S.B. ORDER NO. 9/2008

S.B. ORDER NO. 9/2008

NO. 16-5/2007-SB(AO)

Government of India

Ministry of Communication and IT

Department of Posts

(FS Division)

Dak Bhawan,

Sansad Marg,

New Delhi – 110001.

Dated: 10.04.2008.

To

All Heads of Circles/Regions,

Addl. Director General, APS, New Delhi.

Subject: Non-deduction of income tax at source on the payments of interest under Sr. Citizens Small Savings Scheme, 2004.

Sir/Madam,

The undersigned is directed to say that of late this Directorate is receiving draft audit paras on non deduction of income tax at source on the payments of interest under Sr. Citizens Savings Scheme, 2004. Instructions have already been issued to all Heads of Circles/Regions regarding the procedure to be followed on the above subject vide this office letter No. 79-08/2004-FS (Vol. V) dated 25.05.2007 (SB Order No. 4/2007) and letter No. 79-8/2004-FS (Vol. V) dated 25.10.2007 (SB Order No. 14/2007). Senior Citizens Savings Scheme Rules, 2004 came into effect from August 2004. The deposits made under these rules carry interest at the rate of 9% per annum from the date of deposit payable quarterly. It further envisaged that the applicant while applying for the scheme has to furnish his/her Permanent Account Number or a self declaration to the effect that his/her income from all sources including the interest from the account to be opened did not exceed the exemption limit. Section 194 A of the Income Tax Act, 1962 specified that Tax Deduction at Source is recoverable from the income by way of interest, if the interest exceeds Rs. 5,000/- (Rs. 10,000/- w.e.f. 1.6.2007) in a financial year. Ministry of Finance has clarified in June 2006 that TDS would be applicable from the very first day the SCSS was made operational. The Director General of Audit, P&T has observed that the Postmasters in many Circles did not observe the provisions of the Income Tax Act which led to non deduction of Income Tax at Source on the payments of interest under the Senior Citizens Savings Scheme 2004. The observations of the DGA, P&T received through draft audit paragraphs are ultimately included in the Annual Reports of the Controller & Auditor General of India. Due to these irregularities, the Department may have to bear adverse remarks of the Public Account Committee and other Statutory Institutions. Besides this, considerable times needs to be spent in preparation of Action Taken

Notes, getting them vetted by Audit and submission thereof to the Monitoring Cell of the Ministry of Finance.

Under these circumstances, it is requested that all the Sub and Head Postmasters may be instructed suitably to observe strictly the provisions of Income Tax Act as and where applicable while making payments so as to avoid any further adverse comments in this matter.

This issues with the approval of DDG (FS).

(P. Panneerselvam)

Accounts Officer (FS)

Tel. No. 23036461