 "Penny-wise and pound-forgetful")
Many investors are quite diligent about monitoring their current portfolios. And, they make extra efforts, through research and by taking advice, to maximise their returns. But, there are many small components of their overall wealth that can slip under the radar, if they don't pay enough attention.
Dormant accounts and fixed deposits (FDs): According to the Reserve Bank of India (RBI), 13.3 million accounts were found in inoperable status in 2013. Consequently, banks had accumulated unclaimed funds worth Rs 3,652 crore as of December 2012. An account is generally categorised as inoperative if no transaction takes place in it for two years.
Ignorance and inattention are two reasons for a bank account turning dormant. Otherwise, it happens after a person passes away and the funds remain unclaimed. Make an inventory of all bank accounts. Review these to check which are operational and which are not. Activate the account by submitting Know Your Client (KYC) documents, withdraw the funds and then close it.
A similar exercise for accounts in the name of dead grandparents or parents can be done. Check if the demise of the account holder has been reported to the bank and the balance claimed by the nominees or legal heirs. If nominations have been duly made, claim for the balance is relatively simpler. But, in the absence of nominations, additional paperwork may be required. FDs, too, suffer the same fate. Do the same exercise for these.
Insurance policies: Sometimes, when a policyholder fails to pay the premium through the term of the policy, his policy lapses. In such a case, he needs to do the necessary paperwork and claim the residual value of the policy that remains after paying all the charges.
Sometimes, money from insurance policies lies unclaimed because the dependants are not aware of the existence of those policies of their deceased relatives. To avoid this, mention all life insurance policies in wills and estate-specific documents.
Unclaimed dividends: There are a number of reasons why dividends go unclaimed. The investor may not have updated his bank account and address with the company or the fund house. Sometimes, cheques reach the right address but lie uncashed. In such cases, investor needs to approach the company or fund house with details of the shares or funds that he holds, and make an application for getting his unclaimed dividend.
Income tax refunds: In earlier cases when returns were filed offline, tax payers may have just ignored their refunds as they found the process cumbersome. However, they can now write to their tax officer seeking details of pending refunds for previous years by providing references.
Even for returns that were e-filed, and refunds are in excess of Rs 1 lakh, the refund cheques are dispatched to the tax payer's address with the bank account details as provided in the returns. The tax payer's attention gets diverted if the refund cheque doesn't reach him owing to a change of address, or if there is an error in the bank details. Taxpayers can get these refunds by placing an online request for reissuing them.
Post Office investments: Any claim for maturity proceeds has to be made at the same branch where the instrument was issued. If the investor had made the investment through an intermediary, he may not be aware of the branch. Find out the name of the relevant branch and approach it with the original certificate or passbook to claim the proceeds.
Provident funds: When an employee leaves a job, he has to either encash the Provident Fund (PF) or transfer the balance to his new PF account. People often neglect to act on this count, especially in the early stages of their careers, when the amount tends to be small. They also mistakenly believe that not doing anything will cause little harm, as the balance will keep earning interest.
But, a new rule became effective from April 1, 2011, which provides that no interest will be paid on the PF balance in an account where there has been no deposit for 36 consecutive months. Hence, do withdraw or transfer money from old PF accounts at the earliest.
Physical equity shares: If investors have lost their physical share certificates, it is possible that in due course they could forget entirely about these investments. If their address has changed, any communication from the company, which would have served as a reminder, will also not reach them.
Many investors are sitting on piles of physical shares they have inherited from their parents or grandparents. They should take time out to get these shares converted into demat mode and have these transferred into their accounts.
Mutual funds: First-time investors typically start with smaller ticket sizes of Rs 1,500-5,000 per folio. Further, they invest small amounts in multiple funds to diversify their portfolio. When they reach a mature phase, they sometimes ignore these smaller investments. In this digital age, investors get monthly statements for their mutual fund holdings from NSDL/CDSL and CAMS. Small-ticket investments done five-six years ago may not be shown in these statements as these mutual fund accounts may not have the investor's updated PAN and/or e-mail ID. Hence, the investor could lose sight of his older fund holdings.
The only way to trace such funds is to track down their folio numbers and update the folio with the investor's current PAN and e-mail ID. Alternatively, the funds can be redeemed and the money reinvested in the existing funds.
All the above elements require one single solution - the investor's timely attention. Maintain proper paperwork that would come handy in the future. Close unused and unnecessary accounts and investments on time.
