A senior citizen invested, over a period of time, Rs. 15,70,000 in SCSS-04 (Senior Citizen Scheme), through oversight. Within a month, he approached the bank, admitting his mistake, with a request to return his Rs. 70,000, without interest, and cancel that SCSS-04 account.

The bank refused that request, stating that the SCSS a/c cannot be closed before one year and the a/c holder will not get interest for that period. In short, the money will remain blocked without interest for one year.

Under the circumstances what should senior citizen do? What do the rules say? What do you advice?

?Sharma

As per SCSS rules, as soon as it comes to the notice of the deposit office that a deposit exceeds the ceiling, it shall request the depositor in writing, to withdraw the excess amount immediately. This excess shall carry interest at the rate applicable from time to time to the POSB account (3.5% at present) and it shall be payable from the date of deposit of the excess amount to the end of the month preceding the month in which the depositor is requested to withdraw the same. The amount of excess interest, if any, already paid to the depositor shall be deducted. If an account has been opened in contravention of the SCSS Rules, the account shall be closed immediately and the deposit, after deduction of the interest, if any, paid on such deposit shall be refunded.

It is unfortunate that the handlers of the SCSS do not know the scheme details well.

I am to receive some shares of my company under its ESOP scheme.

Could you clarify the tax position in case the shares bought under ESOP are held for one year from date of exercise or receipt?

Will it be long term gain? What tax rate will be payable?

?Eskay Gupta

Such shares would qualify as long term assets and the rules regarding capital gains taxation would apply. Therefore, if and when you sell the shares after one year of exercise of the options, if the sale takes place on a stock exchange and STT is paid, then there would be no long-term capital gains tax payable. Else, the long term capital gains tax would be 10%.

I have a query regarding the age limit for being declared a senior citizen. What is it as per Income Tax Act, Banking / NBFC Regulations, and Post Office rules? Is it the same for all the three categories or different? Also does the State government follow the same rule as IT dept?

? B.Venkatraman

A person is treated as a senior citizen for differing ages for differing purposes.

For Income Tax, Sec. 80DDB states that an individual who is 65 years of age or more at any time during the previous year. Consequently, one can claim the higher threshold of Rs. 2.40 lakh in the same year even if the birthday was 31st March.

In the case of Sec. 80U and Sec. 80DD which offer deduction for handicapped persons, the deduction is available if the person is suffering from a permanent disability at any time during the previous year. The deduction is available for the entire year irrespective of the date on which the person began suffering from the handicap.

Unfortunately there is no such clarity in the case of minor children for the clubbing purposes. We are sure that this is an act of omission and the authorities would correct it in due course. In the mean time, different ITOs can take different views.

For Senior Citizen Scheme of Post Offices, account can be opened by an individual who has attained the age of 60 years or above on the date of opening the account. There is no age bar for the spouse if the spouse is the second holder.

The age limit is 55 years on the date of opening of an account for someone who has retired on superannuation or otherwise or under VRS or special VRS, provided the account is opened within three months of the date of receipt of the retirement benefits. Retired personnel of defence services (excluding civilian defence employees) shall be eligible irrespective of the age limit.

For banks, the age generally accepted is 60 years for a person to be treated as senior citizen.

I have booked an under construction flat by paying Rs. 4 lakh in October 2009 . In January 2010 I shall be making a payment of 85% of the cost of the flat and bulk of it will be by securing a bank loan. This bank loan too will be disbursed in the month of January 2010. The possession of the flat will be given in April 2013 which is more than 3 years away. In these circumstances will I be given the benefit of getting a tax break in respect of the interest paid for the loan when I get possession of the house in April 2013? Please take into account the fact that I acquired property (i.e. booked it) before I took a bank loan (and started repaying) and it’s possession is being given to me after 3 years of loan disbursement.

? Marwaha

Interest paid on housing loan taken before obtaining possession of the house is deductible in five equal installments beginning from the financial year in which you obtain possession. The installment for the so called ?pre-possession? period has to be clubbed with the interest deduction claimed for the year in which possession is obtained. For self occupied residential property, the limit for interest deduction (along with the pre-possession interest) is Rs. 1,50,000. For let out properties or deemed let out properties, there is no monetary ceiling.

?The authors may be contacted at wonderlandconsultants@yahoo.com