Guidelines protecting pensioners

Let me today spell out some common issues confronting pensioners. There are wide range of issues which include tax deduction at source (TDS) from their pension amount, operational difficulties owing to health problems while withdrawing their pension, lack of timely updation in their PPOs (Pension Payment Order), etc. Most of the pensioners are unaware about the facilities which they can otherwise avail from banks where they maintain their pension accounts. And there are certain issues in case of family pension which need to be answered. In fact, some readers have mailed their queries about pension payment and the relaxations which a pensioner is entitled in certain situations.

Notably, citing the grievances faced by the pensioners, the Department of Pension and Pensioners’ Welfare, a few months back, issued consolidated guidelines to banks for disbursing pensions. The updated and consolidated instructions is expected to benefit 65 lakh pensioners in the country and help improve the processing of pensioner’s requests by banks and others.

From submission of life certificate to banks insisting spouse to open separate bank accounts —the new set of instructions are on various issues. For example,

the consolidated guidelines envisage that the banks shall not insist the pensioner to visit branch for the credit of his first pension. The presence of the pensioner is not mandatory to activate their pension account.

If the pensioner dies, the spouse is not required to submit form 14, if he or she was having a joint account with the pensioner and authorization for payment of family pension exists in the Pension Payment Order (PPO) in his or her favour. The spouse will need to submit a copy of the death certificate to the pension paying branch in order to commence his/her family pension.

Besides, banks will not insist the spouse to open a new account for getting family pension when he/she was having a joint account with the pensioner.

If the pensioner dies, the banks have to identify the family of pensioners based on the information furnished in the PPO and its own know your customer procedure without insisting him/her to physically present himself/herself in the paying bank.

A family pensioner, other than spouse, has to submit a declaration of non-marriage in every six months. The family pension is discontinued if she/he gets married/re-married. If the spouse is a recipient of family pension, no certificate of remarriage is required to be furnished by him/her, new guidelines. Here are some important queries which stand answered on the lines of the standing guidelines from the concerned authorities.

Are divorced daughters entitled for family pension in case a deceased employee/pensioner?

Yes. Few days back, Government of India has relaxed rules for divorced daughters to receive family pension. As per the new rules, now a daughter will be entitled to receive the family pension even if the divorce had not finally taken place but the divorce petition had been filed by her during the lifetime of her deceased parent employee/ pensioner.

Earlier rule provided for payment of family pension to a divorced daughter only if the divorce had taken place during the lifetime of deceased parent pensioner or his spouse.

Remarkably, under new guidelines, orders have also been issued for grant of family pension to a ‘divyang’ child or sibling even if the disability certificate is produced after the death of the pensioner parent but the disability had occurred before the death of the parents.

What is the procedure to be followed by the banks if the pensioner is handicapped /incapacitated and is not in a position to be present at the paying branch? Can a pensioner withdraw pension from his/ her account when he/ she is not able to sign or put thumb/toe impression or unable to be present in the bank?

if the pensioner is physically handicapped/incapacitated and unable to present at the branch, the requirement of personal appearance is waived off. The bank official has to visit the pensioner’s residence/hospital for the purpose of identification and obtaining specimen signature or thumb/toe impression.   The pensioner has to indicate the person who would withdraw the amount from the bank and that person should be identified by two witnesses, one of whom should be a responsible bank official.

Where the pensioner cannot put his/her thumb or toe impression and would be unable to be physically present in the bank, a mark can be obtained on the cheque/withdrawal form which should be identified/ attested by two independent witnesses, one of whom should be a responsible bank official.

Can a pensioner be allowed to operate his/ her account by the holder of Power of Attorney?

A pensioner is not allowed to operate his/ her account by the holder of Power of Attorney. However, the cheque book facility and acceptance of standing instructions for transfer of funds from the account is permissible.

Can bank recover the excess amount credited to the pensioners account?

Yes. As soon as the excess/wrong payment made to a pensioner comes to the notice of the paying branch, the branch should adjust the same against the amount standing to the credit to the pensioner’s account to the extent possible including lump sum arrears payment.

If the entire amount of overpayment cannot be adjusted from the account, the pensioner may be asked to pay forthwith the balance amount of overpayment.

In case the pensioner expresses his inability to pay the amount, the same may be adjusted from the future pension payments to be made to the pensioners. For recovering the overpayment made to pensioner from his future pension payment in instalments 1/3rd of net (pension + relief) payable each month may be recovered unless the pensioner concerned gives consent in writing to pay a higher instalment amount.

Precisely, pensioner is liable to repay the excess amount which was erroneously credited to his/her pension account by the bank. The recovery of the amount can be done even without informing the pensioner. The bank has even right to recover the excess amount of pension credited to the deceased pensioner’s account from his/ her legal heirs/nominees.

Why pensioner is subjected to tax deduction at source (TDS)?

Pensioners start noticing tax deduction at source, which starts happening around the fag end of every financial year. Some of the pensioners call pension simply a compensation which could have either been kept out of tax net or at least not subjected to tax deduction at source.

Under Pension Act, pension is of course compensation, a periodical allowance or you can say a stipend granted on account of past service. However, it’s envisaged in income tax rules that pension is included in salaries and the provisions of tax deduction at source (TDS) are applicable in the same manner as these apply to the salary income of regular employees.

To know tax liability, a pensioner has to first understand that income from pension (considered as salary under income tax rules), financial instruments and business transactions like interest income from banks, dividends, etc. are counted for calculation of the income tax.  Once a pensioner finds his annual earnings crossing threshold limit of exemption, he/she is in tax net and tax deduction at source will come into force.

Notably, tax deduction at source (TDS) is the spot deduction of tax from the income source itself at the time of earning. Since the banks disburse the pension, it’s their responsibility to comply with the provisions of tax deduction at source.

So, it’s imperative for pensioners to find out where they stand in terms of income tax issues. If in tax net they should submit all the relevant investment details, rebates and exemptions if any, along with the supporting documents to the bank. Even if the bank has deducted any tax amount from a pensioner’s account, he/she can seek refund by presenting relevant tax rebate documents to the bank.

However, it’s always advisable to consult a tax consultant.

Is TDS also applicable to family pension?

However, those who receive ‘family pension’don’t fall under salary earning category. This income is taxed for being “income from other sources”. Notably, there is no provision for deduction of tax at source on “income from other sources”.