Updated on – 12 Jan 2021
If you are also confused about demat and trading account, then you have landed at the right place as most of the beginners don’t know the difference between demat and trading.
Let’s understand the difference between demat and trading account in layman’s language.
What is a Demat account
Demat account means a dematerialized account holds your shares in the electronic form instead of physical shares.
Demat account works similar to any bank account where you can deposit, keep or withdraw your money. When you open a Demat account, you get a Demat account number that enables you to electronically buy/sell/hold your shares.
You don’t require any shares to open a Demat account. You can get a Demat account with zero balance.
You need have to open a Demat account if you want to buy and hold shares. You also need a Demat account to receive dividends or bonuses on your shares. Apart from stocks, you also need a Demat account to buy IPOs, bonds or any similar financial instrument.
What is a Trading account
You need a trading account to buy/sell your shares in the stock market. If you want to do intraday stock trading, then you will need a trading account.
The trading account provides you a unique trading ID that allows you to do trading transactions. You can get a trading account by registering with any stockbroker firm.
Difference Between Demat and Trading account (Demat Vs Trading)
Demat account is to store financial entities like shares, mutual funds, bonds, dividends or IPOs. On the other hand, the trading account is purely for trading (buy or sell) stocks.
Trading account withdraws shares from Demat account and sells in the market or buys shares from the market and transfers to the Demat account. Whereas, a Demat account holds the shares/mutual funds/bonds until they are sold or liquidated.
Let’s understand with an example.
For example, if you want to buy Infosys shares, you need a trading account using which you can buy the shares and those Infosys shares will be reflected in your Demat account after purchase.
Similarly, when you want to sell the shares you will execute a sale through your trading account and shares will be debited from your Demat account.
If you want to buy an IPO you don’t need a trading account. You need a Demat account where the allotted shares can be transferred. But when you want to sell those shares in the future, you will need a trading account.
Best Demat & Trading account
Let’s have a look at 3 best Demat and trading accounts in India.
UpStox Demat & Trading Account
UpStox is among the leading flat fee discount brokers with low brokerage charges. You pay just Rs. 20 per trade which is quite low. UpStox provides high-tech trading platforms that make trading easy on mobile and web browsers.
UpStox Brokerage
UpStox charges Rs. 20 for every executed order and no charges for equity delivery.
| Type of Trading | Brokerage Charges |
| Equity Delivery | Zero Brokerage |
| Equity Futures | Rs. 20 per executed order or 0.05% whichever is lower |
| Equity Intraday | Rs. 20 per executed order or 0.05% whichever is lower |
| Equity Options | Rs. 20 per executed order |
| Currency Futures | Rs. 20 per executed order or 0.05% whichever is lower |
| Currency Options | Rs. 20 per executed order |
| Commodity Futures | Rs. 20 per executed order or 0.05% whichever is lower |
| Commodity Options | Rs. 20 per executed order |
Pros of UpStox Demat & Trading Account
- No brokerage in equity delivery
- Trading platforms are fast and free of cost
- You can invest in mutual funds as well
- Provides higher leverage for priority pack customers
Cons of UpStox Demat & Trading Account
- No facility to invest in IPO, FPO, Bond, and NCDs
- Demat debit transaction charges are higher
- No unlimited monthly trading plans in UpStox
- You can’t invest directly in mutual funds
Zerodha Demat & Trading Account
Zerodha gets the credit of introducing the flat brokerage in India. Zerodha has one of the fastest trading platforms to trade on any device whether its a smartphone or a desktop.
Zerodha also allows you to invest in mutual funds directly, without paying any commission. You can create your own trading strategies even if you don’t know the coding.
You can also invest in IPO online from Zerodha’s Kite platform. The best part is you can pay using UPI app while investing in IPO.
Zerodha Brokerage charges
Zerodha charges ZERO fee on the stock delivery. For trading, Zerodha charges a flat Rs. 20 or 0.01%, whichever is lower.
Intraday trading includes equity, currency, and commodity trading. Let’s have a look at charges in different segments.
| Category | Charges |
| Equity Delivery | Zero |
| Equity Intraday Trading | Rs. 20 or 0.03% (whichever is lower) |
| Equity Options | Flat Rs. 20 per executed order |
| Equity Futures | Rs. 20 or 0.03% (whichever is lower) |
| Currency Options | Rs. 20 or 0.03% (whichever is lower) |
| Commodity F&O | Rs. 20 or 0.03% (whichever is lower) |
Pros of Zerodha Account
- Free equity delivery and low-cost brokerage for trading
- You can invest directly in mutual funds
- An online easy process to invest in IPO using UPI
- In-depth reports and vast historical data for better decision making
- You can create multiple trading strategies & alerts
- Better customer support
- NRI can open an account using HDFC, Axis and Yes bank only
Cons of Zerodha Account
- The server slows down during peak time
- NRI accounts are available with limited banks
Check out – Complete Zerodha review
5paisa Demat/Trading Account
5paisa is good for new traders with its easy interface. You also get all options like stock trading, mutual funds, health insurance, and loans under one roof.
5paisa is a part of the leading finance company IIFL.
5paisa Brokerage
5paisa has three plans;
- Optimum Plan – Brokerage is Rs. 20 per executed order (whether delivery or intraday).
- Platinum Plan – Brokerage is Rs. 10 per executed order (whether delivery or intraday).
- Titanium Plan – Equity delivery is free. Brokerage charges for trading is Rs. 10 per executed order. You also get free orders worth Rs. 1,000 or free 100 trades (whichever is lower) every month.
Planwise brokerage detail is as below:
| Segment | Optimum | Power Investor @499/month | Ultra Trader @999/month |
| Stock Delivery | Rs. 20/order | Rs. 10/order | Rs. 10/order |
| Stock Intraday | Rs. 20/order | Rs. 10/order | Rs. 10/order (First 100 trades free every month) |
| Stock F&O | Rs. 20/order | Rs. 10/order | Rs. 10/order |
| Commodity F&O | Rs. 20/order | Rs. 10/order (For Equity options Rs. 2/lot) | Rs. 10/order (For Equity options Rs. 2/lot) |
| Call Trade Charges | Rs. 100/call | Rs. 100/call | Free |
Pros of 5paisa Account
- Zero brokerage and flat fee on trading
- Paperless account opening process
- All-in-One account for investments, trading, insurance, IPO, and loan facilities
- User-friendly app
Cons of 5paisa Account
- The mobile platform gives errors in peak hours
- Trade overcall is highly costly at Rs. 100/call
- No NCDs investment facility
- No 3-in-1 account facility
Check out – 5 Paisa Demat & Trading account review
Conclusion
Upstox is my favorite demat & trading account because of charging fixed brokerage of Rs 20 per trade on intraday and zero brokerage on delivery.
Upstox also provides one of the fastest trading platforms in India.
