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Features of senior citizens savings scheme
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Features of senior citizens savings scheme

Features of senior citizens savings scheme

QUESTION: What are the features of the scheme announced for the senior citizens which will give him a rate of 9 per cent on deposits? Will the income be eligible for deduction under Section 80-L of the Income-tax Act? Will there be tax deduction at source?

ANSWER: The scheme that has been notified under Sec. 15 of the Government Savings Banks Act, 1873 is described as Senior Citizens Savings Scheme Rules, 2004.

Maturity period: While maturity period will not be less than five years, it can be extended by a further period of three years by an application within one year of maturity. Even if there is no application, such extension will be presumed and deposit continued.

Rate of interest: Interest at 9 per cent is payable quarterly, but at the option of the account holder, it can be credited to the savings account of the depositor. Undrawn interest will not earn interest. Any excess deposit and deposit continued after extended period will be entitled only to savings bank rate of interest.

Application procedure: In every application for deposit account, details of the prior deposit account, if any, with account number and the amount deposited are required to be declared by way of verification. Proof of age — PAN (or application for PAN) and pay-in-slip along with deposit amount have to be furnished with every application. A certificate from the employer is necessary, where the depositor is less than 60 years, but has attained 55 years indicating the fact of retirement under voluntary retirement scheme or special voluntary retirement scheme with the details of retirement benefits given to the person. For proof of age, lot of options have been given by way of copies of school leaving certificate, driving licence, PAN card, passport, ration card, identity card issued by Election Commission and birth certificate in the Panchayat/Municipal records or issued by Registrar of Birth and Deaths. The original may have to be produced, if required.

Passbook procedure: There will be a passbook issued at the time of opening the account. Where he draws the amount, he has to present the passbook at the time of collecting interest every quarter. There is a provision for issue of duplicate passbook, where it is lost.

Withdrawal terms: Premature withdrawal of the amount is possible after one year from the date of opening of the account, which means that lock-in-period is one year. But then there will be a damage resulting in a deduction of 1.5 per cent of deposit if the withdrawal is between one and two years and 1 per cent of deposit, if it is after two years.

Benefit of Sec. 80L: As for the query, whether the amount is eligible for relief under Sec. 80-L, Sec. 80L(3) grants deduction subject to the ceiling of Rs. 12,000, inter alia, on any interest on deposits under any scheme framed by the Central Government and notified by it "in this behalf" in the official gazette. Though the scheme is framed by the Central Government as is mentioned in the preamble and notified by it in the official gazette, it is not notified `in this behalf', so that a reference to Sec. 80L as part of the scheme or independently of the scheme is necessary. A clarification from the Board, that the notification already issued should entitle the depositor to deduction under Sec. 80L should, however, be sufficient. Since it is a deposit and in par with so many other deposits like deposits with bank, National Deposit Scheme and some deposits of public financial institutions, apart from deposits in post office monthly income account etc., deduction under Sec. 80L should be available. But it is better that one awaits official confirmation, so that there is no element of doubt as regards such eligibility for the deduction.

TDS: In the context of scheme being available only for senior citizens, who are eligible for tax rebate, it is presumed that there will be no tax deduction at source in view of tax rebate available for senior citizens. Tax deduction should not be necessary. Most of the post office saving schemes, whether recurring or time deposit or monthly income, are already notified for non-deduction at source under Sec. 194A(3)(iv). Similar notification may therefore be necessary for this purpose as well.

Promise fulfilled: The scheme fulfils the promise made by the Finance Minister in the Budget Speech: "For senior citizens, I propose to introduce a new scheme called Senior Citizens Deposit Scheme offering interest of 9 per cent per annum substituting Varishta Pension Bima Yojana, which was administered by the Life Insurance Corporation of India".

S. Rajaratnam

Source Link: http://www.hindu.com/biz/2004/09/06/stor...001700.htm



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02-19-2010 09:02 PM
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RE: Features of senior citizens savings scheme

Senior Citizens Savings Scheme, 2004 – Frequently Asked Questions


Download the document: "Senior Citizens Savings Scheme, 2004 – Frequently Asked Questions" as it appears on the Website of Reserve Bank of India.



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02-19-2010 09:23 PM
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