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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.
Published on 06 February 2023
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.
Also Read: Foriegn Investment Portfolio
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 .
Demat Account Closures
Before you learn the procedure of Demat account closure, you should know that there are two types of Demat account closures. The exact process of how to close a Demat account online will depend on the type of closure you are choosing: The two types of closures are as follows:
Full account closure:
This type of Demat account closure involves permanently getting rid of the account. You can completely close your Demat account completely only when there are no holdings in the account. Moreover, you will also have to make all the pending payments to DP before you permanently close it. Make sure that your Demat account is completely dormant. After that, raise a request to the DP about your plans to close the Demat account.
Transfer and account closure:
People choose this type of Demat account closure when there are some funds available in the account. You can also choose this type of account closure when you haven’t made full payment of your pending charges to the DP. You can transfer the holding in your account and the pending payments to a Demat account. After that, you can raise a request to the DP to close Demat account online.
The online process of closing Demat account online ensures that you don’t have to undergo too much hassle to get rid of the account. You won’t have to run to your broker’s office a hundred times to go ahead with the process. However, you should be a little careful about the following while closing your Demat account:
- Ensure that there are no holdings in your Demat account. Sell out all shares in the account before closing it.
- Ensure that there isn’t any negative balance in the account. You can check out the balance easily by logging into your account or calling someone at your broker’s office.
- Ensure that you know all the documents that you need to submit to close the 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. This means that 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.
Also Read: How to Transfer Money from Demat Account to Bank Account?
Details Required for Closing a Demat Account
When you choose to close a Demat account online, you will have to submit certain legal documents. The documents serve as proof of your ownership over the account and the holdings in it. The details that you need to submit to close a Demat account online are as follows:
- The ID of your Demat account along with your DP ID.
- Your KYC details, including your name and address. Your KYC details must match the personal information provided in the Demat account’s records.
- Your reason to delete the Demat account at this point.
- A self-attested and verified copy of your identity proof. It can be anything from your Aadhaar card and PAN card to your passport. However, you should verify with your broker how to delete a Demat account and what identity proof you need to submit.
You also need to submit the Demat account closure form while closing or transferring your account. You can download the Demat account closure form from the official website of your broker or depository. Remember to fill up all the relevant details correctly in the form.
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.
