Holiday for Central Govt.Offices on 14th April-2010

Holiday for Central Govt.Offices on 14th April-2010

14th April-2010 has been declared as Closed Holiday on account of Birthday of Dr.B R Ambedkar vide Ministry of Personnel, Public Grievances & Pensions ,Government of India letter no. 12/3/2010-JCA-2 Dated the 29th March, 2010.

Decisions of Anomaly Committee

Proceedings of 2nd

National Anomaly Committee Meeting

The second National Anomaly Committee Meeting was held on 27.03.2010 (Saturday).
Main issues discussed in the meeting .........
1)Modified ACP – Agreed to constitute a Joint Committee
2)Pay parity with new entrants – Still hope is there.
3)Increment falls between Feb-Jun – Final decision before June 2010.
4)Increment postponement due to Extra ordinary leave – Under consideration.
5)Retired/Died between 1.1.06 and 1.9.08 – The matter stands settled.
Next NAC meeting – June 2010

Revised DA order issued

Dearness Allowance revised from

27% to 35% w.efrom 01-01-2010.

Order issued vide Finance Ministry No. 1(3)/2010-E-II( B) dated 26-03-2010.

Income Tax Dept. plans to issue DIN

Govt. Plans for issue of document identification number (DIN)

After introducing unique account numbers for taxpayers (PAN) and those for tax deductors (TAN), the government will this fiscal introduce a unique document identification number (DIN) to be quoted on “every” income tax related communication.
The department will soon put in place a tech-based mechanism to generate DIN which will not only be allotted to taxpayers but also the officials of the department from October this year, which will become essential while filing the annual income tax return of the financial year (2010-11).
According to a Central Board of Direct Taxes “insertion of new Section 282B” in the I-T Act, DIN will be made mandatory “in respect of every notice, order, letter or any correspondence” with the department.
“The number will be generated by the department and will be useful essentially for error-free filing of tax returns, claiming refunds and other communication with the department by the assesses,” a senior Finance Ministry official said.
Taxpayers and tax deductors currently are required to quote Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) among others for filing returns with the department.
Assesses will not be put to any trouble as the numbers will be generated and allotted by the department itself. Once allotted, the assessee will have to quote it thereon. I-T officials will also be allotted the numbers as the effort is to streamline the process, the official said.
According to section 282B of the Income Tax Act which deals with DIN — “in respect of every notice, order, letter or any correspondence issued by him (I-T authority) to any other income tax authority or assessee or any other person and such number shall be quoted thereon.
“It is further provided that where the notice, order, letter or any correspondence issued by any income-tax authority does not bear a Document Identification Number, such notice, order, letter or any correspondence shall be treated as invalid and shall be deemed never to have been issued.”
DIN is aimed at bringing more transparency in tax administration as the whole exercise involves a number of documents. Apart from the regular filing of taxes, a taxpayer deals with the department for various other financial services which DIN will help streamline, the official said.
According to the I-T department, “it is also provided that every document, letter or any correspondence, received by an income-tax authority or on behalf of such authority, shall be accepted only after allotting and quoting of a computer generated Document Identification Number.
Further, it is provided where the document, letter or any correspondence received by any income-tax authority or on behalf of such authority does not bear Document Identification Number, such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received.”

Commuted Leave cannot be refused-CAT

CAT order on commuted leave

The Central Administrative Tribunal (CAT), Ernakulam, has held that commuted leave on the basis of medical certificate cannot be denied to a Central government employee who is about to retire. The sanctioning authority cannot refuse leave at its whims and fancies.
The tribunal made the observation recently while allowing an application filed by Elsy John, retired supervisor at the Accountant General’s Office.
The tribunal directed the Union government and the Accountant General to regularise the applicant’s leave for 43 days as commuted leave and disburse the withheld amount for the days with an annual interest of 9 per cent from June 1, 2008 till the day of payment within 15 days.
According to the petitioner, denying commuted leave she was informed that she could apply for any other leave. She contended that her application for commuted leave was legal as it was in accordance with the leave rules.
Leave might not be considered as a matter of right of an employee. But it did not confer on the authority any arbitrary discretion to reject leave without reason.
The tribunal said the public authorities could refuse leave only on the ground of exigencies of public service. It was not open to the authorities to alter the kind of leave applied for except at the written request of the government servants. The Central government decision was that the leave should not be denied during the last ten years of service. The rule restrained employees from evading responsibility by resorting to leave. It did not give a licence to the sanctioning authority to refuse leave at its whims and fancies, or to use it as an instrument of torture, the tribunal said.

