Definition : A cheque leaf is termed as a ‘cancelled cheque’ when you strike two parallel line across it and write the word ‘cancelled’ between two lines. It act as a proof that the individual own an account with bank. Other than this, nothing else needs to be written on cheque, even sign not required. This cheque can not be used to withdraw or transact amount as the words explicitly mean that it has been cancelled. The cheque can be used to communicate other important information like account number, MICR code, IFSC Code, branch address etc to whosoever concerned.

Cancelled Cheque – All You Need to Know

Following information is available on cancelled cheque –

• Name of Account Holder
• Bank Account Number
• IFSC Code
• MICR Code
• Name of Bank
• Branch Address

Use of Cancelled Cheque

Most probably, you would have not heared about cancelled cheque while dealing with bank. But cancelled cheque is widely used for following purposes –

1. Account Opening – You may be required to submit the cancelled cheque while opening a saving or current account in the bank.
2. Electronic Clearing Service (ECS) – ECS is an electronic mode of transfer, used for paperless automated debit/ credit transaction from one bank to another. To activate ECS service, you need to submit cancelled cheque for verification of account credentials.
3. Demat Account – Cancelled cheque is required at the time of opening of demat account. Demat account is used for purpose of trading and investment in stocks. You will be required to provide cancelled cheque along with account opening form, ID proof, address proof etc.
4. EPF withdrawal – While making withdrawal from your provident fund account, you need to provide cancelled cheque with withdrawal from and submit. The cancelled cheque leaf helps in validating the details of account in which the amount is to be credited directly.
5. EMIs – If you are applying for loan like home loan, car loan, personal loan etc. You need to repay it through EMIs. The bank or financial lender may ask you for cancelled cheque to finalize the EMI payments.
6. Insurance Policy – Cancelled cheque is also required at the time of purchasing insurance policy. You will be required to submit cancelled cheque with insurance company.

The main purpose of cancelled cheque is to verify your account details, for any direct credit. So there is no need to sign the cheque.

Misuse of Cancelled Cheque

• A cancelled cheque leaf has no monetary value. To use the cancelled cheque, word ‘cancelled’ written across cheque must be cancelled by drawer authenticating the same.
• However, banks also do not accept the already cancelled cheque presented with alteration authenticated by drawer, to avoid legal complications in future.
• A cheque once cancelled is treated as cancelled forever.
• However, there are recent instances of misuse or fraud through cancelled cheque. Be careful while writing a cancelled cheque. Make sure that it is delivered to the right person.

More reasons to cancel a cheque

Cheque Lost – In case of cheque leaf lost, you must cancel the cheque as soon as possible to avoid misuse. However, you need to report to bank to execute the cancellation of cheque.

Payment Cancellation – If you come to know that the person to whom you have issued the cheque is cheating with you. Then you must cancel the cheque by stop payment instructions with bank.

How to cancel a Cheque

Follow these simple steps to cancel a cheque :

In order to cancel a cheque,

• Draw two parallel lines across the cheque.
• Write the word’ ‘cancelled’ in between two lines.
• Done, cheque is cancelled and can’t be used for transaction purpose.

Note : There is no need to sign the cancelled cheque.

Cancelled Cheque Sample Format Image

Here is scanned sample format image of a cancelled cheque.

Conclusion –

So you just read about why you need to issue cancelled cheque and what are the reasons to cancel a cheque, Cheque which is cancelled can not be used for transaction in account. however, you need to be very careful and handover to the intended person.