How to Write a Cancelled Cheque?

Introduction

A cheque is a bill of exchange or an order to a bank. It requires paying a specified amount from the drawer’s account to the bearer of the cheque or to whom it is ordered. A cheque has three parties associated with it: a drawer, a drawee, and a payee. These parties are defined as follows.

Drawer of the Cheque

A drawer is an individual who orders the bank to issue the specified sum of money written on the cheque. The drawer of the cheque is required to sign the instrument. The bank cannot issue the amount to the drawee if the cheque is unsigned.

Drawee of the Cheque

The drawee is the bank that will pay the amount of money to the person specified in the cheque.

Payee

The payee is the person who receives the specified amount from the bank. The bank is ordered to pay the specified amount as per the drawer’s request to the drawee.

There are various types of cheques, such as cancelled, stale, self, open, bank, and crossed cheques. In this article, we will discuss the meaning and uses of a cancelled cheque and how to make a cancelled cheque.

What is Cancelled Cheque?

A cancelled cheque is a piece of paper that has “cancelled” written in between the two crossed lines. If any mistakes have occurred while writing a cheque, the owner of the cheque crosses it with two lines, with the word “cancelled” on it. A cancelled cheque is not valid when represented in any bank, and a person cannot withdraw any amount written on the cheque if it has been cancelled. A cheque is usually cancelled so that people will not misuse it in any way.

A cancelled cheque acts as legit proof that a person has a bank account with the bank name on the cheque. It contains the account holder’s name, account number of the owner or drawer, IFSC code, MICR code, branch and name of the bank address, and cheque number. An individual might not be able to withdraw any money from the cheque, but details can be obtained from the cheque itself.

Uses of a Cancelled Cheque

A cancelled cheque is used for various purposes. The uses of a cancelled cheque are listed as follows.

Know Your Customer (KYC)

A cancelled cheque can be used for various KYC procedures, such as investing in stocks and mutual funds. A KYC procedure requires proof of bank account, address, branch of the bank, and IFSC code, and a cancelled cheque provides these details.

Equated Monthly Installments (EMI)

EMI options are chosen by individuals in all kinds of purchases, and loans, such as a term loan for business, car loan, home loan, business loan, and the purchase of an asset. The bank or company requires a cancelled cheque to complete the formalities associated with the purchase.

Insurance Policies

A cancelled cheque is required while choosing an insurance policy. However, it is not mandatory in all companies and organisations. An individual can use a cancelled cheque if an organisation specifically asks for it.

Withdrawal of Employee Provident Fund (EPF)

A cancelled cheque is required by the bank or company while withdrawing money from the employee’s provident fund. It is used to verify the account details and the existence of the owner or drawer.

Electronic Clearance Service (ECS)

ECS is an electronic mode that allows individuals to transfer funds from one bank account to another. While setting up an ECS account, the amount is deducted every month, and for the deduction, the bank requires a cancelled cheque from the account holder.

How to Write a Cancelled Cheque?

A cheque can be easily misused if not cancelled. Therefore, it is essential to cancel a cheque. A cancelled cheque can be used in several ways. To know how to write cancelled cheque or how to make a cancelled cheque, follow the steps listed below.

• Take a new/fresh paper from the cheque leaf of your bank. Do not sign the cheque anywhere.
• Draw two lines on the cheque in the centre. Make sure they are parallel.
• Write “CANCELLED” between the two parallel lines in capital letters.

While drawing the two parallel lines, make sure that they do not cover any crucial details, such as the account number, MICR IFSC codes, and the branch address or name. If you make any mistakes on the cheque, you can simply start with Step 2. Even if your cheque is signed, no individual can withdraw money from the bank.

It is also essential not to sign on the cheque as signatures can be forged and used for fraudulent activities under your name. If there is a signature on the cheque, keep it to yourself or tear it apart to be safe. When giving a cancelled cheque, you must give it to a person you trust or the relevant authorities in charge of collecting it.

What Does a Cancelled Cheque Look Like?

A cancelled cheque is a negotiable instrument that has “cancelled” written between the parallel lines in capital words. A cancelled cheque sample is given below.

Conclusion

In conclusion, we can say that a cancelled cheque is a cheque that is not eligible for withdrawing cash from a bank. It can be used in various ways, such as opening a Demat account, business line of credit, KYC, EPF, ECS, EMI, loans for new business, and insurance policies, except for withdrawal. A cheque is generally cancelled to avoid misuse.

FAQS

How to write a cancelled cheque in India?

You can write a cancelled cheque in India by following the steps mentioned below.

• Take a fresh cheque from your bank cheque leaf. Do not sign it anywhere.
• Draw two lines across the cheque in the centre. Make sure to draw parallel lines.
• Write “CANCELLED” in between the two parallel lines in capital letters.

What is a cancelled cheque leaf?

A cheque leaf is a booklet that contains 10 or more cheques. A cancelled cheque leaf is a single leaf from it with the term “CANCELLED” written between two parallel lines.

Should I sign a cancelled cheque?

A cancelled cheque has no monetary value, so it does not need to be signed. If you sign it by mistake, it is essential to either give it to a person you trust or tear it. A cancelled cheque with a signature does not hold any monetary value. However, it can be misused as it contains the account number, MICR code, and IFSC code. Some fraudsters might even forge your signature in the future. So, it is always advised not to sign a cancelled cheque.

Can my cancelled cheque be misused?

A cancelled cheque cannot be misused for monetary gain as it is not valid in the bank. However, people can misuse the information it contains, such as branch location, MICR code, IFSC code, and account number.

Why do people cancel their cheques?

Cheques are cancelled for a variety of reasons. Some cheques are cancelled due to manual mistakes, such as writing the wrong amount, doubling the number, or writing the wrong name. Other cheques are cancelled due to companies’ requirements, such as for a KYC, opening a Demat account, and withdrawing money from EPS. All these processes require an individual to submit a cancelled cheque for verification purposes.