Demat Account: Suspension of Accounts From April If PAN-Aadhaar Not Linked

Linking your PAN with Aadhaar is a must if you want your demat or trading account to be completely KYC compliance. The deadline has been established, and account holders must link their PAN with Aadhaar by March 31, 2022 in order for their accounts to be functional on April 1, 2022. According to National Securities Depository Limited (NSDL) "In case PAN is not seeded with AADHAAR before the date specified by the Government, it will not be considered as a valid PAN".

In a circular dated 29th March 2022, NSDL has said "Participants are requested to note that in case where demat account holders fail to link their PAN with Aadhaar by March 31, 2022, such demat accounts will become 6 KYC non complaint (due to invalid PAN) and be suspended (suspended for Debit) under freeze reason code 39 - "Account holder related PAN inoperative" by NSDL until demat account holders link their PAN with Aadhaar and PAN flag is updated by Participants after verification in NSDL system."

If account holders have any debit transactions scheduled for after March 31, 2022, such as account transfers and inter depository transfers, they must perform such directions for transferring securities well in advance of EOD on March 31, 2022 to avoid the risk of non-delivery for sell trades scheduled for March 30, 2022 and March 31, 2022. According to NSDL "Participants are also advised to inform such clients that if they have any debit transactions to be executed in respect of Pay-ins scheduled after March 31, 2022 viz., account transfer and inter depository transfer, they shall execute such instructions for transferring securities well in advance but before EOD of March 31, 2022 to avoid the risk of non-delivery for sell trades of March 30, 2022 and March 31, 2022."

NSDL will suspend such demat accounts if the PAN is not verified or if the PAN is validated but not seeded with Aadhaar. According to NSDL in respect of trades done on or after April 1, 2022, Participants may also advise its client Brokers to inform their clients to ensure that in addition to the trading accounts, the clients are compliant with 6 KYC requirements such as Name, Address, PAN, valid mobile number, valid email ID, income range and AADHAAR-PAN linkages in respect of their demat accounts as well to ensure settlement.

NSDL has also confirmed that from April 1, 2022, prior to opening new demat accounts, resident participants are advised to ensure that the clients who are required to possess Aadhaar number have linked their PAN with Aadhaar. "Participants are advised to send intimation to clients after suspension of demat accounts on April 1, 2022 via letter / email/ SMS or any other mode which the Participant may deem fit," NSDL has said in the circular.

Demat account holders should be aware that if they do not update the six KYC attributes in their demat accounts (Name, Address, PAN, valid Mobile Number, valid Email ID, and Income Range) by March 31, 2022, their demat accounts would be deactivated. Along with updating their pending KYC details and linking PAN with Aadhaar, account holders can make fully KYC compliance of their demat accounts by end of the day.