Zerodha joint demat holders
Zerodha joint demat holders refers to the arrangement under which a demat account at Zerodha is opened in the names of two or three individuals jointly, as permitted under the Depositories Act, 1996 and the SEBI (Depositories and Participants) Regulations, 2018. In a joint demat account, up to three persons may hold securities in the account concurrently. The account is maintained by CDSL or NSDL under Zerodha’s depository participant (DP) registration. Joint demat accounts are commonly used by spouses, parents and adult children, or business partners who wish to co-own securities.
It is important to distinguish between the joint demat account (which holds securities jointly) and the trading account (which places orders on exchanges). Zerodha, like all Indian retail brokers, issues a trading account only in the name of the first account holder. The second and third holders are beneficially co-entitled to the demat account but do not have independent trading account access.
First, second, and third holders
A joint demat account at Zerodha has:
- First holder, The primary holder whose name appears first in the account records. The trading account associated with the demat account is in the first holder’s name only. PAN-linked dividends and interest are typically attributed to the first holder.
- Second holder, A co-owner of the demat account. The second holder does not have access to the linked trading account.
- Third holder, An optional additional co-owner; the third holder also has no independent trading account access.
All three holders must satisfy KYC requirements and provide PAN, Aadhaar (or alternative address proof), and specimen signatures. Zerodha applies eKYC for the first holder (Aadhaar OTP-based) and offline or DigiLocker-based KYC for second and third holders, depending on Aadhaar availability.
Modes of operation
The Depositories Act and depository participant agreements define the mode of operation for joint demat accounts:
| Mode | Description |
|---|---|
| Either or Survivor | Any one of the joint holders may instruct transactions; on death of any holder, the survivor(s) continue without transmission formalities |
| Jointly | All holders must jointly authorise transactions; on death of any holder, survivors must apply for transmission |
| Anyone or Survivor | Same as Either or Survivor; used in some DPs |
| First Holder | Only the first holder can instruct transactions during joint lifetime |
Either or Survivor is the most commonly chosen mode for spouse or family accounts, as it avoids the need for joint physical signatures for each demat debit instruction.
Jointly mode is sometimes chosen by business partners who want dual-control over securities.
Eligibility and documentation
All joint holders must be:
- Indian residents aged 18 or above. (Minors cannot be joint holders in a standard joint account; they must use the minor demat account structure.)
- Not non-resident Indians in a standard joint account. NRI accounts are structured separately; an NRI cannot be a joint holder in a resident demat account and vice versa, under FEMA regulations.
Documents required for each holder
| Document | Notes |
|---|---|
| PAN card | Mandatory for each holder |
| Aadhaar card or alternative address proof | KYC for each holder |
| Specimen signature | Separate specimen from each holder |
| Passport-size photograph | For each holder |
Bank account proof is linked to the first holder’s savings account only. The second and third holders do not link separate bank accounts to the joint demat account for the purpose of fund flows; all fund flows (dividends, redemptions, and trading P&L settlements) go through the first holder’s linked bank account.
The trading account restriction
A trading account at Zerodha can only be in one individual’s name. In a joint demat structure:
- The first holder opens the trading account in their name and links it to the joint demat account.
- The second and third holders do not have trading accounts linked to the joint demat account.
- Orders are placed by the first holder through Kite or other Zerodha platforms. Securities purchased are credited to the joint demat account and are co-owned by all holders.
- Securities sold must be debited from the joint demat account; authorisation for debit requires the first holder (or the signing authority as per the chosen mode of operation) to authorise the demat debit.
The second holder cannot independently sell securities held in the joint demat account without the first holder’s participation (or without “Either or Survivor” authority in CDSL/NSDL Easiest or equivalent).
IPO applications
For Initial Public Offering applications:
- ASBA applications use the first holder’s linked bank account and PAN.
- UPI ASBA is available if the first holder’s UPI ID is linked.
- The allotment is credited to the joint demat account; all joint holders are beneficial co-owners.
- Lock-in periods (if any, as in anchor investor allocations or pre-IPO shares) apply to the joint account.
Tax treatment in joint accounts
The Income Tax Act, 1961 does not have a specific provision attributing joint investment income to one holder automatically. However, SEBI and depositories require the first holder’s PAN to be used as the primary PAN for the demat account. The practical tax treatment is:
- Dividends, TDS is deducted on the first holder’s PAN. The first holder is primarily responsible for reporting dividend income.