ACTION POINTS FOR RECLAIMMING YOUR WEALTH
The writer is a chartered accountant and certified financial planner
Dormant accounts and fixed deposits (FDs): According to the Reserve Bank of India (RBI), 13.3 million accounts were found in inoperable status in 2013. Consequently, banks had accumulated unclaimed funds worth Rs 3,652 crore as of December 2012. An account is generally categorised as inoperative if no transaction takes place in it for two years.
Ignorance and inattention are two reasons for a bank account turning dormant. Otherwise, it happens after a person passes away and the funds remain unclaimed. Make an inventory of all bank accounts. Review these to check which are operational and which are not. Activate the account by submitting Know Your Client (KYC) documents, withdraw the funds and then close it.
A similar exercise for accounts in the name of dead grandparents or parents can be done. Check if the demise of the account holder has been reported to the bank and the balance claimed by the nominees or legal heirs. If nominations have been duly made, claim for the balance is relatively simpler. But, in the absence of nominations, additional paperwork may be required. FDs, too, suffer the same fate. Do the same exercise for these.
Insurance policies: Sometimes, when a policyholder fails to pay the premium through the term of the policy, his policy lapses. In such a case, he needs to do the necessary paperwork and claim the residual value of the policy that remains after paying all the charges.
Sometimes, money from insurance policies lies unclaimed because the dependants are not aware of the existence of those policies of their deceased relatives. To avoid this, mention all life insurance policies in wills and estate-specific documents.
Unclaimed dividends: There are a number of reasons why dividends go unclaimed. The investor may not have updated his bank account and address with the company or the fund house. Sometimes, cheques reach the right address but lie uncashed. In such cases, investor needs to approach the company or fund house with details of the shares or funds that he holds, and make an application for getting his unclaimed dividend.
Income tax refunds: In earlier cases when returns were filed offline, tax payers may have just ignored their refunds as they found the process cumbersome. However, they can now write to their tax officer seeking details of pending refunds for previous years by providing references.
Even for returns that were e-filed, and refunds are in excess of Rs 1 lakh, the refund cheques are dispatched to the tax payer's address with the bank account details as provided in the returns. The tax payer's attention gets diverted if the refund cheque doesn't reach him owing to a change of address, or if there is an error in the bank details. Taxpayers can get these refunds by placing an online request for reissuing them.
Post Office investments: Any claim for maturity proceeds has to be made at the same branch where the instrument was issued. If the investor had made the investment through an intermediary, he may not be aware of the branch. Find out the name of the relevant branch and approach it with the original certificate or passbook to claim the proceeds.
Provident funds: When an employee leaves a job, he has to either encash the Provident Fund (PF) or transfer the balance to his new PF account. People often neglect to act on this count, especially in the early stages of their careers, when the amount tends to be small. They also mistakenly believe that not doing anything will cause little harm, as the balance will keep earning interest.
But, a new rule became effective from April 1, 2011, which provides that no interest will be paid on the PF balance in an account where there has been no deposit for 36 consecutive months. Hence, do withdraw or transfer money from old PF accounts at the earliest.
Physical equity shares: If investors have lost their physical share certificates, it is possible that in due course they could forget entirely about these investments. If their address has changed, any communication from the company, which would have served as a reminder, will also not reach them.
Many investors are sitting on piles of physical shares they have inherited from their parents or grandparents. They should take time out to get these shares converted into demat mode and have these transferred into their accounts.
Mutual funds: First-time investors typically start with smaller ticket sizes of Rs 1,500-5,000 per folio. Further, they invest small amounts in multiple funds to diversify their portfolio. When they reach a mature phase, they sometimes ignore these smaller investments. In this digital age, investors get monthly statements for their mutual fund holdings from NSDL/CDSL and CAMS. Small-ticket investments done five-six years ago may not be shown in these statements as these mutual fund accounts may not have the investor's updated PAN and/or e-mail ID. Hence, the investor could lose sight of his older fund holdings.
The only way to trace such funds is to track down their folio numbers and update the folio with the investor's current PAN and e-mail ID. Alternatively, the funds can be redeemed and the money reinvested in the existing funds.
All the above elements require one single solution - the investor's timely attention. Maintain proper paperwork that would come handy in the future. Close unused and unnecessary accounts and investments on time.
ACTION POINTS FOR RECLAIMMING YOUR WEALTH
- Close your idle bank accounts after after withdrawing funds
- Write to the I-T department, giving references, and seek details of pending refunds
- Get hold of your original documents and approach the right branch of the Post Office to claim maturity proceeds
- Withdraw or transfer funds from old PF account
- If you hold physical share certificates, get these converted into demat form and transferred to your account
- Track down the folio numbers of older mutual fund investments, and update your PAN and e-mail ID in those accounts
The writer is a chartered accountant and certified financial planner