Demat account is a necessity for every investment as per SEBI rules and digitalization of the stock market processes. However, what if there is no activity in the free Demat account? Can you close the account or leave it?
What is the procedure for closing a Demat account? What happens to their account when a Demat account holder dies? There are many such rarely answered questions regarding the closure of the Demat account, which we will discuss in this article.
Why Closing the Demat Account Necessary if You are Not Using it?
Before diving into how to close the Demat account, let’s see why it is crucial for you to close the account if it is not in use.
- Firstly, as per NSE, if there are no transactions/ trading activity in the Demat and trading account for the consecutive 12 months, then the account will be regarded or tagged as a dormant account. While these rules are for a trading account, if there is no trading activity or you are not holding stocks in the Demat account, it is better to close the account.
- The reasons to close Demat accounts include illegal or fraudulent activities by rouge stock brokers and hackers. While technology has made transactions, and trading easier, it has also brought cybercriminals with it. The rouge stockbrokers and hackers are always on the hunt for dormant accounts, and if they find such accounts, they can take control by hacking into them without any knowledge, your accounts can be used for illegitimate purposes. So, the best thing to do is close the account if you are not using it and not going to use it in the future, especially if you are not keeping an eye on it.
- Another way you can stop this from happening is by freezing the accounts if you are not trading, investing, or tracking the account presently, but you will use it later, then you can just freeze the account. For doing the same, you have to contact the brokerage house. This will keep the account safeguarded without you using it even for a longer duration as well.
How to Close a Demat Account?
Now you know why it is important to close the account, let’s find out how you can close the account.
- Firstly, you need to download the Demat account closure form from the website of the brokerage house.
- Fill it with the necessary details like:
- Client ID
- DP ID
- Your name and address on the Demat account –must be the same as your provided while opening the Demat account with CDSL or NSDL.
- The reason for closing the account is crucial and needs to be mentioned – it can be the voluntary closure of the account or the death of the account holder and others.
- If there are joint holders, the details of the other holder have to be mentioned as well.
- The account holder/s has to sign the closure form duly at every section as mentioned.
- It takes around 7-10 working days from the submission of the Demat account closure form to close the account.
- There are no charges to be paid to the Depository for closing the account. However, the Depository Participant (broker) may charge a nominal fee for closing the account but it depends from broker to broker.
- Finally, make sure you have cleared all your dues with the brokerage house, if any, before closing the account, and you are done with the closure of the account.
How to Close the Demat Account of a Deceased Holder and Transfer the Holdings?
In the case of a deceased Demat account holder, either the nominee of the account can sign and take the transfer of the securities in the Demat account and then close the account or in absence of a nominee, the legal heir of the deceased holder can request for transmission of the securities held in the account on their name and then close the account.
Closing Demat account is important as it can lead to unnecessary and unwanted hassle in life. If you are not using it permanently, closing it can help you from all sorts of hassles that may happen as mentioned above. If you are not using it temporarily, then freeze it by placing a request with the brokerage house.