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Unclaimed Dividend

Vijay Sarathi H (PARTNER) (562 Points)

17 June 2010

Unclaimed dividends u/s.205 shall be kept in a separate bank account till seven years.It may be a current account or a Fixed deposit.

Lets assume a company has made a separate FD out of unclaimed dividends. Now how should the interest from such FD be treated? Can it be used in the ordinary business or should it again be kept in a separate bank account?

If so it should not be used in ordinary course of business what shall be the effect of tax deducted on such interest?

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5 Replies

PRATEEK (ACA) (102 Points)
Replied 17 June 2010

DEAR VIJAY ,

ACCORDING TO ME IF THE PAYMENT OF DIVIDEND REMAINS UNPAID FOR A PERIOD OF 7 YEARS FROM THE DUE DATE THEN THE SAME HAS TO BE DEPOSITED IN INVESTOR EDUCATION AND PROTECTION FUND u/s 205 C WHICH SHALL BE UTILIZED FOR THE PURPOSE OF PROMOTING AWARENESS AMONGST THE INVESTORS AND FOR THE PROTECTION OF INTEREST OF THE INVESTORS AS PER THE PRESCRIBED RULES . SINCE THE AMOUNT HAS BEEN DEPOSITED IN THE SEPERATE A/C AS F.D, IT DOES NOT MATTER AS THE INCOME IS EARNED ON THE AMOUNT TRANSFERED TO INVESTOR EDUCATION AND PROTECTION FUND AND THE SAME WOULD BE UTILIZED FOR THE INVESTORS.

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Vijay Sarathi H (PARTNER) (562 Points)
Replied 18 June 2010

Dear Friend

I'm unable to understand your conclusion.

Kumar (Article) (922 Points)
Replied 18 June 2010

Mr. Vijay... Unclaimed dividend need to be kept in a seperate account.... and the same need to be transferred to investor education fund after 7 years if the amount still remains unclaimed.

The interest earned on the unclaimed amount will also be transferred to Investor's fund.

(Guest)

Unclaimed dividend must be kept in the Current Account and not as the FD.

Because, If you keep that amount as FD, and some shareholder came to you for the revalidation of the Dividend warrant, How will you pay the amount?????

Because amount of FD is crystallized and Company has to pay dividend to shareholder also.. So, In that case will director give the money out of their pocket???

Answer, will be no…

So, It must be in the Current Account, Now by mistake you kept that amount in the FD Form, then Interest on that amount is the right of the shareholders and not the Company.

So, any of the Interest on that will have to be deposited in the IEPF also.

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