Many times, bank accounts get changed and are not updated in the folios or name mismatch, due to which the redemption or dividend proceeds does not get directly credited and Mutual Fund company issues a Draft/Warrant against the same. When an Investor fails to encash the dividend or redemption warrant before it becomes Invalid, the said amount is called as Unclaimed Dividend or Unclaimed Redemption. This article talks about What are dividend options in Mutual Funds, What is Unclaimed dividend, how to get the Unclaimed Dividend or Redemption Amount if you have missed it.
It is important to keep your bank details and proper address updated in the KYC and MF records, to avoid Unclaimed Dividend.
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Unclaimed Dividend of Mutual Funds
What is Unclaimed Dividend of Mutual Funds
The investors while investing in Mutual funds can choose Growth or Dividend option.
Under the Dividend option, the dividend can be Dividend Payout and Dividend Reinvestment. Remember It is not compulsory for mutual funds to pay a dividend.
- In Dividend Reinvestment option, the Dividend is used to purchase reinvested into the same scheme.
- In Dividend Payout option, the dividend amount is deposited into your bank account.
Our article Growth and Dividend Option in Mutual Funds explains the Growth and Dividend investing options in Mutual Funds. And Dividends Options of Mutual Funds:Tax, Switch talks about the tax part of Dividend.
But if the bank account associated with Mutual Fund has been closed for whatever reason, then the Mutual Fund company cannot deposit the dividend. It will try to inform the investor about the dividend. It will also send the cheque to the investor address in the mutual fund company records, which the Investor can deposit. If the investor does not deposit the cheque within the validity period(3 months) then that money becomes Unclaimed Dividend.
The process was formalised by SEBI n February 2016, it has been made mandatory for all the fund houses to disclose the details about the unclaimed redemption and dividends of all mutual fund schemes on their website with effect from April 01, 2016.
The Mutual Fund company puts this unclaimed dividend amount into a Debt fund(Liquid/Money market) specifically created for this purpose. There is no Exit load in this fund and Mutual fund company may charge a maximum of 0.50% as Total Expense Ratio (TER). If you claim the unpaid dividend then you will be paid initial unclaimed amount along with the income earned till the end of the third year.
If one does not claim within 3 years from the due date, the income earned on such unclaimed amounts is used for the purpose of investor education.
The investor can claim the Unclaimed Dividend any time by contacting the Mutual fund company and submitting the details which are explained below.
You have to have details with you like the PAN Number or Folio Number or bank account number. You may be asked for the date of birth or name or email id.
How to know that you have Unclaimed Dividend?
If your email/mobile details are with the mutual Fund company they will inform you about Unclaimed Dividend, as shown in the image above.
Unclaimed Dividend will also show up in Consolidated Account Statement (NSDL CAS), if folio is associated with your PAN. Details about CAS are covered in our article NSDL CAS, CDSL CAS: Statement of holdings in all Demat Accounts, Mutual Funds
You can also check about Unclaimed Dividend on the Mutual Fund websites. All Mutual Fund websites are required to provide the details of investors with the Unclaimed amount on their website. They also tell the procedure and respective forms that investor can use to claim the amount.
AMFI webpage has links to the various mutual fund companies for the Unclaimed. You can go to it by clicking here.
How to claim the Unclaimed Dividend?
The investor can claim the unpaid dividend any time but it is not an online process. The documents have to be submitted to either Mutual Fund company or R&T agents like CAMS, Karvy. (I sent it to Mutual Fund company office)
One can claim the unpaid dividend amounts by
- Filling the Unclaimed Redemption/Dividend Claim Form. Sample form from HDFC Mutual is shown below
- The form should be filled and signed as per the mode of holding (Joint/Single)
- One should also submit other appropriate forms and documents there is a change of bank details/address/name. Ex Cancelled cheque with Bank Update form
- Copies of document like Proof of Identity(POI), Proof of Address(POA) should be self-attested and accompanied by originals for verification.
It is important to keep track of your hard-earned money. Avoid having more than two or three savings accounts. Keep your KYC updated, make sure your Phone number and email id is there in the Mutual fund records so to help you trace your funds at a later date if the need arises. Tracking of Mutual funds is easy nowadays with many online tools and mail. Those who are not net savvy and who invest physically, they have a file having all the statements and records at a single place to avoid any confusion later on. It is recommended for others too.