PS Gr-B-2008 examination is defective-CAT,Madras

CAT Madras holds the Group B examination held in 2008
as defective, arbitrary, irrational and discriminatory

Normally, any departmental examination for promotion is held every year depending upon year-wise vacancies so that the eligible candidate for a particular year vacancy would get opportunity to seek selection for subsequent year vacancies. But disregarding all principles, the department conducted Group B examination by bunching of vacancies for four years viz. 2003, 2004, 2005 and 2006. Some officials filed cases before CAT Madras and CAT Patna and prayed for a stay order. The honourable CATs at that time rejected to pass stay order. Though the single selection for all the four years is prejudicial to majority of the eligible candidates the Department successfully conducted the examination. With a result many juniors who were not at all eligible for the vacancies of 2004, 2005 and 2006 were allowed to appear, got selected and promoted. Now many ineligible candidates are working as PS Group B officer. The CAT Madras passed an order in OA 64/08 and some of the relevant paragraphs are reproduced below:
15. If the selection for promotion is based every year separately for 2003, 2004, 2005 and 2006, depending upon year-wise vacancies, the eligible candidate for 2003 who did not get selection for the year vacancies, would get opportunity to seek selection for subsequent year vacancies and because of bunching of vacancies for all the four years and holding single selection is prejudicial to majority of the eligible candidate and such selection is detrimental to the eligible employees for whose purpose it has been intended. The respondents have not placed any instruction of guidelines in support their claim for holding the single selection by bunching of vacancies for 4 years or several years.
16. In view of such circumstances as discussed above, the decision to bunch the vacancies for all the four years together and holding a simple selection is discriminatory, arbitrary, unfair and also amounts to defect the selection.
17. In spite of objections raised by the applicants by way of representations and also by filing of this OA, the authorities have not taken any care and proceeded further in conducting examinations. The authorities have completed most of the selection procedure in conducting examination and also declared the result of the successful candidates in the written test.
18. In view of such circumstances, if this selection is restricted for the vacancies for the year 2003, no harm would be caused to any of the eligible candidates who faced the examination and selection for the year 2003 is held valid and the selection for the vacancies for 2004, 2005 and 2006 are held to be defective, arbitrary, irrational and discriminatory. Thus the claim of the applicants is allowed partly, directing the respondents to secure year-wise vacancies for the years 2004, 2005 and 2006 in respect of promotion to the cadre of Postal Services Group B by preparing year-wise list of eligible candidates and also vacancies and thereafter hold fresh Limited Departmental Competitive Examination (LDCE), restricting the present selection only for the year 2003.
19. In the result, the OA is partly allowed as above, with no order as to costs.‖
source-PI 1-3/2010

Today in Postal History

Today in Postal History

Iceland to Germany
March 23, 1899

This Icelandic postal reply* card was postmarked at Reykjavik on its way to Georgenthal bei Gotha.
(You'll be a bit surprised by this Reykjavik link, I was.)
The 10A. indicia received a clear strike of the CDS.
This is the proper postal card rate abroad.
One of the surprising things about this item is that normally
one expects postal reply cards to be sent back to the sender.
Had this one come with a two part card from Germany, it would have been a German card.
However, it would be expected to be from Iceland originally.
It is, of course possible that the sender just bought such cards
to provide a supply of postal cards or had a leftover and used both sides himself.
This appears to be another of life's little mysteries which has no answer.
Only the matching card could answer the question.
The card arrived at its destination as shown by the receiving mark on April 1.

