FINMIN clarification on Senior Citizens Savings Scheme

New Delhi, June 23 (UNI) The government today cleared the mist created by a spate of reports regarding taxation of interest income pertaining to senior citizens, indicating that there was no change in the practice followed so far in this regard.

It said that under the Senior Citizen Savings Scheme(SCSS) an individual of 65 years of age or above needs to furnish a declaration in Form No. 15H to the bank or post office if the tax on his estimated income for the financial year is nil.

However, a declaration in Form No. 15G needs to be furnished by a depositor of less than 65 years of age if- (a) the tax on his estimated total income for the financial year is nil and (b)the aggregate amount of interest credited or paid or likely to be credited or paid during the financial year is not more than the maximum amount which is not chargeable to tax (Rs.1,00,000/- for male taxpayers and Rs.1,35,000/- for a woman taxpayer).

A Finance Ministry release late tonight said both these conditions are required to be fulfilled. The information relating to deposits under the Senior Citizens Savings Scheme, 2004, needs to be given by the depositors in Schedule III of Form No.15-G.

The release said on furnishing of a declaration in Form 15H or Form No. 15G to the bank or post office, no deduction of tax will be made by the bank or post office.

The CBDT said in suitable cases a certificate for lower deduction or no deduction of tax at source under section 197(1) could also be obtained by the depositors from their assessing officers.

The Finance Ministry has advised Banks and Post Offices that such portion of the tax not deducted by them during 2004-05 and 2005-06, which has been paid directly by the depositors as advance tax or self-assessment tax will not be recovered by the Income Tax Department from the banks and post offices.

Similarly, to the extent of the amount for which declarations in Forms No. 15H and 15G as well as certificates under section 197(1) are available with the bank and post office, the Department would not make recovery from the bank or post office.

It noted that the interest accruing on the deposits held under the Senior Citizens Savings Scheme, 2004 is taxable as per the provisions of the Income Tax Act, 1961 and is also liable for tax deduction at source (TDS) as per the provisions of section 194A of the Act.

The Ministry said clarifications had been sought from the Government as to whether declarations made by the depositors under SCSS in Form No. 15H and Form No. 15G of the Income Tax Rules could be accepted by the banks and post offices. Moreover, clarifications had also been sought on the recovery of TDS pertaining to financial years 2004-05 and 2005-06 in the current year.

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