If you have ever entered the world of investing or trading, you will be aware that having a dematerialized (i.e. Demat) account is a primary requirement to carry out your investing or trading activities. Before you start your investing journey, you’ll be required to register your account as per the process followed in the article - How to Open a Demat Account
However, over time, you may find yourself not using your Demat account very often. Maybe you are extremely passive, or you gave up trading. However, regardless of your usage, you’ll be required to pay an annual maintenance fee to your broker, and this can become an unnecessary expense in case of dormancy.
Therefore, if you are unable to use your Demat account, the best course of action would be to close down your Demat account. The process of closing down your Demat account will be covered in this article.
How to Close your Demat Account?
Post the digitization of the stock market, the majority of the brokers do allow you to close your account online, just like how you registered online. However, some brokers may ask you to submit a letter requesting closure offline. If this is your broker, you’ll have to make yourself aware of the closure process thoroughly. Do check on your broker’s website for the official downloadable closure form. You’ll be required to fill in your personal details and any account identification details to ensure additional security.
Make a closure request through your brokerage firm’s website and submit the signed closure form with the required paperwork. Cross-check your account for any equity holdings in your account. If any exist, sell them. Ensure that the account does not carry a negative balance i.e. you likely owe money to your broker.
Deactivating Your Demat Account
You will be required to fill the account closure form. Use all the latest updated details while filling the form. You are typically required to keep all of your following documents and information with you, which you will be submitting in conjunction with the closure form. These documents include the identification number of your Demat account as well as your Depository Participant (DP), your KYC (Know Your Customer) details, full name and address, your reason for closing the said Demat account, and a self-attested identity proof copy like an Aadhaar Card, PAN card, voter ID or passport.
If your Demat account has any holdings:
The closing procedure of the Demat account broadly remains the same regardless of whether the account has holdings in it or not. If you do not want to hold on to your existing shares, you may sell them. Else, you must follow the given instructions to ensure you keep your holdings while closing your account.
You will still be required to fill out the closing form, although in this scenario there will also be a delivery instruction slip (DIS) related document in which you are required to transfer your securities to another Demat account, either your alternate account or someone else’s. Usually, both accounts belong to the same account holders, but this need not always be the case.
Along with this, you may also be required to turn in a client master report from a central depository of any new account in which you are transferring your existing holdings. A signature, followed by a stamp and a logo are also usually mandatory to be filled along with this report. You may also be required to fill in other documents for KYC purposes, after which all these documents will have to be submitted to the head office of your Depository Participant. Your request will be processed once you have completed the said procedures.
The process of closing down a Demat account is pretty simple, with minimal steps involved and no additional charges required. The advantage of closing a Demat account that you do not actively use is the money you save from the annual maintenance charge you’re required to pay your broker every year.