Journey on LTC by AIR

Journey on LTC by AIR

Journey on LTC by Air only in ECONOMIC Class. Pl. find the latest order in the subject

Types of Stamps.........Do U Know?

Types of stamps

• Airmail - for payment of airmail service. While the word or words "airmail" or equivalent is usually printed on the stamp, Scott (the dominant U.S. cataloguing firm) has recognised as airmail stamps some U.S. stamps issued in denominations good for then-current international airmail rates, and showing the silhouette of an airplane. The other three major catalogs do not give any special status to airmail stamps.
• ATM -
o stamps dispensed by automatic teller machines (ATMss)
o Automatenmarken, stamps issued in the denomination of the customer's choice by a kind of machine (similar to computer-vended postage) are also referred to by the acronym ATM, which has created some confusion.
• carrier's stamp
• certified mail stamp
• commemorative stamp - a limited run of stamp designed to commemorate a particular event
• definitive - stamps issued mainly for the everyday payment of postage. They often have less appealing designs than commemoratives. The same design may be used for many years. Definitive stamps are often the same basic size. The use of the same design over an extended period of time often leads to many unintended varieties. This makes them far more interesting to philatelists than commemoratives.
• express mail stamp / special delivery stamp
• late fee stamp - issued to show payment of a fee to allow inclusion of a letter or package in the outgoing dispatch although it has been turned in after the cut-off time
• local post
• military stamp - stamps issued specifically for the use of members of a country's armed forces, usually using a special postal system
• official mail stamp - issued for use solely by the government or a government agency or bureau
• occupation stamp - a stamp issued for use by either an occupying army or by the occupying army or authorities for use by the civilian population
• parcel post
• postage due - a stamp applied showing that the full amount of required postage has not been paid, and indicating the amount of shortage and penalties the recipient will have to pay. (Collectors and philatelists debate whether these should be called stamps, some saying that as they do not pre-pay postage they should be called "labels".) The United States Post Office Department issued "parcel post postage due" stamps.
• postal tax - a stamp indicating that a tax (above the regular postage rate) required for sending letters has been paid. This stamp is often mandatory on all mail issued on a particular day or for a few days only.
• registered - for pre-payment of a registry fee (fee for "registered mail").
• self-adhesive stamp - stamps not requiring licking or moisture to be applied to the back to stick. Self-sticking.
• semi-postal / charity stamp - a stamp issued with an additional charge above the amount needed to pay postage, where the extra charge is used for charitable purposes such as the Red Cross. The usage of semi-postal stamps is entirely at the option of the purchaser. Countries (such as Belgium and Switzerland) that make extensive use of this form of charitable fund-raising design such stamps in a way that makes them more desirable for collectors.
• special handling - gave parcel post mail first-class treatment in the United States.
• test stamp - these labels are not valid for postage and are not usually available to the public. They are used by postal authorities on sample mail to test various sorting and cancelling machines or machines that can detect the absence or presence of a stamp on an envelope. Putting a stamp on the upper left corner of an envelope can confuse these machines.
• war tax stamp - A variation on the postal tax stamp intended to defray the costs of war.
• water-activated stamp - for many years "water-activated" stamps were the only kind so this term only entered into use with the advent of self-adhesive stamps. The adhesive or gum on the back of the stamp must be moistened (usually it is done by licking, thus the stamps are also known as "lick and stick") to affix it to the envelope or package.

