After retirement, senior citizens often look for safe and lucrative saving instruments so that they can invest their hard-earned money in the right place. Nevertheless, senior citizens are hesitant and unwilling to put their lifelong retirement corpus in equities. The reason is that such investment products carry a great risk of capital loss. The Senior Citizen Savings Scheme (SCSS) is a budget-friendly and long-term saving plan which has been introduced by the Government for the senior citizens of India. The scheme guarantees regular income with tax benefits and utmost safety.
Besides capital protection, the scheme offers interest payment on every quarter as a reliable source of income for retired citizens.
Senior Citizen Savings Scheme (SCSS) 2019
The Senior Citizen Savings Scheme is a government-sponsored saving instrument which is meant for senior citizens aged 60 and above.
However, if a citizen between the age group of 55-60, willingly retires under Voluntary Retirement Scheme (VRS) or superannuation, he/she can also avail the Senior Citizen Saving Scheme (SCSS). But it’s important to note that citizens aged 55 and above, who have voluntarily retired should invest in the scheme within a month of attaining the retirement benefits.
Some time ago, retired defence personnel could opt for the SCSS irrespective of their age. But now the government has set the age limit to 50 years for retired defence personnel.
Nonetheless, non-resident Indians (NRIs) & Hindu Undivided Families (HUFs) cannot invest in the Senior Citizen Savings Scheme (SCSS).
The procedure to make an investment in the Senior Citizen Savings Scheme (SCSS) is very easy.
For investing in the scheme, a senior citizen can either open a single account or a joint account with his/her spouse at any of the authorised post office branches or commercial banks across the country.
Can I open multiple SCSS account?
Although there’s no restriction on the number of accounts that a senior citizen can open but the total amount of money in all the SCSS accounts should not exceed the maximum limit of investment for this government-backed scheme.
What is the maximum amount one can deposit under SCSS?
The minimum investment amount for the SCSS scheme is 1 thousand whereas the maximum amount that a senior citizen can invest is 15 lakhs provided that the deposit amount is in multiples of 1000. But it’s essential to keep in mind that the amount one invests in the scheme cannot be more than the money received on retirement.
In simple words, a senior citizen can either make an investment of 15 lakhs or the money received as retirement corpus, whichever is lesser.
For an investment below 1 lakh, the account can be opened by cash. Whereas for investment more than 1 lakh, the mode of the deposit is cheque as per the guidelines for the SCSS mentioned on the official website of Income Tax.
Another important thing to remember is that the investment date for Senior Citizen Savings Scheme is subject to cheque realisation. Therefore, the date on which the cheque is realised by the government account is considered as the official investment date for the scheme.
What is the current interest rate of SCSS?
The current rate of interest available for the Senior Citizen Savings Scheme is 8.7% per annum.
The interest rate for the SCSS account is reviewed by the Ministry of Finance each and every quarter. For this very reason, the interest rates change periodically.
The interest on an SCSS account is calculated taking into consideration the amount up to the final day of each quarter, namely March 31st, June 30th, September 30th, and December 31st. Afterwards, the interest to be paid is credited to the holder of the SCSS account on dates, namely April 1st, July 1st, October 1st, and January 1st.
Besides that, the assured rate of interest payable on an SCSS investment is fixed on the date on which the investment is made by the applicant. The fixed interest rate does not change irrespective of future revisions in the interest rate.
Hence, a change or revision in the rate of interest is not applicable to existing SCSS accounts and it can only affect new investments under the scheme.
But if a senior citizen applies for an extension of his/her account after maturity, the fixed interest rate payable on his/her investment will no longer be valid. The extended SCSS account will earn interest in accordance with the prevailing interest rate on the date on which the account is extended.
Can SCSS be extended?
The tenure of SCSS is usually 5 years but it can be extended for a maximum time period of 3 more years depending on the requirements of the investor.
So if an investor wishes to extend the scheme for 3 more years after the completion of its mandated policy term of 5 years, he/she is required to submit the duly filled form for the scheme’s extension.
Whereas for shutting the SCSS account and getting the whole maturity amount after the mandated tenure of 5 years, the account holder is required to return the passbook and submit the ‘closure form’ provided that it’s duly filled.
On the other hand, if the account holder does not extend or close the SCSS account after maturity of the scheme, the deposited amount will receive the prevailing interest rate of post office savings account applicable during the time.
Who is eligible for SCSS?
The eligibility criterion for SCSS:
- The citizen must be aged 60 above.
- In cases of Voluntary Retirement Scheme (VRS) or Superannuation, senior citizens falling in the age group of 55-60 can apply for the SCSS scheme.
- The tenure of the SCSS scheme is 5 years and it can be extended for 3 years more.
- Minimum Investment Amount Is 1 Thousand whereas the maximum investment amount is 15 lakh.
- Rate of interest on the SCSS account is 8.7% per annum for the current quarter.
- HUFs and NRIs are not eligible for the SCSS scheme.
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How do I open a SCSS account?
You can easily open a Senior Citizen Savings Scheme (SCSS) account in authorised post offices and banks situated across India. For opening an SCSS account, you would have to fill up an account opening application form known as Form-A’ which can be obtained online as well as offline. The application form requires information such as the number of SCSS accounts opened by a citizen and the total amount of money invested in each SCSS account. Not only that, but you must also have the following documents (self-attested) for opening an SCSS account.
