Imagine you want to buy gold. You need:
- A shop to buy/sell gold → Trading Account
- A locker to store gold safely → Demat Account
In the stock market:
- Trading Account = Your buying/selling tool
- Demat Account = Your digital storage for shares
📌 What is a Demat Account?
- Digital Wallet for your shares/stocks
- Holds: Stocks, mutual funds, bonds, ETFs (just like Gmail holds emails)
- Managed by: NSDL or CDSL (SEBI-approved depositories)
Where It’s Needed:
✔ When you buy shares (they come into your Demat)
✔ When you sell shares (they go out from your Demat)
✔ When you get bonus shares or dividends
📌 What is a Trading Account?
- Your trading app/platform (like Amazon for stocks)
- Connects you to NSE/BSE (stock markets)
- Used for: Buying, selling, checking prices
Where It’s Needed:
✔ Every time you buy/sell stocks
✔ For intraday trading (same day buying-selling)
✔ To track investments
📌 Key Differences
| Feature | Demat Account | Trading Account |
| Purpose | Stores shares | Trades shares |
| Like | Bank locker | Shopping app |
| Needed When | Receiving/sending shares | Buying/selling shares |
| Managed By | NSDL/CDSL | Your stockbroker |
📌 Where Are These Accounts Used?
1. For Investing in Stocks
- Example: Buying Reliance shares → Goes to Demat
- Without Demat: You can’t hold shares
- Without Trading: You can’t buy/sell
2. For Mutual Funds & ETFs
- Many mutual funds now come in Demat form
3. For IPO Applications
- To apply for IPOs (new company shares)
4. For Corporate Benefits
- Getting dividends, bonus shares directly in Demat
📌 Real-Life Example
Situation: You want to buy 10 TCS shares
- Trading Account: Place order (like adding to cart)
- Money deducted: From your linked bank account
- Demat Account: Receives TCS shares (like delivery)
When selling:
- Trading Account: Sell order
- Demat Account: Shares go out
- Money comes back: To your bank
💡 Pro Tip:
Most brokers (Zerodha, Groww etc.) give both accounts together when you sign up. You need:
- PAN card
- Aadhaar
- Bank details
Sekhar Gour is the creator of Finance Hub Assam. A finance enthusiast with a knack for simplifying complex money matters, Sekhar offers practical insights tailored to Assam’s economic scene. When not writing, he enjoys exploring local culture and market trends.