A demat account is essential to invest in the share market. It is a repository of securities wherein you can store equities, mutual funds, ETFs (Electronic Traded Funds), commodities, currencies, corporate bonds, and government securities. Therefore, opening a demat account is mandatory to trade online in India.
Why would one want to close their demat account?
You may also decide to close your demat account if you are no longer interested in trading and want to avoid demat charges like AMC (Annual Maintenance Charges). People who have opened multiple demat accounts might plan to close a few of them to keep a track of their investments conveniently.
You must know that an idle demat account is vulnerable to thefts and security breaches. Therefore, it is better to close an unused or idle demat account.
A demat account can also be closed in the event of the death of the account holder. If there are any securities in the demat account of the deceased, the nominee or the legal heir may have the right to liquidate them.
If you want to trade only in futures and options, you don’t have to take the delivery of shares. Therefore, it is possible to trade only with a trading account in this segment. Due to this, you may no longer need your demat account and might plan to close it.
What is demat account freezing? What are its advantages?
You can also freeze your demat account if you don’t intend to use it for a certain period. The credits and debits to your demat account can be freezed during this period. The demat account freezing also comes with the option of blocking any unwanted debits where you can keep the credits active to receive the bonuses, dividends, and other corporate benefits from the stocks in which you have invested.
Things to ensure before closing a demat account
Here are a few things you can ensure before closing a demat account:
- Ensure that there are no idle funds in your demat account before closing it.
- Don’t leave any open positions in your account before adopting the demat account closing procedure.
- You must not leave any mutual funds, bonds, SIPs, etc. associated with your demat account before closing it.
- Before closing a demat account, ensure that it has zero holdings. It is wiser to liquidate them, or you can also get them transferred to another demat account.
Steps to close the demat account
Follow the below steps to close your demat account without any issues:
Step 1: Obtain the account closure form
Get an account closure form and provide your personal details, reason for closing the demat account, and other details such as your demat account number, DP ID, etc. in it. If it is a joint demat account, you will also have to provide the details of the other members.
Step 2: Choose the account closure type
There are two types of demat account close viz. full closure and transfer and closure. The first type is applicable if you don’t have any holdings in your demat account.
If there are some holdings in your account, you can opt for the transfer and closure process. In this process, you have to transfer your holdings to another demat account, pay AMC and other charges that are pending, and then request for the demat account closure.
Step 3: Submit the form & documents to the DP
Once you have filled the account closure form completely, visit the DP’s office and submit it along with the required KYC documents.
Upon completion of these formalities, your demat account will be closed in 7 to 10 days. Read the terms and conditions mentioned in the closure form carefully to avoid any hassles in the future.
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