New Form-16

New Form -16 (Income tax-TDS) for the Assessment Year 2010-11 is available at the following link.
http://sites.google.com/site/postalinfosite/new-form-16-for-2010-11

Post Offices are Pension Offfices

Post Offices are Pension Offfices

Now, persons employed in the unorganised sector need not go farther than their nearest head post office to avail pension benefits.
India Post has enlisted 817 head post offices across the country as the Point of Presence to start its New Pension Scheme, introduced by the Central government. Of them, 27 head post offices are in the 14 districts of Karnataka.
“The scheme is now open. Any person other than government employees, in the age group of 18-55 years, can avail the scheme and contribute till the age of 60 years, after which every month the person can get the pension benefits as per the scheme he/she opts for,” said Sandhya Rani, Post Master General, South Karnataka region.
She said that the training of officers working for the region was complete. The 27 head post offices in the state where the service is available are - Kollegal, Nanjangud, Chikmagalur, Koppa, Chitradurga, Karkala, Kulshekar, Mangalore, Puttur, Davangere, Arsikere, Hassan, Madikeri, Chikballapur, Kolar, Mandya, Srirangapatna, Mysore, Saraswathipuram, Bhadravati, Sagar, Shimoga, Tiptur, Tumkur, Kundapur, Manipal and Udupi.
Rani said that the Pension Fund Regulatory and Development Authority had facilitated the scheme.
She said the subscriber’s money would be invested as per the scheme preferred by him/her. She said the subscriber had to fill the registration form available at the post-office, which would be verified and then forwarded to Central Record Agency-Facilitation Centre (CRA-FC).
“I believe this is one of the best pension schemes for those in the unorganised sector. It will provide a kind of social security for people like rickshaw drivers and other private job holders,” Rani said.
Features of the scheme
It is open to any Indian citizen other than Government employees, between the age of 18-55 years.
Contribution to the scheme may be monthly, quarterly, half-yearly or yearly.
Minimum contribution is Rs 500 per month or Rs 6,000 per annum. Minimum number of contribution is four in a year.
Source-i net

8% DA hike for central govt employees

8% DA hike for central govt employees
Government increased the Dearness Allowance for central government employees and pensioners by eight percentage points to compensate for price rise.
The increase is in accordance with the accepted formula based on the recommendations of the Sixth Central Pay commission, Union Information and Broadcasting Minister Ambika Soni told reporters after a meeting of the Union Cabinet.
The increase would be eight per cent over the existing rate of 27 per cent of basic pay or pension.
The additional instalment of Dearness Allowance would be released with effect from January this year.
The combined impact on the exchequer on account of both dearness allowance and dearness relief would be to the tune of Rs 6969.36 crore per annum and Rs 8131.20 crore in the financial year 2010-2011.
The DA revision is based on the consumer price index (CPI) for industrial workers, which has been showing a steep increase along with other indices of price rise.

Core Banking Solution in Post Offices

Core Banking Solution in Post Offices

There is a proposal to introduce Core Banking Solution (CBS) in 4,000 post offices for ensuring “anytime, anywhere and any branch banking” in these 4000 post offices. There is a financial outlay of Rs.106 crores for development of CBS software, customer relations management, training, project management unit, centralised back office etc. during the 11th Five Year Plan. The project aims at provision of delivery channels like ATM, internet, phone and mobile banking services besides streamlining the existing operations of savings schemes /savings certificates. Till now, 117 officers have been imparted CBS appreciation training and 60 operative officials have attended workshop on Core Banking.
Government has also taken the following steps to make the post offices a profitable organization:
• Modernize mail operations through improved transmission of mails, parcel and logistics between major cities, setting up of automatic mail processing centres for faster processing of mails and rationalization of the existing mail network.
• Induction of technology in speed post network and financial services so as to increase the efficiency of operations.
• Leveraging the postal network to provide various utility services.
• Utilizing technology for improving productivity in post offices.
• Imparting need based training to all staff.
This information was given by the Minister of State for Communications & Information Technology, Shri Gurudas Kamat in written reply to a question in Lok Sabha.

