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What is Unclaimed Dividends?

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When a company declares a dividend but a shareholder does not claim it, then it is called an “unclaimed dividend.” But, why would a shareholder not claim a dividend, as it is a source of income for him?

At times, companies have outdated contact information of a shareholder. Besides, some shareholders are not even aware when dividends are announced.

Suppose a company declares a dividend, but a shareholder does not claim it within 30 days, then it will be considered an unclaimed dividend.

A company that has declared a dividend is under an obligation to pay unclaimed dividends. However, if a dividend is not claimed for more than seven years, a company can transfer it to the Investor Education Protection Fund Authority (IEPF), which is under the Ministry of Corporate Affairs.

Unclaimed Dividend Meaning

When a company reports a profit, it is not under a legal obligation to pay dividends to its shareholders. However, once it announces a dividend, it is under a legal obligation to pay it.

Nowadays, it is incredibly easy for shareholders to receive or claim a dividend. If their demat account is linked to an active bank account, then the dividend declared by a company whose share they own will automatically come to their bank account.

Still, dividends go unclaimed often. You may wonder why. When a shareholder provides incorrect bank account details to either his stockbroker or the company whose shares he has purchased, the dividend will go unclaimed. At times, a shareholder changes his bank account but does not provide the updated details to his broker. In such a case, dividends go unclaimed.

If a primary shareholder dies without providing details of his nominee or inheritor, then also dividends go unclaimed.

Example of IEPF Unclaimed Dividend

Suppose a shareholder had invested in the stocks of a company many years ago before dematerialisation of shares happened. At that time, shares were bought and sold using paperwork.

The company kept on announcing dividends but the shareholder did not claim them. The company sent letters to his address, but turns out that the address is incorrect. As the investment was made many decades ago, the investor could not provide his email ID, which means he could not be reached out to even over an email.

The bank details that he provided are also old. It is possible that the old bank account is either dormant or closed. There is no way the company can reach out to him or pay him dividends. The shareholder has not collected dividends for more than seven years.

As a result, the company decides to transfer all the dividends that it owes to the shareholder to the IEPF.

How do you Check for Unclaimed Dividends?

Checking for unclaimed dividends is not tough. All you have to do is follow these steps:

a)    Step 1: Go to this link - https://www.iepf.gov.in/IEPFWebProject/services.html - of the IEPF. You need to click on "Search Unclaimed/Unpaid Amount." You can find it under Quick Links.

b)    Step 2: Then, a screen will appear. Here, you should provide the name of the person whose unclaimed dividends you need to check. Now, click on Search. There is another way for it, too. In case, you have the folio number or Client ID/Account number, you can use that as well for this purpose.

c)     Step 3: Now, you will see the search results on your screen. Find the entry that is close to the one you are trying to search for and click on it.

d)    Step 4: Now, you will be able to see the details of the entry that you have selected. In case, it is the current record, you can select it. For that, you need to click on the box in the S. No. column and click on the submit button.

e)     Step 5: Here, you can see the list of all the unclaimed dividends for the person whose name you selected.

Unclaimed Dividend Treatment

a)     If a shareholder does not claim his dividend for more than seven years, his dividends can be transferred to the IEPF by the company. How can a shareholder get his dividends from there?

b)    The fact that the dividends are with the IEPF does not mean that the shareholder cannot claim them. He can certainly do so.

c)     The shareholder has to now claim his unclaimed dividends from the IEPF after following a detailed process.

d)    He will have to prepare a claim application and adhere to all the legal requirements for this purpose. He will also have to provide all the documents needed.

e)     When unclaimed dividends are transferred to the IEPF, they remain absolutely safe and they can be claimed by the rightful owner at any point in time.

How to Claim Unclaimed Dividends

The step-by-step process to help people claim their unclaimed dividends is provided below:

  1. Step 1: Go to the IEPF website – You will find a “Services” tab on the home page. On this tab, you will notice the “Claim Refund” option. Click on it. It will redirect you to the “Upload eForms” page.

  2. Step 2: Log in to the portal of the Ministry of Corporate Affairs (MCA) – Once you click on “Upload eForms,” you will be redirected to the MCA’s website, where you have to log in. Having done that, you should go to the “MCA Services” tab and click the “IEPF-5” option.

  3. Step 3: Fill out the online form – Now, you have to provide all the details (including name, cancelled cheque, folio number, demat account number, PAN number, etc.) in the online form so that your identity can be verified and your right to the investments you have made in a company is established.

  4. Step 4: Provide the necessary documentation – At this step, you have to attach all the required documents, including PAN card, ID proof, cancelled cheque, etc. so that your entitlement to the extent of your investment in a company is established. You must ensure that all the details are correct. Otherwise, you may have to face delays in processing.

  5. Step 5: Submit the form – Once you submit the form on the MCA’s portal, it will assign an SRN acknowledgment to you, which will help you track your claim status.

  6. Step 6: Submit physical documents to the nodal officer – You have to provide physical copies of your documents to the nodal officer designated by the company in which you have an investment. Post this, the officer will send an e-Verification Report to the IEPF authorities.

  7. Step 7: A verification report is filed by the company – Now, the nodal officer appointed by the company will go through the physical documents provided by you. After this verification is complete, an online e-Verification report will be delivered to the IEPF authorities.

  8. Step 8: Approval of the IEPF authorities – It is possible that the IEPF’s verification takes some time. So, you should be prepared to follow up because 60 days is usually the maximum time frame for this purpose. It can also happen that you are told to provide more documents. Once the verification is successful, you will get an approval email on your registered email ID.

  9. Step 9: Refund initiation and transfer of unclaimed dividend money – After a claim is successfully verified, the IEPF authority will begin the refund process. Post this, you will get the unclaimed dividend amount in your bank account.

Conclusion

Any shareholder can end up not claiming the dividends due to him. However, the process of claiming unclaimed dividends is not that tough. That said, as an investor, you must ensure that your contact details, bank account number, and any other documents are updated with your stockbroker and with the companies you have invested in. It will prevent you from all the hassles involved in claiming an unclaimed dividend.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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Frequently Asked Questions

How do I find my unclaimed dividends?

Answer Field

You can contact the investor relations team of the company you have invested in. Or, you can even visit the website of the Investor Education Protection Fund Authority (IEPF) to find your unclaimed dividends.

How do I claim unclaimed dividends?

Answer Field

You have to follow a detailed process by going to the IEPF’s website, filling out a form, and providing all the required documents to claim your unclaimed dividends

What is an unclaimed dividend example?

Answer Field

Suppose Mr. A invested in the share of a company called X. X announced a dividend but A did not claim it for 30 days. Then, such a dividend is called an unclaimed dividend.

What causes unclaimed dividends?

Answer Field

Often shareholders close one bank account but do not update the details of their new bank account with their stockbroker. Or, their contact details are not updated with the company they have an investment in. Such causes lead to unclaimed dividends.

Are unclaimed dividends taxable?

Answer Field

Unclaimed dividends are taxable. When they are announced and payable, they should be added to your income. You must show them in your tax returns, whether you have claimed them or not.

What is the time limit for unclaimed dividends?

Answer Field

If dividends are not claimed within seven years of their announcement, a company can transfer them to the IEPF.

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