- Capital gains, The first holder is typically treated as the primary taxpayer for capital gains arising from the joint account. In practice, joint holders may agree internally on how to report and split income; this is a matter of income tax return filing and not governed by demat or broker regulations.
- Clubbing provisions, If the second holder is the spouse of the first holder and has contributed to the purchase of securities from funds gifted by the first holder, clubbing provisions under section 64(1)(iv) of the Income Tax Act may apply, attributing the capital gains back to the first holder regardless of the internal agreement.
Survivorship and transmission
Death of a joint holder
When one joint holder dies:
Either or Survivor mode, The surviving holder(s) continue to operate the account without any transmission formalities. The surviving holder is required to submit a death certificate to Zerodha and the DP to update records, but the account remains operational in the interim.
Jointly mode, Operations are suspended on the death of any holder. The surviving holder(s) must apply for transmission of the deceased’s share to their own names, submitting a death certificate, succession certificate or probate (if applicable), and indemnity bond. The process involves the DP and follows SEBI’s transmission guidelines (SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/79, dated 6 June 2022).
Death of the first holder
On the death of the first holder (regardless of operation mode):
- The linked trading account (which is in the first holder’s name) is immediately frozen.
- The surviving second holder may apply for transmission of the securities to their own demat account or to a new joint account.
- Transmission requires the standard transmission documentation under SEBI’s guidelines, including a death certificate, succession documents, and an indemnity bond for amounts above the threshold (currently INR 15 lakh as per SEBI circular).
IPO applications with joint demat accounts
When a client holds a joint demat account and applies for an Initial Public Offering:
- The applicant (first holder) applies using their own PAN and the linked savings bank account.
- The ASBA application is in the name of the first holder.
- On allotment, shares are credited to the joint demat account, beneficially co-owned by all joint holders.
- The first holder’s PAN is used for TDS and tax reporting on subsequent dividends and capital gains.
- UPI ASBA is available if the first holder’s UPI-linked bank account is the designated savings account.
The second and third holders cannot independently apply for IPOs using the joint demat account; each must apply using their personal demat accounts (if they have separate individual accounts) or through the joint account with the first holder’s authorisation.
Fund flows and bank account linkage
The savings bank account linked to the joint demat account at Zerodha is always in the name of the first holder (or in the first holder’s name jointly with the second holder at the same bank, if it is a joint savings account). Fund additions and withdrawals always route through this account. The second holder cannot independently add or withdraw funds from the Zerodha trading account.
Dividend crediting
Dividends paid by companies on shares held in the joint demat account are credited to the bank account linked to the first holder’s PAN. The company or registrar uses the first holder’s PAN and bank account for NACH-based dividend crediting. TDS is deducted on the first holder’s PAN.
Rights issues
For rights entitlements on shares held in a joint demat account:
- The rights entitlement (RE) is credited to the joint demat account.
- The first holder must renounce, apply, or sell the RE; the second and third holders cannot act independently on rights entitlements.
Practical use cases
Spouse accounts
Joint demat accounts between spouses are common in India. The typical structure is:
- First holder: husband (or wife).
- Second holder: wife (or husband).
- Mode: Either or Survivor.
This structure ensures survivorship continuity while allowing only the primary investor (first holder) to conduct day-to-day trading. The second holder becomes the automatic inheritor of all securities on the first holder’s death under the Either or Survivor mode, without needing court transmission.
Parent and adult child
A parent may hold a joint account with an adult child to simplify estate transfer. The parent (first holder) manages the portfolio; on the parent’s death, the adult child (second holder) inherits the demat account seamlessly under the Either or Survivor mode without requiring probate or a succession certificate.
Business partners
Business partners may prefer the Jointly mode to ensure both partners’ consent is required for any securities transaction, preventing unilateral action by one partner.
Nomination in joint accounts
SEBI mandates nomination for all demat accounts, including joint accounts. The nominee is the person entitled to receive the securities on the death of all joint holders. Nomination in a joint account may be registered by the first holder online via Zerodha Console or by all joint holders jointly, depending on the DP’s requirements.
References
- Depositories Act, 1996.
- SEBI (Depositories and Participants) Regulations, 2018.
- SEBI circular on transmission of securities, SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/79, dated 6 June 2022.
- SEBI circular on nomination in demat accounts, SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/672, dated 16 November 2021.
- Income Tax Act, 1961, sections 64(1)(iv), 194.
- SEBI Master Circular on KYC, SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/37, dated 8 March 2023.
- Foreign Exchange Management Act, 1999 (FEMA residency restrictions on joint account holders).