The U S Postal Strike of 1970

The U S Postal Strike of 1970

March 18 marks the 40th anniversary of one of the most momentous events in postal history — the postal strike of 1970. The night before, postal workers in New York voted 1,555 to 1,055 to go out on strike in protest of a House committee vote to limit their wage increase that year to 5.4 percent on the heels of a 41 percent increase in Congress’s own pay. The wildcat strike and picketing were effective in shutting down postal operations in New York and quickly spread to about 30 other cities. Within days about 152,000 workers in 671 locations were on strike. It was illegal for federal workers to strike, or even to advocate a strike, but union officials said they had no control over the action. The strike shut down New York’s financial industry, kept 9,000 youths from receiving draft notices, delayed the mailing of census forms and tax refunds, and generally disrupted the country’s communications. Injunctions and heavy fines were levied on union leaders; but the membership paid no attention. President Nixon called out 24,000 military personnel to distribute the mail, but they were ineffective. While the president asserted there would be no negotiations until the workers returned to work, Secretary of Labor William Usery did engage in negotiations that brought the strike to an end after 2 weeks.

source-i net

Home Ministry introduces flexi-hours for its employees

Home Ministry introduces flexi-hours for its employees

The Home Ministry has allowed flexi-hours for it's employees with a maximum relaxation of two hours to attend social obligations or visit a doctor but they have to ensure a 40-hour work schedule in the week.

"In exceptional cases like consultation with doctors in Central Government Health Services, hospitals, attending social obligation, late arrival in the morning, early departure in afternoon up to two hours (maximum) will be allowed subject to the condition that prior intimation or approval of the immediate supervising officer has been obtained," Home Secretary G K Pillai said in an order.

The arrangement has been made after the ministry employees made two representations to Home Minister P Chidambaram on November 19 last year and March 3 this year.

Chidambaram had then assured the employees of working out a solution and subsequently asked Pillai to issue an order, sources said.

No regular pay scale for contractual posts: CAT

No regular pay scale for contractual posts: CAT

The subsequent merger of a contractual post into a regular establishment of a government department will not entitle an employee to claim a regular pay scale, the Central Administrative Tribunal has held.
The Tribunal was hearing a matter of an ex-armyman Jai Ram Solanki, appointed on contractual basis, who demanded the regular pay scale associated with Office Superintendent after the regular establishment of MCD took over the post in 2001.
"The appointment was purely on contractual basis for a particular project with certain stipulations which included payment of a fixed remuneration. Thus, claim for a regular pay scale would not be tenable. Again, even the subsequent merger of the post in the regular establishment of the MCD would not give him any such right," it said.
Source-PTI

Know about Form 15H & 15G

Everyone is aware that Form 15G and form 15H are used for avoiding the TDS deduction while computing the interest earned during the financial year. In this article discussions are made on important points to remember while submitting the Form 15G and Form 15H to the deductor.
Form 15H :- Declaration under sub-section (1C) of section 197A of the Income-tax Act, 1961, to be made by an individual who is of the age of sixty-five years or more claiming certain receipts without deduction of tax.
• Form 15H can be submitted only by Individual above the age of 65 years.
• Estimated tax for the previous assessment year should be nil. That means he did not pay any tax for the previous year because his income is not coming under the taxable limit.
• This form should be submitted to all the deductors to whom you advanced a loan. For example you have deposit in three SBI bank/Post Office branches Rs.100000 each. You must submit the Form 15H to each branch.
• Submit this form before the first payment of your interest. It is not mandatory but it will avoid the TDS deduction. In case of the delay, the bank/Post Office may deduct the TDS and issue TDS certificate at the end of year.
• You need to submit form 15H to bank/Post Offices if interest from one branch of a bank exceeds 10000/- in a year.
• You need to submit for 15H If interest on loan ,advance, debentures , bonds or say Interest income other than interest on bank/Post Office exceeds 5000/-.
Form 15G:- Declaration under sub-sections (1) and (1A) of section 197A of the Income-tax Act, 1961, to be made by an individual or a person (not being a company or a firm) claiming certain receipts without deduction of tax of tax.
• Form 15G can be submitted by Individual below the age of 65 years and Hindu Undivided family.
• The above points are applicable to the Form 15G as well, except the Form 15H is only for the senior citizen.
• Form 15G should be submitted before the first payment of interest on fixed deposit.
Difference between form 15G and 15H:-
1. Form 15G can be submitted by individual below the Age of 65 Years while form 15H can be submitted by senior citizens i.e. individual’s above the age of 65 years.
2. Form 15G can be submitted by Hindu undivided families but form 15H can be submitted only by Individual above the age of 65 years.
3. 15G CANNOT BE filed by any person whose income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax.
In nutshell we can say that anybody whose tax on estimated income is not NIL and having income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax cannot file DECLARATION u/s 15G . This is clear from the point 3 & 4 of the of From 15 G.
However, if you are eligible and also fulfil the condition, the payer cannot deduct the tax even if it is above 10,000.
Note:- Maximum amount not chargeable to tax for Hindu Undivided family (HUF) and Individual male (below the age of 65 years) for A.Y. 2010-11 is Rs. 160000/- and for Individual female (below the age of 65 years) for A.Y. 2010-11 is Rs. 190000/- .
Senior Citizens who are eligible to file Declaration in Form 15H has no such conditions. They can submit form 15H even if there total Income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax if tax payable by them is NIL. This is clear from point 4 of the form 15H, which reads as under:-
” 4. that the tax on my estimated total income, including *income/incomes referred to in the Schedule below computed in accordance with the provisions of the Income-tax Act, 1961, for the previous year ending on relevant to the assessment year _____________ will be nil”

