Close to five lakh demat accounts have been frozen by the Central Depository Services Ltd (CDSL) and the National Securities Depository Ltd (NSDL) for want of PAN details. This makes up for about three per cent of the total number of demat accounts in the market today, which stands at 1.8 crore.
CDSL had 78,000 frozen demat accounts as on September 30, 2010, while NSDL had the lion’s share with around 4.3 lakh frozen demat accounts, as on October 31, 2010. SEBI had mandated that from August 16, 2010, accounts not providing Permanent Account Number (PAN) would be suspended.
Earlier the suspension was with respect to debit only, whereas now the suspension is with respect to credit too. CDSL has about 70 lakh demat accounts, while NSDL has around 1.1 crore accounts. What is a bigger concern is the fact that of the 5.1 lakh accounts that have been frozen, around 4.91 lakh accounts are the ones with balance in them.
“This is a huge number and a very serious issue that such a large number of active account holders have not provided PAN details,” said Mr Jagannadham Thunuguntla, Head of Equity, SMC Global Securities.Online GST Certification Course by TaxGuru & MSME- Click here to Join
The decision to freeze demat accounts without PAN details was taken by SEBI for ensuring better tax compliance as well as the identity of investors.
“Often investors open multiple demat accounts and forget about them. Thus, with multiple accounts it becomes difficult to keep track of them unless there is a common identity such as PAN,” said Mr Vinay Agrawal, Executive Director — Equities Broking, Angel Broking.
Earlier, with only address and other contact details available, keeping track of all the investors was difficult. But providing PAN details streamlines the entire process for taxation purposes.
It is also possible that many may now give up their accounts altogether.
“There are many who are into speculative trading, but do not fall into the taxable income bracket. Therefore, they do not require PAN. Such investors may choose to close their accounts altogether,” explained Mr Thunuguntla.