An account type called a demat account enables you to hold shares of firms electronically. Because holding physical certificates for your shares can be difficult and time-consuming, you are no longer required to do so. A demat account that has not been utilized for a particular amount of time is considered dormant. The period of time varies from one depository participant (DP) to another, but it is typically 2 years.

There are a few reasons why a demat account might become dormant. One reason is that the account holder might have stopped investing in shares. One such explanation is that the account holder may have lost track of the account. Check more on What is demat account?

If a demat account becomes dormant, it can have a number of consequences. For example, the account holder might lose out on dividends or bonus shares. The account holder might also have to pay fees to the DP.

The methods to reactivate an inactive demat account are as follows:

• Tell your DP that you want to revive your account by getting in touch with them.:
• Provide your DP with the following information:
• Your demat account number
• Your PAN number
• Your bank account details
• Your contact details
• After that, your DP will reactivate your account so you can resume trading shares. Check more on What is demat account?

The following advice will help you maintain your dormant demat account:

• Regularly review your account statement: By doing this, you can be sure that no dividends or bonus shares are being missed.
• Remit any unpaid fees: You should settle any unpaid fees on your account as soon as you can.
• Keep your account details updated: This includes your address, bank account details, and contact details.
• If investing in shares is not something you want to do anymore, you might want to think about cancelling your demat account. Check more on What is demat account?

Here are some of the risks associated with dormant demat accounts:

• Loss of dividends and bonus shares: You risk missing out on dividends and bonus shares if you don’t frequently review your account statement.
• Penalties and charges: You may be subject to penalties and charges if you fail to pay any unpaid fees on your account.
• Security hazards: Your demat account may be more susceptible to security risks if it isn’t used for a long time.
• It is critical to be aware of the dangers posed by dormant demat accounts and to take precautions to reduce those dangers.
• You can safeguard the security of your dormant demat account and that you don’t lose out on any potential advantages by using the advice provided above.
• It is important to be aware of the risks associated with dormant demat accounts and to take steps to mitigate those risks. By following the tips above, you can help to ensure that your dormant demat account is secure and that you do not miss out on any potential benefits.

Thus a Demat account provides numerous benefits, such as safekeeping of securities and easy access to investments. However, investors should be aware of the tax implications associated with holding and trading securities in their Demat accounts. Understanding the tax on capital gains, dividends, interest income, and other taxes such as STT and TDS is crucial for effective tax planning and compliance.