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What is a Cancelled Cheque?

A cheque is referred to as a 'cancelled cheque' when you draw two lines across it and write the word ‘cancelled’ inside the two lines. Other than this, there is no need to mention anything else on the cheque. The cheque holds no monetary value, which means you cannot use it for transferring funds from one account to another. The intention behind crossing a cheque is to ensure that it does not get misused by anyone. A cancelled cheque is a common KYC document and is used for the purpose of verifying a bank account. A cheque contains various details, like cheque number, IFSC code, account number and MICR code, and if the cheque is not crossed and cancelled, it can be misused should it fall in the wrong hands.

When do you Require a Cancelled Cheque?

Cancelled cheques are used for several different reasons. Some of them are:

KYC

Cancelled cheques are generally used for KYC procedures and documentations. If and when you want to invest in market-linked instruments, such as mutual funds and stocks, the financial institution can ask you to submit a cancelled cheque.

EPF Withdrawal

Cancelled cheques are often times required to be submitted by salaried individuals when they want to withdraw money from their EPF accounts. If you are a salaried employee looking to take money out of an EPF account, you will have to first attach a cancelled cheque with the withdrawal form and then submit them to your employer or the Employees’ Provident Fund Organisation. The cheque helps in confirming the details of the account to which the amount is to be directly credited.

Electronic Clearing Service (ECS)

ECS is an electronic mode of funds transfer, facilitating paperless credit or debit transaction, from one bank account to another. If you wish to make use of ECS for deducting money from your account every month, you will be required to submit a cancelled cheque.

Demat Account

At the time of opening a demat account, which is used by investors to hold their shares in an electronic form, you will be required to submit a cancelled cheque with the account opening form and other KYC documents.

EMIs

Banks offer various loans whose payments can be made on an EMI basis. They will insist on a cancelled cheque to complete the process. A cancelled cheque is necessary for finalising EMI payments.

Insurance

When you buy an insurance policy, such as term plan, endowment plan or health plan, you will be asked to handover a cancelled cheque to the insurance company.

How to Cancel a Cheque?

In order to cancel a cheque leaf, all that you have to do is draw two parallel lines across the cheque and mention the word ‘Cancelled’ inside the two. There is no need for a signature on a cancelled cheque. The details that will be communicated through a cancelled cheque include the account number, name of the account holder, MICR code, name of the branch and branch address of the bank. A cancelled cheque serves as a proof that you have an account in that particular bank whose cancelled cheque you are submitting.

Frequently Asked Questions

How can I make a cancelled cheque?

To cancel a cheque, draw two lines across the cheque leaf and write the word ‘cancelled’ inside the two. Such a cheque does not hold any monetary value, which means you cannot use it for transferring funds from one account to another. The purpose behind crossing a cheque is to ensure that it does not get misused by anyone.

Should we sign on a cancelled cheque?

No, you are not required to sign on a cancelled cheque. All that needs to be done is that you draw two parallel lines across the cheque and write the word ‘Cancelled’ between the two. There is no need to sign on a cancelled cheque.

Why is cancelled cheque required?

A cancelled cheque is required in the following cases:

EPF Withdrawal - Cancelled cheques are usually required to be submitted when salaried individuals look to withdraw money from their EPF accounts. If you are a salaried employee looking to take money out of an EPF account, you will have to first attach a cancelled cheque with the withdrawal form and then submit them to your employer or the Employees’ Provident Fund Organisation. The cheque helps in confirming the details of the account to which the amount is to be credited.

Electronic Clearing Service (ECS) - ECS facilitates paperless credit or debit transaction, from one bank account to another. If you wish to make use of ECS for deducting money from the designated account every month, you will require a cancelled cheque.

KYC - Cancelled cheques are generally used for KYC procedures and documentations. If and when you want to invest in market-linked instruments, such as mutual funds and stocks, the financial institution can ask you to submit a cancelled cheque.

Demat Account - At the time of opening a demat account, which is used by investors to hold their shares in an electronic form, you will be required to submit a cancelled cheque with the account opening form and other KYC documents.

EMIs - Banks offer loans whose payments can be made on an EMI basis. Banks will insist on a cancelled cheque to complete the process. A cancelled cheque is necessary for finalising EMI payments.

Insurance - When you opt for an insurance cover, such as term plan, endowment plan or health plan, you will be asked by the insurance company to submit a cancelled cheque.

Is a cancelled cheque required for PF withdrawal?

Yes. Salaried individuals are generally required to submit a cancelled cheque when looking to withdraw money from their EPF accounts. If you are a salaried employee looking to take money out of an EPF account, you will have to first attach a cancelled cheque with the withdrawal form and then submit them to your employer or the Employees’ Provident Fund Organisation. The cheque helps in confirming the details of the account to which the amount is to be credited.

How do I get a cancelled cheque from my bank?

To cancel a cheque, apply for a cheque book from your bank. Tear off a cheque leaf and cross it with two lines (parallel to each other), mentioning the word ‘Cancelled’ between the two.

How do you write a cancelled cheque?

You cannot write a cancelled cheque. This cheque holds no monetary value, which means you cannot use it for transferring funds from one account to another.