Demat accounts are crucial for trading and investing. However, over time, you might accumulate multiple accounts, some of which may become inactive due to changing financial needs. Closing unused or zero-balance Demat accounts can help streamline your financial management. In this article, we'll explore how to close a Demat account, the different types of closures, and important factors to consider before taking this step.
What is a Demat account?
A Demat account, short for Dematerialised account, is a digital repository that securely holds all your financial assets, including securities, stocks, shares, bonds, and more. By converting these holdings into electronic format, it eliminates the need for physical share certificates, which can be vulnerable to loss, theft, or damage. Whether you have investments in shares, exchange-traded funds (ETFs), government securities, corporate bonds, or mutual funds, a Demat account is designed to house all these assets in one convenient location.
Why should you close a dormant Demat account?
If you have a dormant Demat account with no holdings or a zero balance, it is advisable to consider closing it. Demat accounts often come with annual maintenance fees and maintaining an empty or inactive account can be an unnecessary expense.
Demat account closures: Two types
Demat account closures typically fall into one of two categories:
Basic account closure
This is a straightforward process that account holders can follow when there are no holdings, pending payments, or charges in their Demat account. The procedure is usually quick and hassle-free, often completed online.
Transfer and account closure
When you still have securities or charges payable in your Demat account, closing it becomes more complex. This situation requires transferring the relevant holdings to another Demat account, which can involve additional steps and processes.
How to Deactivate Demat Account: The do’s and don’ts
Here are the essential do’s and don’ts when closing your Demat account:
Do’s
- Check for any holdings in your Demat account, such as mutual funds, shares, bonds, etc.
- Ensure that the account balance is not negative during the closure process.
- Make sure there are no open trades or positions in the market associated with your account.
- Download a copy of the account closure form and carefully read the terms and conditions.
- Submit the closure form along with your Know Your Customer (KYC) documentation.
Don’ts:
- Do not forget to dematerialise your shares, if required.
- Never invest more than what you can afford to lose in the market.
How to close your Demat account?
To close your Demat account, follow these steps:
- Download the Demat account closure form from your depository participant's website.
- Accurately fill out the form and submit it along with your KYC documentation.
- Send the form to your DP’s registered address for processing.
Typically, it takes 7-10 business days to complete the account closure process when all necessary paperwork is filed correctly.
How long does it take to close a Demat account?
Demat account closure process:
- Timeframe: Expect 7-10 business days for closure after submitting the form and documents.
- Charges: There are typically no fees associated with closing your demat account.
Before you close:
- Empty your account: Transfer any remaining shares to another demat account or sell them.
- Settle your balance: Ensure there are no outstanding dues.
- Return unused DIS: Send back any unused Delivery Instruction Slips to your depository participant (DP).
- Dematerialise dead ISINs: If your account holds shares from companies no longer traded (dead ISINs), contact your DP to initiate dematerialisation. They will handle the process with the depository and registrar.
Details required for closing a Demat account
When closing a Demat account, you will need the following details and documents:
- The closure application form, which can be downloaded from your depository participant's website
- Your Demat account number and DP ID
- KYC proofs like PAN card
- Provide a reason for closing the account
- Submission of the account closure form to the DP’s head office
Reasons and impact of closing Demat account
Thinking about closing your Demat account? Here is what you need to know.
Reasons to close a Demat account:
- Going inactive: You might not be actively trading and want to avoid maintenance fees.
- Better deals: You found a different broker with lower costs.
- Consolidation: You have multiple accounts and want to simplify your holdings.
- Service issues: You are unhappy with your current broker's customer service.
- Upgrade: You found a broker with features or services better suited to your needs.
Things to consider before closing:
- Transferring securities: Make sure all your stocks and other holdings are transferred to another Demat account before closing. Leaving them in a closed account could make it difficult to access them later.
- Market timing: Selling securities before closing your account can be risky. If the market dips during the transfer, you might lose money. Consider waiting for a favourable market situation if possible.
- Impact on Credit Score: There is no need to worry about your credit score. Demat accounts and their activity typically do not affect your creditworthiness.
Conclusion
Closing a Demat account can be a straightforward process if you follow these steps carefully and ensure that all necessary details are accurately provided in your application form. Whether you are consolidating your investments or simply moving on, taking these steps will help you navigate the Demat account closure process with ease.
Related Articles:
Lifetime Free Demat Account
What is Dematerialisation
How to Use a Demat Account app
Demat Account Eligibility and Documents
How Many Type Of Demat Account
