The Government Savings Promotion Act, of 1873 covers the Public Provident Fund, Sukanya Samriddhi, Senior Citizens Savings Scheme, National Savings Certificate, Post Office Time Deposits, Kisan Vikas Patra, Post Office Monthly Income Scheme and more.
According to existing provisions of the Government Savings Promotion Act 1873, if a depositor dies without a nomination in force, the authorised officer is authorised to pay the balance deposit to any person entitled to receive the balance amount and appearing before her, if probate of the will or letters of administration of the estate of the deceased person or a succession certificate granted under the Indian Succession Act, 1925 is not produced to the authorised officer within three months of the depositor’s death, explained Shri Venkatesh, Managing Partner, SKV Law Offices, a law firm.
What the new amendment says
The Finance Bill 2023 has proposed an amendment to Section 4A of the Government Savings Promotion Act 1873, which states that:
“If a depositor dies and no nomination is in force at the time of his death, and the probate of his will or letters of administration of an estate or a succession certificate granted under the Indian Succession Act, 1925, or legal heir certificate issued by the revenue authority, not below the rank of Tahsildar having jurisdiction, is not produced within six months from the date of death of the depositor to the Authorised Officer, then, where the eligible balance does not exceed such limit as may be prescribed, the Authorised Officer may, for reasons to be recorded in writing, pay the eligible balance to the person legally entitled to receive it or to administer the estate of the deceased in accordance with such procedure and manner as may be prescribed.”
Key changes small savings scheme accountholders must know
The amendment in the Finance Bill 2023 has proposed the following three changes with respect to this issue, explained Shri Venkatesh
1) A legal heirship certificate issued by a local Revenue Officer (not below the rank of Tahsildar) is recognised as a valid document for the transfer of funds from the bank accounts.
2) The time period to produce the documents before the authorised officer has been increased to six months from three months. The increase in time period proposes to align the provision with the ground realities for securing the necessary documents.
3) The authorised officer has to now record the reasons in writing before paying the eligible balance to the person appearing before her. Earlier the authorised officer was not required to record the reasons in writing which has changed with this amendment.
Also Read: Senior Citizen Savings Scheme’s investment limit increased to Rs 30 lakh: Budget 2023
The amendment has indicated that government will later notify the limit and the eligible amount. “Instead of the amount of deposit, the term ‘eligible balance’ has been used for setting the criteria for releasing the money to a person claiming the money as heir of the depositor. The term ‘eligible balance’ has not been given any specific meaning, but, it is understood that this would mean the amount of interest, dividends, etc. as may be provided in a detailed scheme of savings,” said Shashank Agarwal, Advocate, Delhi HC.
Explaining it further, Agarwal said, “Effectively, under the amended sub-section (4), if a depositor dies and there is no nomination at the time of his death and if the depositor’s will or letter of administration or succession certificate or a ‘legal heir certificate’ issued by Tehsildar, is not produced within six months to the government savings bank, then the said government savings bank would pay the ‘eligible balance’ to any person appearing to be entitled to receive or to administer the estate of a deceased depositor if the ‘eligible balance’ does not exceed up to a certain amount.”
Full list of schemes covered under the Government Savings Promotion Act, 1873
As per Schedule-I, the following government savings schemes are regulated by the Government Savings Promotion Act, of 1873:
a)Post Office Savings Account
b)National Savings Monthly Income (Account)
c)National Savings Recurring Deposit
d)Sukanya Samridhhi Account
e)National Savings Time Deposit (1 year, 2 years, 3 years, and 5 years)
f)Senior Citizens’ Savings Scheme
g)Savings Certificates:—
i)Kisan Vikas Patra (discontinued from 1st December, 2011 and restarted from 23rd September, 2014);
ii)National Savings Certificates (VIII Issue).
h)Public Provident Fund Scheme
How this move will impact depositors
“The Government has made a small but critical step by recognising a legal inheritance certificate as an acceptable document for the transfer of funds lying in the small savings plans. This is in sync with the Master direction of the Reserve Bank of India (RBI), wherein the central bank had recommended banks to adopt a simplified approach for the repayment to legal heirs of the bank account holders,” said Venkatesh.
“This move will prevent an excessive concentration of power in the hands of the officials by laying out a procedure for paying over the balance in the account in the event of the unfortunate death of the account holder, provided that the account is neither a joint account nor has nomination capability. The proposed change has taken into account the risk management practice of defining the scope of this authority’s use as well as the protocols to be followed,” said Sandeep Shah, Managing Partner- N.A. Shah Associates, a law firm.
We will have to wait for the government notification to know the limit and eligible amount. It may also offer more clarity on the process to claim such funds in case where the amount is above the limit.