EPFO Stands By The Working Class Even As Post Office Leaves Senior Citizens In The Cold

Comparisons, they say, are odious. But then the human tendency is to instinctively make a comparison with those who are better off or have got a better deal.

Senior citizens for whom the Senior Citizens Deposit Scheme (SCDS) of the post office was godsend were stricken when last year at the height of the Covid pandemic-triggered lockdown, the Finance Ministry reduced all small savings interests across the board drastically.

Thus the interest on senior citizens deposit scheme came down sharply from 8.6 per cent in 2019-20 to 7.4 per cent in 2020-21.

Seniors, who had a slight edge over the working class in 2019-20 as the EPFO (Employee Provident Fund Organisation) paid an interest of 8.5 per cent, were in for a rude shock when the SCDS interest was cut sharply to 7.4 per cent.

Now it is their turn to compare themselves wistfully with the working class especially after the board of trustees of EPFO on 4 March 2021 retained the interest rate of 8.5 per cent for the year 2020-21 as well.

The Department of Post has no independent authority and hence had to abide by the Finance Ministry diktat. But it redounds to the credit of EPFO board that they refused to budge and rightly so because, come to think of it, it is like a mutual fund that caters to the working class.

The monthly deductions from salary and the matching contribution made by the employer can be likened to the systematic investment plan (SIP) of mutual fund schemes.

With mammoth funds under its management, EPFO has managed to earn about Rs 70,000 crore in a difficult year marked by lockdown and is in an envious position of being left with about Rs 300 crore even after the seemingly extravagant payout of 8.5 per cent.

A generous payout of a mutual fund scheme cannot be resented. Likewise, the mandarins in Finance Ministry should not resent the generous payout by EPFO.

Finance Minister Nirmala Sitharaman rubbed the EPFO and other exempt provident fund members on the wrong side by slapping income tax at the applicable marginal rates on interest earned in excess of Rs 2.5 lakh in a financial year with effect from 1 April 2021.

Hitherto, interest credited to one’s PF (provident fund) has been immune from tax thus tantalising intelligent employees to park their savings in it by contributing generously to provident fund far in excess of the statutory requirement.

This might curb the enthusiasm of highly-paid employees to use PF as an investment avenue when its avowed purpose is to provide a rain-check during the post-retirement period. So, the government must do something to stop the reverse proclivity — to withdraw from the PF accumulations at the drop of the hat thus leaving the very corpus for the post-retirement life. Be that as it may.

Coming back to the plight of senior citizens, it is not enough to exempt them from filing income tax return as has been done by the Finance Bill 2021 for those who are 75 years of age or more by foisting on the bank from which they draw pension to deduct tax at source under the newly coined section 194P if together with their interest income, such deduction of tax at source is warranted.

This is squeamishness at its worst. Exemption from filing return is not a big deal given the fact that the young in the family would happily file their grandparents’ or parents’ income tax returns. What they need is income support when they no longer can earn.

Doles are deplorable for those who value their honour highly. But not a special rate of interest. There is no reason why the interest on senior citizens deposit scheme should not be the same as the EPFO interest if only to reinforce the feeling that while they might have hung up their boots, the government still values their past services.

For reasons best known to the government, it has been tough on the senior citizens when they ought to be handled with velvet gloves like Japan does. Why should the cap on SCDS remain at a lowly Rs 15 lakh? And why should one be ejected out of it after eight years?

Remember at the time of opening of the SCDS account, its term is five years which can be extended for just another three years. It means should one open his account when he turns 60, he would be ejected out of it when he turns 68. Longevity vests him with life till 80 but for 12 long years he is condemned to live in wilderness or scouting for a safe scheme.