A cancelled cheque is just a regular cheque however, there are two strikes across the cheque and the word cancelled is written between the two lines. The main goal of a cancelled cheque is that it acts as proof that the person writing the cheque in fact has an account in the bank.
When do you need a cancelled cheque?
1. When investing in stocks, mutual funds
A cheque is an instrument used for the payment of money. It can be used for payment at any time and place, but it is most useful when used to pay the money you have been given by your employer or someone else. Your employer may give you a cheque as compensation for your services or salary, but it is not necessary that you should use them immediately; they will remain in your possession until they are cashed by you or destroyed.
2. To make a withdrawal from your EPF account
If you want to withdraw cash from your EPF account, you need to submit two documents- a passbook and another application form. The passbook has details like the name and address of the member along with the period covered by the member for which he/she is drawing cash from his/her EPF account. The application form has all the details about how much amount is being withdrawn from his/her EPF account and also the reason why he/she wants to withdraw this amount from his/her EPF account.
3. As documentation
A cancelled cheque can also be used as proof of insurance payments and rental agreements, as well as to prove that money has been paid over to charities for donation purposes. Additionally, if you need to pay for a loan or for credit card bills in such cases too you would need to submit a cancelled cheque to the bank or NBFC.
4. For opening a Demat account:
A Demat account is opened with a letter of introduction from a bank or other financial institution. The client who opens such an account needs to submit his/her application along with their passport photocopies and KYC documents which include proof of identification and address proof. However, along with all this documentation, a cancelled cheque is also required.
Learn to write a cancelled cheque
Now that we have introduced you to the world of cancelled cheques let’s understand how to write a cancelled cheque. The following guide shows what should be included in a cancelled cheque:
- You would need a new cheque
- On this new cheque, no information should be written like the payee’s name or signature
- Cross the cheque with two parallel lines
- Write cancelled between the two lines
- While drawing the parallel lines make sure information like account number or MICR code etc is not obstructed.