- Documents for proof of address such as Aadhar card and telephone bill.
- Proof of age such as Voter ID card and birth certificate.
- Documents for proof of identity like passport and KYC form.
- 2 photographs (passport size)
- Permanent Account Number (Pan Card)
- Proof of the total amount of money received on retirement.
Once a new SCSS account is opened, the depositor is provided with a passbook as a proof of investment which consists of the following important information.
- Account holder’s name
- Account opening date
- Address & Photograph
- Account number
- Total invested amount
- Details Of Payment Of Quarterly Interest
- Details Of Nomination (if availed)
- Date Of Maturity
Essential Points To Be Noted Before Opening An SCSS Account
If you open an SCSS account at a post office, it’s very important to ensure that you have working savings account in a post office in order to receive the quarterly interest payment.
Presently, the credit of the quarterly interest on an SCSS investment made at the post office cannot be forwarded to SCSS account holder’s savings account in a bank.
Similarly, if open an SCSS account at a bank, you should have operating savings account in a bank so as to receive the quarterly interest credit.
Benefits Of Senior Citizen Savings Scheme (SCSS)
Let’s take a look at the various benefits of the Senior Citizens Savings Scheme (SCSS)
Safe And Easily Available
Since the Senior Citizen Savings Scheme (SCSS) is government-backed, it is completely safe and comes with security assurance. Not just that, the scheme is easily available and one can easily open an SCSS account at approved post office branches and banks.
The best thing about the Senior Citizen Savings Scheme is that its tenure is flexible. In simple words, the average tenure (policy term) is 5 years which can be increased up to 3 more years depending on the investor’s requirement.
The Senior Citizen Saving Scheme offers satisfying returns at an interest rate of 8.7% per annum. Thus, the SCSS account emerges as a better alternative as it offers greater returns than fixed deposit and saving accounts.
The Senior Citizen Savings Scheme (SCSS) is eligible for tax deduction under Section 80c of the Indian Tax Act. The tax benefits are available only in during the financial year in which the SCSS investment is made. Hence, a senior citizen can claim a tax deduction up to 1.5 lakhs on his/her investment only once. In case of premature withdrawal and extension of the SCSS account after maturity, the account holder cannot avail any additional tax benefits as per section 80c. Speaking of premature withdrawal by a nominee in case of death of the SCSS account holder, the principal amount is free from tax. But the interest credited to the account of a depositor after his demise is taxable in the hands of the nominee.
The Senior Citizen Savings Scheme (SCSS) offers a nomination facility for free of cost. The facility is usually availed at the time of account opening. It can also be availed at any time during the tenure by submitting a duly filled application under ‘Form C’. In case of a joint account, all the account holders should duly sign the nomination form. The nominee can even be a minor on the condition that the depositor provides the birth date of the appointed nominee and guardian’s details. Moreover, an SCSS account holder can change the nominee as many times as he/she wants.
Unlike the majority of the schemes available in the market, the SCSS offers the facility of premature withdrawal. The scheme allows senior citizens to close their SCSS account so that they can gain access to their invested funds and make use of them during times of financial distress. However, one can only avail the facility of premature withdrawal after 365 days (1-year). Initially, a penalty of 1.5% is charged after a period of one year whereas the penalty comes down to 1% after two years. In case of an unfortunate event such as the death of the depositor, no such penalties are levied on premature withdrawal.
Making an investment in SCSS can work wonders for senior citizens as the scheme promises regular income and tax benefits. Since the SCSS is backed by the Indian government, the scheme comes with the highest security. On these accounts, the Senior Citizen Savings Scheme (SCSS) is undoubtedly apt choice for retired citizens.
Let’s Answer The Most Commonly Asked Questions About The SCSS Scheme
What is the interest rate for the senior citizen savings scheme?
The interest rate for the Senior Citizen Savings Scheme (SCSS) is 8.7% for the current quarter. Nonetheless, the interest rate keeps on changing with every quarter.
Is senior citizen saving scheme tax free?
No, the Senior Citizen Savings Scheme (SCSS) is not tax free. The interest earned from the SCSS scheme is completely taxable as income.
Is TDS applicable on SCSS?
Moreover, the income from the scheme is subject to TDS if the amount in a year is more than 50,000.
Is senior citizen savings scheme interest taxable?
Yes, the Senior Citizen Savings Scheme (SCSS) interest is completely taxable as income.
Is senior citizen saving scheme eligible for 80c?
Yes, the Senior Citizen Savings Scheme (SCSS) is eligible for tax deduction section 80c of the Indian Tax Act. A senior citizen can claim a deduction up to 1.5 lakhs under section 80c.
Which banks offer senior citizen savings scheme?
The Senior Citizen Savings Scheme (SCSS) is offered by a large number of banks such as State Bank Of India, ICICI Bank, Punjab National Bank, Central Bank Of India, and many more.
Who can invest in senior citizen savings scheme?
Senior citizens who are 60 years or above can invest in the Senior Citizen Savings Scheme. Besides, citizens aged 55-60 who have retired under the VRS or superannuation are also eligible for the SCSS scheme.
Senior Citizens Saving Scheme Calculator
You can determine the total interest generated on your deposited investment by using this Senior Citizen Savings Scheme Calculator.