Eureka … Finally 15% interest to all senior citizens
Eureka … that’s how one elderly customer of a Sri Lankan bank expressed his delight this week on learning that the 15 per cent interest on deposits of senior citizens would be provided to all irrespective of how much they had in a bank.
There had been utter confusion in commercial banks for several weeks over the budget proposal on the 15 per cent special interest rate benefit to senior citizens (aged 60 years and over).
The Business Times has been urging the Government – through news stories, editorials and pleas (through letters) from senior citizens – to stick to the budget proposal which didn’t have any restrictions but were subsequently imposed in the operating instructions to banks.
Bankers said the facility, which went through several amendments after the presentation of the January budget, was finally made clear to banks two weeks ago.
According to the latest circular to commercial banks, all senior citizens – irrespective of how much they have in fixed deposits – are eligible to open a fixed deposit at 15 per cent interest on an amount not exceeding Rs.1 million.
This means they are entitled to an interest of Rs.150,000 per annum compared to the earlier interest rate of 7-8 per cent which worked out to around Rs. 80,000 per annum (on a Rs.1 million deposit).
Just before a March 18 notice was published by the Sri Lanka Banks Association (SLBA) citing amendments to the proposal, senior citizens were eligible to this special interest rate only if they had Rs.1million or below in total, in all banks. For example if a senior citizen had a total of Rs.2 million in all banks, he or she was not eligible.
Furthermore, bankers said a further amendment to the earlier proposal permits senior citizens to combine the Rs.1 million from savings and current accounts, which was not permitted before.
“In reality there is no restriction at all on these deposits. Every senior citizen who has money in banks of any amount is eligible to this scheme,” one elderly lady said after opening a new account. “We should also thank the government for listening to the people. This is much appreciated.”
Senior citizens exempt from withholding tax on security deposits Senior Sri Lankan citizens over 60 years of age are to get another relief under the 2015 budget proposal came into effect this week.
The government has revised the present withholding tax regime applicable to deposit holders in commercial banks and non-bank financial institutions offering a New Year bonanza for senior citizens.
According to the circular issued by the Finance Ministry with operational guidelines to banks and financial institutions, “exemption on interest income of senior citizens was made by removing the exempt threshold presently applicable on interest income”.
The circular stipulated that present withholding tax regime applicable to individuals and charitable institutions will be revised by introducing a single withholding tax rate of 2.5 percent irrespective of the amount of interest.
The present withholding tax rate of all deposit holders in banks and financial institutions with an annual income of over Rs. 500,000 was in the range of 5 to 8 per cent.