INDIPEX 2011

INDIPEX 2011 is organized by India Post

Indipex 2011 is organised by India Post, Government of India in collaboration with the Philatelic Congress of India (PCI) under the patronage of the Federation Internationale de Philatelie (FIP) and the auspices of the Federation of Inter-Asian Philately (FIAP). The World Philatelic Exhibition ( hereinafter referred to as INDIPEX 2011) will be held in Halls No.8-11 of the Pragati Maidan Exhibition Complex, New Delhi, India from 12th to 18th February 2011.

Your Photos on Real US Postage!

Your Photos on Real US Postage!

What are some of the things people are doing with Photo Stamps?

For over a hundred years, the USPS was the only producer of U.S. postage. For many of those years, stamp subjects were mostly confined to dead presidents and national monuments. During this time you didn't want to be on a stamp, for that meant you would have been dead for more than ten years.
But that all changed with Photo Stamps and similar services such as those from Pitney Bowes and Zazzle.com. Now, most anyone can create their own custom postage stamps with personalized photos. For obvious reasons, there are a few restrictions. In fact, when the service was in its test phase, a Website was able to order photo stamps with notorious images. But for most people, they'll be able to commemorate their favourite person, pet, or event.
Some of the most popular personalized stamps are those of proud parents featuring their new babies. Weddings are another popular subject of these picture postage stamps. Pets are popular also, and not just cats and dogs, but birds and lizards too. Boy Scouts, Girl Scouts and little league sports teams are also popular subjects of this custom picture postage. And people aren't shy about putting their own mug on these photo postage stamps.
People are designing their own stamps as well, much like the Postal Service does. People are designing customized stamps with their own Christmas designs and Valentine's Day designs for example.
Business are putting their logos on this customized postage. Realtors, service businesses, and tech companies are some of the many business types that are taking advantage of this new marketing tool.
PhotoStamps.com themselves are offering customized postage designs, if you don't want to create your own. Their collection includes NFL teams, college teams, and picture stamps featuring images of Anne Geddes. Don't miss the Wizard of Oz 70th Anniversary stamps either.
Best of all, the Photo Stamps can be used as official US postage, and they will sure to be noticed with a smile by family, friends and associates when they come in the mail.

