How to Close Demat Account Online – A Step by Step Guide
Demat Accounts are a mandatory requirement to trade in securities in the stock exchange. A lot of people use this as their secondary source of income to supplement their main income flow. There are several benefits offered by demat accounts including real-time visibility of the holder’s investment portfolio and ease of access from anywhere using any web-enabled device. It is these reasons, and more, which have led to the creation of almost 7 crore demat accounts in India, till date (according to BusinessLine). Interestingly, another statistic by Motilal Oswal mentions that as high as 65% of these accounts are dormant.
Now, it is worth recalling that the demat accounts incur some regular charges like; Account Opening Charges, Demat Account Maintenance Charges, Demat Account Safety Charges/ Custodian Fees, Demat Account Transaction Fees, to name a few. In the case of dormant, inactive or zero balance accounts all the charges may not be applicable. Still, charges like account maintenance, custodian fees would continue being levied. This is a completely unwarranted expenditure, and to curtail this you must close your demat account online. In this blog, we will take you through the relevant steps and guide you on how to close a demat account.
Nature of Demat Account To Be Closed
One scenario could be a simple closure of the demat account which has no pending transactions associated. Which means, there are no payments to be made and there are no holdings within the account. It is also referred to as a zero-balance account. This is a usual straightforward process, and in the forthcoming section we will explain the steps in how to close this demat account.
The second scenario is possible in which there are pending securities which either need to be liquidated or transferred to another account before the closure of this current one. The process for this is slightly different, which will also be explained in this blog.
How to Close A Demat Account - Scenario 1
As we defined in the previous section, Scenario 1 is the closure of your demat account without any pending formalities involved. These tendencies can be easily verified by checking your balance statement. It is also important to confirm there is no negative balance in your account. The steps for closing this account are as follows:
- Step 1 - The demat account closure form can be downloaded from your depository participant’s (DP) website. The DP can be a bank, broker or any authorized government agency with which you had opened the account.
- Step 2 - Carefully and accurately fill in the form and attach your current and valid KYC documents. This step cannot be concluded offline and involves physically submitting the forms and documents to the DP’s branch or office. In case physical presence cannot be managed, then you might request an exception and mail the documents to the concerned office.
- Step 3 - It is important to note, that in the case of joint account ownership, all the demat account holders need to sign the closure form in the presence of an official at their DP’s office.
How to Close A Demat Account - Scenario 2
In scenario 2, as per our precise, it is expected that there are some holdings which either need to be transferred to another demat account or to be liquidated. In such a case, the steps for account closure are as follows:
- Step 1 - In the case of intra-depository transfer (which means between NSDL and CSDL) of shares and holdings between accounts, an intra delivery instruction slip (DIS) will be required and the ‘Off-Market’ transfer option will need to be chosen in the demat account. Names and details of Demat account holders on new and old must be identical.
- Step 2 - Then the original client master list (CML) needs to be acquired from the account including the relevant details like; logo, stamp and signatures etc.
- Step 3 - After this, the detailed form needs to be completed with names and relevant details of the shares that are to be transferred. The target client/account details will also need to be mentioned for the transfer to be successfully executed.
- Step 4 - Once all this is completed, the filled-in form along with KYC and other relevant documents must be submitted in-person to your DP’s office or mailed to their head office.
- Step 5 - Important to note, for closure, it is compulsory for a bank official to verify the self-attested demat closure form.
De-Activate or Freeze A Demat Account
While we have discussed the steps involved in how to close a demat account permanently, there is another option for those people who wish to stop trading on a temporary basis with the intention to resume it later. By deactivating or freezing your demat account, instead of closing it, you avoid the hassle of having to create a new account all over again when you plan to resume trading. Account reactivation is a far quicker and simpler process than creating a new demat account. Deactivation implies that your account will be frozen for the duration you have requested for and no transactions can take place meanwhile. You are likely to receive periodic notifications, like account balance statements, holding statements, etc as before. Due to this, AMC and other such charges will continue to be levied, as applicable. Hence, freezing your account only makes sense if you wish to resume activity in the near horizon. Else there is no need to incur these expenses.
We hope you are now equipped with sufficient information on how to close a demat account. It is important to ensure that all outstanding dues are cleared before requesting for account closure. Also, it is expected that all unused delivery instruction slips are returned to the DP.
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No, holding a valid POA does not provide sufficient authority to sign the account closure form. As per the regulatory mandate, the account holder needs to physically sign the form. In case of joint ownership of the demat account, then all the account holders need to sign.
While demat account closure forms can be downloaded or even filled online, the final closure process does involve visiting the DP’s branch office or mailing the documents to their head office. Some broking firms or banks might entertain closure requests via email as well using the e-sign option, so it is advisable to carefully check the procedure on the website of your DP.
No, your demat account can only be closed if you don't have a negative account balance. Which means, you must clear all pending dues, prior to submitting the account closure form.
Typically, there are no charges associated with the closure of a demat account. However, since each DP might have certain other associated application processing fees and such, it is advisable to check these details on the DP’s website.