Letters to the Editor
View(s):Senior citizens struggling with FD rates and hidden taxes
In early September 2024, a month before the Presidential election, when banks were offering around 10–11% on FDs, then as a Presidential hopeful Anura Kumara Dissanayake met with senior citizens at the NYC Hall, Maharagama and promised to restore the 15% interest rate on FDs up to Rs. 1.5 million immediately upon taking office.
However, the banks have dropped the rates below 8% and in his budget speech, the President instead proposed only a 3% increase over prevailing FD interest rates, capped at Rs. 1 million per individual deposit, effective July 2025.
It is evident that a majority of senior citizens are facing severe financial difficulties following the withdrawal of their special 15% fixed deposit (FD) interest rate, which was previously exempt from withholding tax (WHT) and advanced income tax (AIT).
Currently, FD interest rates have dropped drastically – from 11% in September 2024, to 7-7.5% per annum. Adding to the burden, all citizens now face an additional 5% WHT or AIT on their interest income from FDs and savings accounts – a double blow. The cumbersome refund process introduced by the Inland Revenue Department (IRD) has only further frustrated affected citizens.
Simply put, the IRD uses AIT/WHT collections to supplement government revenue while forcing deposit holders to apply for refunds quarterly – often receiving less than expected and only when the authorities decide to pay.
Unfortunately, this relief was immediately diluted by another proposal to increase WHT/AIT from 5% to 10% on all FD and savings interest. The worst affected group is senior citizens who are not government pensioners and rely solely on their savings. With the cost of living escalating rapidly, they have gone from the frying pan into the fire.
Another pressing concern is the government’s undisclosed strategy of bridging the massive budget deficit through gradual increases in indirect taxation. This hidden burden will inevitably affect every citizen, pushing up the cost of essential goods and services while further diminishing disposable income.
The President did mention plans to exempt eligible senior citizens—those below the taxable income threshold – from WHT/AIT in the future. One can only hope this relief will be implemented swiftly and certainly before the proposed tax hike takes effect.
K.K.S. Perera Via email
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