A saving scheme introduced by the government primarily for senior citizens to ensure they get regular income is the Senior Citizen Savings Scheme (SCSS). It offers higher returns than a savings bank account and a fixed deposit and is considered an ultimate savings scheme for citizens above 60. In this article, we have explained in detail the scheme’s features, benefits, and eligibility criteria.
What is the Senior Citizen Savings Scheme?
The Senior Citizen Savings Scheme (SCSS) is a retirement benefit scheme introduced by the government to provide a regular source of income for individuals aged 60 and above. The government backs it and it falls under the National Savings Scheme, hence, it is considered a low-risk investment.
You can invest in SCSS through a post office or any authorised bank. The government pays a fixed interest on your deposit. Currently, the scheme’s interest rate is 8.2% per annum for January to March 2024, and the Ministry of Finance decides the interest rate every quarter. Though the interest rate can change every quarter, the interest rate on the day you invest gets locked in for the entire tenure of the scheme.
Investment in SCSS is eligible for tax deduction under section 80C of the Income Tax Act, 1961. The interest is taxable as per your income tax slab.
How Does SCSS Work?
You can invest in SCSS when you turn 60. However, if you retire at 55, then you must invest within three months of your retirement. Moreover, the investment amount is restricted to the retirement benefit you receive from your employer.
Once you invest in the scheme, the scheme will pay you a fixed interest on your deposit every quarter on the first of April, July, October, and January. This interest is directly credited to your bank account and is taxable in the year of receipt.
You will receive the maturity proceeds in your bank account at the end of the tenure. However, if you opt for an extension, you will continue to receive interest from the government for another three years.
You can also prematurely close your SCSS account but will have to pay a penalty for withdrawing your money early.
Features of Senior Citizens Savings Scheme (SCSS)
Deposits
The deposit amount has to be in multiples of Rs 1,000. The maximum limit for the SCSS account is Rs 30,00,000. You can open any number of SCSS accounts. However, the maximum amounts held in these accounts cannot exceed Rs 30,00,000.
You can manage the SCSS account individually or jointly. You can hold the account jointly with your spouse.
You can open the SCSS account with cash if the investment amount is less than Rs 1,00,000. However, for higher deposit amounts, you must provide a cheque. For all cheque payments, the date of realisation of cash in the Government Account will be considered as the account opening date.
Interest on SCSS
The current interest rate is 8.20% p.a. (as of Q3 FY 2023-24), the highest among small savings schemes. The interest payments are made at the end of every quarter (on the first working day of January, April, July and October). You can withdraw interest through post-dated cheques or money orders at the post office.
Lock-in Period of Senior Citizens Savings Scheme (SCSS)
SCSS has a five-year lock-in period. Upon maturity, you have an option to extend your investments for a duration of three years.
The interest rate for the extended deposit tenure will be at the prevailing rate. Also, the extension of the scheme is allowed only once.
Tax Benefits
Your SCSS investments up to Rs 1,50,000 per annum are eligible for tax deduction under Section 80C of the Income Tax Act, 1961.
The interest on the SCSS account is taxable as per your applicable income tax slab rate. TDS is deducted if the interest income in a year is more than Rs 50,000.
It is important to note that this tax exemption is available only if you opt for the old tax regime. No tax deductions are available under the new tax regime (announced in Budget 2023).
Premature and Partial Withdrawals
SCSS allows premature withdrawals after one year of account opening. However, these withdrawals attract penalties. The penalty is as follows:
Withdrawals after one year – 1.5% of the total deposit value
Withdrawals after two years – 1% penalty on the deposit value
If you have extended your SCSS investments for three years, the premature withdrawal in this case does not attract any penalty.
In the event of the unfortunate death of the account holder (before maturity), the account will be closed. The nominee or legal heir will get the deposit amount, for which they need to fill out and submit the withdrawal form along with the account holder’s death certificate.
Account Transfer
You can transfer your SCSS account from any post office to a bank or vice versa anywhere in India.
Eligibility
The following are the eligibility criteria to invest in SCSS.
- Senior citizens above the age of 60.
- Retired employees aged above 55 but below 60 must invest the retirement proceeds within three months from the date of retirement.
- Retired defence personnel aged above 50 and below 60 must invest the retirement proceeds within three months from the retirement date.
- Spouse of a deceased government employee who passed away at the age of 50. The retirement or death benefit that the spouse receives will have to be invested in the scheme.
- Non-resident Indians (NRI) and Hindu Undivided Families (HUF) are not eligible to invest.
Documents Required for Opening SCSS Account
The following are the documents required while opening an SCSS account:
- SCSS application form
- Aadhar Card
- PAN Card
- Voter ID
- Passport
- Electricity Bill
- Telephone Bill
- Senior Citizen Card/ Birth Certificate
- Two passport-sized photographs
- Self-attested photocopies of all the documents mentioned above are required to be submitted at the account opening branch.
How to Invest in SCSS?
You can open an SCSS account at any post office in India or private or public banks. The procedure is as follows:
- Visit the nearest public or private bank branch or post office branch.
- Fill out the SCSS Form A
- Submit the KYC documents along with the SCSS Form A (identity, address, and age proof)
- Two passport-sized photographs
- The cheque for the deposit amount
The authorized banks include but are not restricted to:
- Bank of Baroda
- Bank of India
- Canara Bank
- Central Bank of India
- ICICI Bank
- IDBI Bank
- Punjab National Bank
- Punjab & Sind Bank
- State Bank of India
- UCO Bank
- Union Bank of India
Conclusion
The Senior Citizen Savings Scheme is an ideal investment option for retired individuals seeking regular income at a fixed return. It best suits investors with a very low-risk tolerance. Moreover, it also offers tax benefits and can help retirees save on taxes by investing in the scheme. However, it comes with a lock-in period and has penalties for premature withdrawals. It also doesn’t offer any compounding benefits to its investors. Hence, you must check all the terms and conditions of the SCSS before investing in it.
Frequently Asked Questions (FAQs)
Is SCSS interest paid monthly?
No, the SCSS account pays interest every quarter. The interest pay-out date is the first working day of April, July, October and January of every financial year.
Can the SCSS account be transferred?
Yes, you can transfer the SCSS account from one deposit office to the other. However, for deposits above Rs 1,00,000, you will have to pay a transfer fee (Rs 5 for every one lakh). If you are transferring the account for the second time (and all subsequent transfers), the amount has to be at least Rs 10 lakhs.
How many times can one invest in SCSS?
You can hold multiple SCSS accounts. However, the investment value across all accounts must not exceed Rs 30,00,000.
Can you open an SCSS account online?
Unfortunately, there is no provision available yet to invest in the SCSS account online. You can only invest by visiting the nearest bank or post office.
Is premature withdrawal allowed?
Yes, premature withdrawals from the SCSS account are available after one year. However, these come with certain penalties.
