Saving senior citizens

A new RBI notification on the Senior Citizens Saving Scheme brings both good news and bad news

There's good news and bad news for senior citizens as defined by the Senior Citizens Savings Scheme (SCSS). First the good news.

Good news

By a notification dated October 7, 2004, the RBI has declared that the SCSS, which was operated by post offices ever since its launch on August 2, 2004, will now also be operated through all the branches of public sector banks which are operating the PPF Scheme.

Small savings agents working under the Standardised Agency System are eligible to mobilise deposits and commission at 0.5 per cent of the deposit shall be payable. The 'at source commission payment system', adopted in the case of PPF agents will also be applicable to agents mobilising deposits under SCSS.

When the SCSS was launched, I had observed that "The only drawback of this scheme is that it is to be handled by post offices, where systems and procedures at post offices are often laborious and outdated."

Thankfully, good counsel has prevailed, but the problem is only partially solved.

Bad news

Now, the bad news.

There are two problems which have arisen, possibly because the SCSS is operated by the post offices which also operate 'Monthly Income Scheme' (MIS).

In the case of MIS, a notification dated February 1, 2000 states, "A depositor may operate more than one account subject to the condition that deposits in all accounts taken together shall not exceed Rs 300,000 in a single account and Rs 600,000 in a joint account.

For the purpose of maximum balance, the depositor's share in the balance of a joint account shall be taken as one half or one third of the balance according to whether the account is held by two adults or three."

In the case of SCSS, Rule 3(3) states, "A depositor may open the account in an individual capacity or jointly with spouse." Obviously, if the husband opens an account and the wife also opens an account, both of them can contribute up to the limit of Rs 15 lakh.

Rule 3(2) states, "A depositor may operate more than one account subject to the condition that the deposits in all accounts taken together shall not exceed the maximum limit, provided that more than one account shall not be opened in the same deposit office during a calendar month."

It may be noted that for SCSS, there is no stipulation that the depositor's share in the balance of a joint account shall be taken as half for the purpose of maximum balance.

And yet, some of the post offices are importing MIS rules related to limits on investment in MIS joint accounts to SCSS accounts. Consequently, two joint applications, one in the name of the husband and the wife and the other in the name of the wife and the husband are not accepted on the grounds that,

Where the total amount of deposit exceeds Rs 15 lakh, the ceiling of Rs 15 lakh is applicable to both the accounts put together and

Even where the total amount is well within the limit, the two joint accounts are treated as one account and therefore, the second shall not be opened in the same deposit office during the same calendar month.

This is arbitrary and unreasonable. As long as SCSS rules are free from ambiguity, they should be plain without importing any foreign provisions from an unrelated rule.

I know from letters received from my readers, (particularly from Sharad Hatekar who has drawn the attention of this irregularity to each and every authority concerned) that the authorities are aware of these problems. I was expecting them to issue a clarification but they have failed to do so.

I have a submission to make. SCSS has replaced the Varishtha Pension Bima Yojana launched last year to support senior citizens who have suffered grievously because of falling interest rates from safe investments.

There is hardly any difference between the two other than replacement of the paltry limit of Rs 2.66 lakh with Rs 15 lakh and the age of the senior citizens, which has been raised to 60 from 55 (Only those who have opted for VRS are allowed to invest within three months of taking VRS if their age is 55 or over).

The intention of the legislation is clearly to give more support to senior citizens than what the previous government envisaged.

Now, more bad news.

Normally, in the case of post office schemes, if so authorised, interest payable on the due dates shall be credited to the depositor's savings account in the deposit office in which the account exists subject to the condition that by the credit of the interest amount, the maximum limit is not exceeded.

This is inconvenient. Besides the effort of opening the POSB, the investor, particularly the one who has invested Rs 15 lakh, has to keep track of the savings account and also make arrangements for transferring the amount to his regular bank account. To circumvent this difficulty, MIS has incorporated an ECS facility.

This means the investor can give instructions to directly credit the interest and also withdrawals to his normal bank account. The ECS facility could have been extended to SCSS. All investment avenues should avail of state-of-the-art technology available at the click of a mouse.

Without this facility, even the public sector banks, which are now allowed to operate SCSS, will have to incur the cost of opening new SB accounts and the depositors will have to handle one more account, which they can do well without.

Alternatively, 20 advance cheques for quarterly interest payments can be issued. Since it is a known fact that many cheques sent through post offices are pilfered, it will be advisable if the post offices use courier services for these advance cheques.

Last but not least. My distress is acute because of the differing definition of 'senior citizen' for different purposes. SCSS defines it as one who has attained the age of 60 or above on the date of opening an account whereas the ITA considers any individual whose 65th birthday falls anytime during the FY, even on March 31 a senior citizen.

The Professional Tax Act recognizes senior citizens as those who completed 65 years during the previous year.

I sincerely hope that the next budget will adopt the definition of senior citizen as defined by SCSS for the purpose of ITA (and the state governments will follow suit for the purposes of professional tax).

A statute is an edict of the legislature and the conventional way of interpreting it is to look at the underlying intention. It is necessary for the authorities to take this wake-up call and come down from their ivory towers to apply the legitimate intent. Otherwise it will reduce the beneficial legislation to futility.

The author may be contacted at
anshanbhag@yahoo.com