application form by an NRIs in Cape Town, South Africa
In the first step, the individual needs to fill out the form. First of all, download and print the DEMAT account opening form and enter all the necessary details in the respective columns.
Next, you must submit the account opening form and the necessary documents to your broker. You should also fill out an updated Know Your Client (KYC) form and submit your identity proof, address proof, and permanent account number with bank proof.
You need to mention your nominee in the DEMAT account opening form. In simple words, a nominee is a person who will become the incharge of your account and its assets if you suffer from any kind of miss happening.
After that, you will come across your Depository Participant (DP) agreement containing the details of the charges you will incur while holding your DEMAT account. The agreement will also contain:
The rules and regulations
Terms and conditions
The duties of the broker
Your rights as an investor
Besides this, you need to do in-person verification. The in-person verification is done to confirm that the details are correct and valid.
Lastly, once all formalities are completed, you will receive a beneficiary owner identity which is also called a unique client code. It is a unique account number that is used in all future transactions.
Step two: Fill out your Know Your Client (KYC) form by an NRIs in Cape Town, South Africa
In the second step, the individual is required to do Know Your Client (eKYC).
After the paper registration process, the individual needs to fill Know Your Client (KYC) document.
For the Know Your Client (KYC) form, the individual must have a soft copy of the Aadhaar letter as address proof. After that, the individual needs to fill in the basic details like email id and mobile number in order to receive OTP. Ensure that the mobile number you have given is linked to your Aadhaar card and is correct, as you will receive the OTP in the given mobile number.
After that, you need to enter your Permanent Account Number (PAN) for verification.
Now in the next tab, you need to do validation through the Aadhaar details.
Here you need to enter your Aadhaar number and other details like name, address, age, and gender. On some websites, all the other details will get prefilled once you enter your Aadhaar number.
Lastly, you are required to upload all your documents for account registration.
Documents required to open a DEMAT account by an NRIs in Cape Town, South Africa
To open a DEMAT account by an NRIs in Cape Town, South Africa, An individual must meet some mandatory requirements. Before opening the account, you should know the documents required to open a DEMAT account and the opening account charges. Following are the necessary documents for the DEMAT account: –
Proof of Identity
An individual can submit his Permanent Account Number (PAN) card, Aadhaar card, passport, driving license, voter identity card, National Rural Employment Guarantee Act (NREGA) job card, or any other document notified by the central government as identity proof. The identity proof should carry your photograph because it makes the identification easy.
Proof of Address
Passport
Aadhaar card
state-issued driving license
voter identity card
NREGA job card
any utility bill (like electricity bill, telephone bill, piped gas bill, water bill, etc., which is not more than two months old are acceptable as address proof.
Bank account statements or post office savings bank statements are also acceptable.
Lastly, you can submit any document issued by the government departments issued by a foreign jurisdiction. Any letters issued by the foreign embassy or Mission in India will also be accepted as proof of address.
Bank Proof
After submitting address and identity proof, the individual must generate proof of bank account. You need to submit proof of bank account that you are willing to connect with your account. For that, you can submit a cancel cheque with your name and send it to the broker along with the account opening form. If you are opening your DEMAT account online, you can upload the picture of the canceled cheque with the IFSC code of the bank to the online portal.
The bank proof you submit should carry your name, the IFSC code of the bank, and the MICR code. If you don’t have any cancel cheques, you can simply send a copy of the front page of your passbook as long as it contains all the above details.
Charges to open a DEMAT account for an NRIs in Cape Town, South Africa
While operating and opening a DEMAT account, there are multiple types of charges imposed on the individual, but primarily there are only three types of charges that are generally imposed for NRIs in Cape Town, South Africa; they are as follows: –
First is the annual maintenance fee. The annual maintenance fee is charged primarily on a yearly basis. It is levied in advance to keep the account working and provides services regularly as per the demand of the individual. The annual maintenance fee of a DEMAT account can vary from 300 to 800 rupees and may be charged even higher by traditional brokers.
Account opening charges are the second type of charges imposed on an individual while opening a DEMAT account. Different institutes have different charges. The account opening charges of an institute completely depend on its structure, overhead costs, and the service they provide to the individual. Generally, the discount brokers levy a low cost on DEMAT account opening compared to the other traditional banks and brokers.
Dematerialization fees are the fees imposed on some securities that the individual holds in physical form. If an individual holds some securities in physical form, the firm will charge the nominal fee for converting these physical securities into the DEMAT form. This is not a compulsory fee and is applicable only if the individual wants to convert their physical securities into DEMAT form.
The broker charges custodian fees to keep your security safe. The brokers and firms basically charge custodian fees for safe keeping your security. Generally, it is charged yearly depending on the number of assets held by the firm.
Lastly, transaction fee, generally, if you are opening a DEMAT account in a broker’s firm, then they will charge on each transaction. The transaction fee can vary depending on the value of the transaction and the number of stocks, and it is most likely to be a significant proportion of total charges. But nowadays, the scenario is changing, and some brokerages offer zero charges on delivery trades.