Insurance Union Issues Petition Against Japan Govt's Postal Reform

Insurance Union Issues Petition

Against Japan Govt's Postal Reform

A federation of labour unions of Japanese life insurance companies called on the government Monday to make sure its review on the nation's postal privatization process does not allow the insurance business of state-owned Japan Post Holdings Co. to become too big.
The National Federation of Life Insurance Worker's Unions issued a petition against the postal reform bill the government has been working on as the state is planning to raise the 13 million yen upper limit on postal insurance payments through legal changes.
"It is sure to deal a heavy blow to the private sector," says the petition, which has 864,260 signatures, mainly from employees of life insurance companies.
With the petition, the federation plans to request a meeting with Financial Services Minister Shizuka Kamei, who is also in charge of the nation's postal reforms.
Japan's postal privatization, the symbol of former Prime Minister Junichiro Koizumi's structural reforms, was put on hold after the Democratic Party of Japan-led government took power last September.
The current government has been working to include the increase in the upper limit on postal insurance payments into the postal reform bill.
Meanwhile, private insurance companies have been opposed to the ceiling increase, saying the move may cause a flight of money to Japan Post Insurance Co. on the back of its implicit state guarantee and impede fair competition against private companies.

Record Collections under Postal small savings schemes

Collections under Postal small savings schemes

set to touch record high

Collections under the government’s small savings schemes such as post office deposits and instruments such as Public Provident Fund, National Savings Certificate and Kisan Vikas Patra are set to scale a record high in the current fiscal in states such as West Bengal, Maharashtra, Gujarat and Uttar Pradesh, according to finance ministry officials.
In most of these states, where small savings schemes have traditionally been popular, collections till January were far higher than in the full year till March 2009.
In West Bengal, for instance, collections till January at Rs23,238 crore were 21% higher than what people in the state deposited in small savings schemes in the full year till March 2009.
In Maharashtra, the rise was even more striking: Collections till January at Rs19,965 crore were 54% higher than in fiscal 2009.
Economists and finance ministry officials attribute the spurt in small savings deposits to payment of wage arrears to government employees following pay revisions announced in March 2008.
Salaries of state and Central government employees were raised from January 2006. Since then they are being paid arrears in instalments. The Union government paid the second instalment of arrears in August.
“The increase in small savings deposits is largely due to to the Sixth Pay Commission,” said Nasir Sajjad, regional director of small savings in Mumbai.
“People chose to deposit in small savings schemes because on the one hand, they offer assured returns, and on the other, the returns are higher than bank deposits,” he added.
Government employees normally save through safe instruments, according to Mihir Rakshit, former professor of economics at Calcutta University. “For a large section of government employees, the post office is the obvious choice,” he said.
The post office monthly income scheme, which is by far the most popular small savings scheme across India, offers 8% interest a year and a 5% bonus on maturity after six years. A six-year deposit with State Bank of India, the country’s largest bank, would fetch only 7.25% annual interest and no maturity bonus.
In some states, increase in rural income, too, has contributed to the growth in small savings deposits, said Jameel Asghar, regional director of small savings in Kolkata.
“People’s income in rural areas have increased because of various government initiatives such as the Mahatma Gandhi National Rural Employment Guarantee Act, a scheme that guarantees 100 days of work a year to one person in each family,” he says.
In West Bengal, there are over 20 million small savings depositors, and at least 15% of them, or three million people, are from rural areas and economically weaker sections.
The increase in small savings deposits will help states cut borrowing costs in the long run. The Centre gave each state a part of the amount raised through small savings as a 25-year loan carrying 9.5% interest, which is to be reduced to 7.5% from next year under recommendations of the 13th Finance Commission. The Central government gives these funds to states net of new small savings deposits and withdrawals.
States such as West Bengal, Gujarat and Maharashtra have been paying 7.8-8% in the current fiscal to borrow from the market, according to data from the Reserve Bank of India, the country’s banking regulator.
For West Bengal, borrowing cost had shot up to 8.63% in January, according to an official of the finance department of the state government, who spoke on condition of anonymity because he isn’t authorised to speak to the media.
“If more money is available through the small savings route, all states would benefit, more so after the Centre agreed to the demand for reduction in interest rate,” he added.

source-I net