Introduction

When you choose to open demat account there are some procedures you follow. Likewise, to close demat account some procedures must be followed. SEBI says, there are more than 44 million demat accounts in India, and believe it or not a Demat account is nothing but an electronic account that is used to hold shares and securities. In a country like India where the GDP and economy are growing, it is no wonder why individuals are keen to get started in the stock market with all the financial benefits. 

However, even with such a huge user base of Demat Accounts, SEBI also reports that close to 75% of accounts are dormant. An unused Demat Account where no transactions are made i.e., no buy or sell of securities or trades is termed as a Dormat account. These inactive accounts may attract annual fees and maintenance charges so, to avoid any unexpected charges you must close your demat account online. 

In this article, we will understand what steps you must follow to close a demat account. 

Closure of Demat Account Online

Are you finding ways how to deactivate Demat account? There are two types of demat account closures a user can select. Here are they: 

• Transfer and Account Closure: Suppose your demat account has pending securities and you want to close demat account, in that case, the pending must be transferred to another demat account. 
• Account Closure: This closing procedure can be done directly if the investor doesn’t have any pending securities or transactions in the Demat Account. 

We will take a look at the steps of both these closure methods in this article. 

Read More: Demat Account Holding Statement

Reasons for Closing a Demat Account

A Demat account close (Dematerialized) might be considered by investors for several reasons. Here are five common reasons for closing a Demat account:

1. Lack of Use

Many investors open a Demat account to actively trade or invest in securities but may find that they do not use it as frequently as expected. If the account remains inactive for an extended period, the investor might decide to close it to avoid unnecessary complications or fees.

2. High Maintenance Fees

Demat accounts often come with annual maintenance charges and other fees. If an investor finds these costs burdensome, especially if they are not actively using the account, they might choose to close the account to save money.

3. Shift in Investment Strategy

Investors may change their investment strategies over time. For instance, they might move from stock market investments to other types of investments like real estate, mutual funds, or fixed deposits that do not require a Demat account. This shift can lead to the decision to close Demat account.

4. Consolidation of Accounts

An investor might have multiple Demat accounts and decide to consolidate their holdings into a single account for simplicity and better management. This consolidation can result in the closure of redundant Demat accounts.

5. Poor Customer Service

Investors expect efficient and reliable customer service from their brokerage or depository participants. If they experience consistent issues or poor service, they might choose to close Demat account and transfer their holdings to a provider with better service.

Read More: Account Maintenance Charge

Steps to Close a Demat Account

Closing a Demat account can be done in two ways: “Transfer and Account Closure” and “Account Closure.” Here are the steps for each type:

1. Transfer and Account Closure

This process involves transferring the securities from the Demat account you wish to close to another Demat account before closing it.

1.1 Obtain the Closure Form

Contact your depository participant (DP) to get the Demat account closure form or the application for closing Demat account. Many DPs also provide this form on their websites for download.

1.2 Fill in the Closure Form

Complete the account closure form with the required details such as your account number, name, and reason for closure. You will also need to provide the details of the target Demat account (account number, DP ID, etc.) where the securities will be transferred.

1.3 Attach Required Documents

Attach any necessary documents, such as a copy of your latest Demat account statement and the Client Master Report (CMR) of the target account to which you want to transfer your holdings.

1.4 Submit the Form and Documents

Submit the completed form and attached documents to your DP either in person or by mail.

1.5 Verification

The DP will verify the form and documents. If everything is in order, they will initiate the transfer of securities to the specified target account.

1.6. Account Closure

Once the transfer is complete, the DP will close your Demat account. You will receive a confirmation of the closure.

2. Account Closure 

This process involves closing the Demat account without transferring the securities, typically after selling or liquidating all holdings.

2.1 Sell or Liquidate Holdings

Ensure that all securities in the Demat account are sold or transferred out before initiating the closure process. The account should have zero holdings.

2.2 Obtain the Closure Form

Contact your DP to get the Demat account closure form. This form is often available on the DP’s website as well.

2.3 Fill in the Closure Form

Complete the account closure form with the required details such as your account number, name, and reason for closure.

2.4 Attach Required Documents

Attach any necessary documents, such as a copy of your latest Demat account statement showing zero holdings.

2.5 Submit the Form and Documents

Submit the completed form and attached documents to your DP either in person or by mail.

2.6 Verification

The DP will verify the form and documents. If everything is in order, they will proceed with the account closure.

2.7 Account Closure

Once the DP confirms that the account has zero holdings and no pending dues, they will close your Demat account. You will receive a confirmation of the closure.

General Tips:

• Clear All Dues: Ensure that all outstanding dues are cleared before initiating the closure process.
• Follow-Up: Follow up with the DP to ensure that the closure process is completed and you receive the confirmation.
• Check Statements: Verify the final account statement to ensure that all securities have been transferred or sold and that the account balance is zero.

Things to Consider Before Closing a Demat Account

Before closing a Demat account, it’s essential to consider several factors to ensure a smooth and hassle-free process. Here are the key things to consider:

1. Current Holdings and Transactions

1.1 Sell or Transfer Holdings:

Ensure that all securities held in the Demat account are either sold or transferred to another Demat account. Having residual securities can complicate the closure process.

1.2 Pending Transactions:

Check for any pending transactions, such as unsettled trades, dividend payouts, or corporate actions. Complete all pending transactions to avoid any issues during the closure.

2. Account Balance and Charges

2.1 Clear Outstanding Dues:

Pay off any outstanding dues, including annual maintenance charges or transaction fees. The depository participant (DP) will not process the closure if there are any pending charges.

2.2 Refund of Balance:

If there is any balance in the account, request a refund or ensure it is appropriately settled before closing the account.

3. Required Documentation

3.1 Account Closure Form:

Obtain and fill out the account closure form from your DP. Ensure all details are accurately filled in.

3.2 Identity Proof:

Attach a copy of your identity proof, such as a PAN card, Aadhaar card, or passport, as required by the DP.

3.3 Latest Demat Statement:

Include a copy of your latest Demat account statement as part of the closure documentation.

4. Linked Accounts and Services

4.1 Bank Account Linkage:

If your Demat account is linked to a bank account for auto-debit or credit of funds, ensure that any such instructions are canceled or updated as necessary.

4.2 Brokerage Account:

If the Demat account is linked to a brokerage account, inform the broker about the closure to update their records and avoid any future discrepancies.

5. Transfer of Power of Attorney (POA)

If you have granted a Power of Attorney (POA) to your broker or any third party for operating your Demat account, ensure it is revoked before initiating the closure process.

6. Consolidation of Accounts

If you have multiple Demat accounts, consider consolidating your holdings into a single account. This can simplify your portfolio management and reduce maintenance fees.

7. Tax Implications and Records

7.1 Capital Gains:

Consider the tax implications of selling or transferring securities, such as capital gains tax. Consult with a tax advisor if necessary.

7.2 Record Keeping:

Maintain records of all transactions and communications related to the account closure for future reference.

8. Future Investment Plans

Evaluate your future investment plans. If you plan to invest in securities again, consider whether closing the account is the best option or if keeping it dormant with minimal maintenance fees might be more beneficial.

Conclusion

So, How do close a Demat Account online? Follow the above-mentioned steps and consider staying updated before closing the account. Like if you want to close your demat account permanently, you need to clear all the pending transactions and holdings. On the other hand, if you want to transfer to another demat account and close, then there is a different procedure. 

If you want to transfer your holdings to a new and feature-rich Demat Account Provider, you are just a few steps away! 

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