How to Close Your Demat Account Online?

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A Demat account is mandatory to participate in the share market. It allows an investor to store shares and other forms of securities, electronically. Investing in the share market is completely revolutionized since the advent of a Demat account. However, you may have more than one Demat account and it is important to close the dormant accounts that do not have any investments in them. There are annual maintenance charges among other fees and charges that are incurred on a Demat account. To avoid them, you must close such accounts.

What is a Demat Account?

As the name suggests, "Demat", means dematerialization. In simple terms, Demat means the digitization of a physical copy. A Demat account, as mandated by the Securities and Exchange Board of India (SEBI), is key to investing in the securities market. It allows you to store shares digitally or electronically and prevents any physical loss of shares in your holdings. Before the concept of Demat was introduced, investors would have a physical copy of contracts, for the shares bought and sold. Demat account eliminated the need for such documents and made it simple and secure for investors to track and store their investments. A Demat helps you store, shares, ETFs, mutual funds, bonds, debentures, etc., in one place and can help track all transactions in a single view.

Why should you close dormant Demat Accounts?

A dormant Demat account is one that does not have any investments in them. Just like a person may have more than one bank account they may also have more than one Demat account. However, the key aspect of a Demat account is that it involves maintenance charges that are levied by the Depository Participant (DP). Such charges are known as Annual Maintenance Charges or AMC. To avoid paying such charges, it is wise to close dormant Demat accounts. While opening a Demat account, these charges are mentioned in advance. If your Demat account has not been used for a year, it will be marked as inactive, and you will have to reach out to your broker to activate the account once again.

Another significant reason to close dormant Demat account is to avoid them from being used for any fraudulent activity. Before you get surprised, you should know that inactive Demat accounts are a hunting ground for fraudsters and scammers. To avoid any mishap, it is recommended to close dormant Demat accounts that have zero balance and holdings in them.

Demat account closures: There are two types of Demat account closures

Demat account closure can be further categorized into two parts depending on the current state of holdings in the account:

  • Full Closure: If your Demat account is completely dormant, and you do not have any holdings or pending charges to be cleared, you can raise a request with your DP (which can be your stockbroker) to close the Demat account.
  • Transfer and Closure: If your dormant Demat account has some holdings, in the form of shares or any other form of securities, then you are first required to transfer these holdings into a different Demat account, clear all the pending charges, and then raise a request for the closure of the Demat account.

How to close your Demat account? Dos and Don’ts

To close a Demat account, the process is usually available online. However, there may be some brokers who would want you to complete an offline procedure, like submitting a closure form. Closing a dormant Demat account would require you to fill in some necessary details. Also, it is wise to download the closure form for any future reference or use. Before you close a Demat account, it is important to check some prerequisites.

  • Check if there are any holdings in your Demat account like mutual funds, shares, bonds, etc.,
  • The account balance should not be negative during the closure
  • You should not have any open trades or positions in the market
  • It is recommended to download a copy of your account closure form and read the terms and conditions

How to deactivate your Demat account?

Deactivating your Demat account requires certain basic procedures, that may vary from broker to broker. It usually involves filling up an account closure form that asks you to fill in your personal details, the reason for closure, providing KYC documents, etc. If your Demat account is a joint Demat account, then it would also ask for the details of the other member. You may have to submit a client master report, depending on the stockbroker’s requirement.

Details Required for Closing a Demat Account

The details required for closing a Demat account are mentioned below:

  1. Your Demat account number, and DP ID.
  2. KYC proofs like PAN card.
  3. Reason for the closure of the account.
  4. Submission of the account closure form to the DP’s head office

The Process to Close a Demat Account in Case of Account Closure

You need to follow the below-mentioned steps:

  • First and foremost, you would require an account closure form. You may download from the DP’s (Depository Participant’s) website
  • Now fill in the form and submit it along with your KYC (Know Your Customer) documents. This is inclusive of address and identity proof. Submit the form & documents.

Conclusion

Closing a Demat account that is dormant or inactive, is important to avoid paying any unnecessary annual maintenance charges. It also prevents you from any fraudulent activity and keeps you in control of your investments in the securities market.

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FAQs

Can I open multiple demat accounts?

Answer Field

Yes, you can open multiple demat accounts but only under the below conditions:

  • You can open only one demat account per DP using the same PAN card.
  • You can open multiple demat accounts with different DPs using the same PAN card.

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