Understanding the role of demat accounts in improving investment flexibilityNithin Kamath, the founder of Zerodha, has frequently highlighted the importance of simplicity and discipline in investing—and his personal strategy exemplifies this.
By maintaining two separate demat accounts, one for long-term investments and the other for active trading, Kamath creates a purposeful barrier that decreases the likelihood of making rash decisions, particularly when selling long-term assets.
This strategy has grabbed the curiosity of retail investors looking to add companies to their portfolios. It raises practical questions regarding whether having numerous demat accounts improves discipline, how they should be used, and what restrictions apply to them.
Using Kamath's perspective as a starting point, this exploration delves deeper into the concept, answering common questions and evaluating how investors might wisely incorporate it into their own investment plans.
An individual in India can have many demat accounts, which is a typical practice among active retail investors. Many people prefer to maintain several accounts for long-term holdings, short-term trading, IPO participation, or even multiple brokers to take advantage of different services and platforms.
Harshal Dasani, Business Head, INVasset PMS, explained that having many accounts can help to better organise the portfolio and reduce reliance on a single middleman. However, Dasani opined that the goal should be convenience and clear separation, not excessive duplication. In the end, what matters is not how many accounts an investor has, but whether each account serves a defined purpose and is properly maintained.
There is no legal limit on the number of demat accounts an individual can have in India, as long as each account follows PAN, KYC, and depository criteria. This allows investors to open several accounts if they have valid reasons to do so.
Nonetheless, Dasani emphasized that what is legally permitted may not always be the most practical option. Juggling too many accounts can make it difficult to monitor investments, manage corporate actions, and spend related fees. Thus, while there is no set limit, investors should prioritize organized usage and ensuring that each account serves a clear and controlled purpose rather than generating unnecessary complexities.
Retail investors can open multiple demat accounts with different brokers using the same PAN, which serves as the primary identity for all financial transactions involving the market. This is a common strategy that allows investors to compare brokerage rates, access a range of trading platforms, retain a secondary broker, and differentiate between long-term investments and active trading.
Nonetheless, all accounts must meet KYC criteria and be properly linked to the investor's identification. Although utilizing numerous brokers is permitted, it is critical to keep structured records and ensure that no accounts get dormant or forgotten.
Dasani believes that the biggest benefit of having many demat accounts is increased flexibility. Investors can choose between long-term holdings and trading positions, use one broker for cost-effective execution and another for research or innovative tools, and ensure operational assistance if one platform encounters problems. When used correctly, it can also simplify portfolio administration. However, convenience can quickly lead to disarray.
Further, he believes that having several accounts results in higher maintenance costs, an abundance of statements, extra compliance scrutiny, and a greater likelihood of missing important updates such as dividends, company activities, and nomination information. For the majority of retail investors, having numerous accounts is only advantageous when there is a stated purpose; otherwise, they generally provide more confusion than benefit.
Holding several demat accounts does not inherently increase your tax obligations. Taxation is reliant on the transactions and earnings produced through those accounts, rather than the quantity of accounts held. Thus, whether an investor possesses one demat account or five, capital gains, dividends, and other taxable earnings are ultimately evaluated based on the PAN. The primary issue lies in the need for compliance and consolidation.
Investors with multiple accounts must maintain meticulous records to accurately calculate short-term and long-term capital gains, monitor purchase prices, and reconcile broker statements when filing taxes. In this respect, the tax effect is indirect: while the tax principles remain the same, the complexity of managing the accounts increases.
Individuals holding a joint demat account can also possess a personal demat account. Dasani noted that this arrangement is quite common and practical, frequently utilised by families for purposes such as estate planning, ease of use, and separating their portfolios.
For example, an investor might manage a personal account for individual investments while simultaneously being a joint holder in a family account designated for communal assets.
Dasani emphasized that each account must adhere to the necessary documentation, identity verification, and KYC regulations. Although this level of flexibility is advantageous, investors should make sure that nominations, succession arrangements, and account mapping are regularly updated to prevent future issues.
This is still one of the prevalent misunderstandings among retail investors. The regulation established by the Securities and Exchange Board of India is explicit: one PAN allows for one IPO application within the retail segment. Regardless of having several demat accounts, an investor can only submit a single valid application per IPO. Any effort to apply multiple times with the same PAN—whether through various brokers or accounts—will result in the complete rejection of all applications.
Dasani explained that many investors learned this the hard way after much anticipated IPOs such as Avenue Supermarts and IRCTC. The ideal strategy to increasing allotment possibilities is to have many family members, each with their own PAN, demat account, and bank account. For example, during the LIC crisis, families improved their chances by applying individually among members. Ultimately, the amount of unique PANs—not demat accounts—determines IPO allocation opportunities.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
Dhanya Nagasundaram works as a Content Producer at LiveMint, specializing in news related to financial markets, stocks, and business. With over eight years of experience in journalism and content creation, she has honed her skills in data-driven reporting and market analysis. Her focus is on monitoring stock trends, initial public offerings (IPOs), corporate news, policy shifts, and larger economic trends that affect investors and market players.
At LiveMint, Dhanya consistently writes and produces articles that make complex financial topics accessible to readers. She keeps a close eye on equity markets, commodities, and macroeconomic indicators, assisting audiences in comprehending how global and domestic events influence investment perspectives. Her stories frequently underscore emerging trends within sectors, the IPO market, company earnings results, and market strategies pertinent to both retail and institutional investors.
Before her tenure at LiveMint, Dhanya accumulated a wealth of professional experience at various companies, including MintGenie, Informist, Cogenics, Chary Publications, KPMG, and the Royal Bank of Scotland. These positions allowed her to establish a solid foundation in financial research, reporting, and content creation.
Throughout her career, she has explored numerous subjects such as trading strategies, commodities, IPOs, wealth generation, corporate profits, and macroeconomic indicators. Her background in both financial journalism and corporate settings has given her the ability to tackle stories with analytical rigor while ensuring clarity for her audience. Through her contributions, Dhanya strives to deliver insightful, trustworthy, and investor-centric financial content.