Difference between inactive and dormant savings bank accounts
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Have you left behind a trail of unused savings bank accounts when you changed jobs? Many individuals don’t close bank accounts that they no longer need. Here is what happens if you don’t close your savings or current accounts and why you need to keep a track.
INACTIVE AND DORMANT ACCOUNT
If you have a current or a savings bank account and have not done any transactions through it for more than 12 months, then it will be classified as an inactive account. And if you don’t do any transactions from a bank account for 24 months, then it will be classified as dormant. As per Reserve Bank of India (RBI) guidelines, an account becomes dormant if a customer does not initiate transactions such as withdrawal of cash at a branch or automated teller machine (ATM), payment by cheque, transfer of funds through Internet banking, phone banking or ATMs.
System generated transactions, such as interest credit, are not considered valid. However, if you get dividend on shares or the proceeds of your fixed deposit (FD) in your savings account, then it will be considered as a customer induced transaction. Hence, the account will be treated as operative as long as the dividend or FD proceeds is credited to bank account. It will be treated as inoperative only after two years from the date of the last credit entry of dividend or FD, provided there is no other customer induced transaction.
Once your account is tagged as inactive, you won’t be able to request for a debit card or cheque book, use Internet banking or get user identity (ID) and password. And when it becomes a dormant account, besides the restrictions applicable on an inactive account, you won’t be allowed to change your address, contact number, email address, and do transactions through ATMs, Internet and phone banking.
WHAT YOU SHOULD KNOW
One can activate an inactive bank account by doing basic banking activities such as cash withdrawal or deposit, funds transfer or bill payment. Some banks give you the option to request for activation of your account through Internet banking. You can even call the customer care or contact the bank branch. In case of a dormant account, you may have to submit a written request along with identity proof. Your signature may also be verified to activate the account.
Even after your account turns inactive or dormant, interest, if any, will be credited to your savings account regularly. And last year, the RBI had asked banks not to levy penal charges for non-maintenance of minimum balances in any inoperative account.
From a tax point of you, remember that this year, while filing your income tax return, you have to give details of all your savings and current accounts including dormant and inactive ones. According to income tax laws, details of all bank accounts, excluding those that have been non-operational for over three years, held in India at any time during the previous year should be provided in the return.