If you overlook or no longer require an account, neglecting to close these savings or current bank accounts can lead to their classification as either inactive or dormant.
Have you ever pondered the fate of a bank account that has fallen out of use? Whether it's an account that slipped from your memory or one that you no longer require, neglecting to close such savings or current bank accounts can lead to their categorization as either inactive or dormant. However, what exactly do these terms signify, and how do they vary from one another?
Inactive bank accounts
An account is deemed inactive when no transactions, including deposits, withdrawals, or other banking activities, occur for a period exceeding 12 months. In simpler terms, if no activity takes place within this timeframe, the account is classified as inactive.
Dormant bank accounts
Alternatively, if a savings or current account remains untouched for a duration surpassing 24 months, it is classified as dormant. A dormant bank account represents an extended period of inactivity, necessitating specific procedures to reactivate it.
Implications of inactivity or dormancy in bank accounts
Once an account becomes inactive or dormant, certain implications arise. Transactions that are automatically generated by the banking system, such as interest credits, cease to apply to these accounts. However, if any earnings from fixed deposits (FD) or dividends from shares are credited to your savings account, these will be considered as customer-induced transactions. Consequently, the savings account will remain active, provided that the FD funds or dividends are transferred to it.
Restrictions on banking services and account access
In the scenario of inactive accounts, certain services such as internet banking, requesting debit cards or check books, and updating contact information like phone numbers, addresses, or email addresses become inaccessible. The limitations placed on dormant accounts are even more extensive, encompassing restrictions on ATM transactions, phone banking, and internet banking usage. In essence, both inactive and dormant accounts curtail your ability to utilize a range of banking services and functionalities.
Reactivating an inactive or dormant savings account
To reactivate an inactive savings account, you can engage in various banking activities such as bill payments, cash deposits or withdrawals, or fund transfers. Some banks offer specialized internet banking facilities specifically designed to reactivate inactive savings accounts. Alternatively, you can contact the bank's branch or customer care to initiate the account reactivation process.
For dormant savings accounts, you need to submit a formal request along with proof of identity to reactivate the account. It is crucial to include information about your active, inactive, and dormant current and savings accounts when filing your income tax return. Ensure that the income tax return provides details of all bank accounts held in India during the previous year, except for those that have remained inactive for more than three years.
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