Senior Citizen Savings Scheme (SCSS)

SCSS full form is Senior Citizen Savings Scheme. It is a government-sponsored savings instrument for individuals above the age of 60. The Government of India introduced this scheme in 2004, intending to provide senior citizens with a steady and secure source of income for their post-retirement phase.

It is one of the most lucrative savings schemes in India and offers comparatively substantial returns to its subscribers. Furthermore, it is a government-backed scheme, and hence, the risk of capital loss is negligible.

Individuals can apply for SCSS through post offices as well as public & private banks.

Recent News about Senior Citizen Savings Scheme (SCSS)

The Finance Ministry of India has made PAN and Aadhaar Card numbers mandatory for making investments in Senior Citizen Savings Scheme (SCSS). The government issued a notification about the same on March 31, 2023.

Features of the Senior Citizen Savings Scheme

To elaborate on what is Senior Citizen Savings Scheme, here are the characteristics of SCSS discussed below – 

  • Quarterly Revision of Interest Rates

The interest rate offered under the Sr Citizen Saving Scheme is revised every quarter, and its derivation depends on several factors, such as the prevalent rates in the market, inflation level, etc.

Due to stagnant economic conditions or no significant change in it, rates might remain the same after revision.

  • Fixed Income

The interest rate declared during the time of investment remains fixed throughout the maturity tenure and is not affected by alterations in a later quarter.

  • Minimum and Maximum Deposit

Eligible individuals require making a minimum deposit of Rs. 1,000 to open an account under the Senior Citizen Scheme. At the same time, the deposit quantum is capped at Rs. 30 Lakh or the amount received as a retirement benefit, whichever is lower.

For example, if an individual receives Rs 10 Lakh as a retirement benefit, he can invest up to that amount in the scheme. This clause applies irrespective of whether the account is held individually or jointly. However, one can only open a joint account with his/her spouse.

Also, if an individual holds multiple accounts under this scheme, the total amount deposited in all such accounts shall not exceed the maximum limit.

  • Maturity Tenure

The maturity period for the SCSS scheme is 5 years. It can be extended for another 3 years, effectively bringing up the period to 8 years. If an individual is willing to extend such a period by 3 years, he/she shall submit Form B after duly filling it. An extension is allowed only once. Upon extension, however, interest rates applicable at that quarter would apply.

For instance, an individual deposited Rs. 7 Lakh under SCSS in April 2012, when the interest rate offered was 9.3%. However, when she extended this scheme in April 2017, the interest rate she was eligible to earn stood at 7.4%.

  • Premature Withdrawals and Account Closure

An individual can withdraw prematurely from their account under Sr. Citizen Savings Scheme one year after account opening. If an individual closes their account before the completion of 2 years, 1.5% of the deposited amount will be deducted as a penalty.

If account closure takes place after the completion of 2 years, 1% of the deposited amount is levied as a penalty. In the case of extended accounts, an individual can close their account after the first year without incurring any penalty.

Example of SCSS premature closure penalty-

If Mr Shah deposited Rs. 5 Lakh in the Senior Citizen Savings Scheme on 1st March 2019 and closed it on 6th February 2021, he would have had to bear a penalty of Rs. 7500. However, if the investor is deceased before the maturity of their account, no penalty will be charged.

  • Quarterly Disbursal

Individuals who open an account under the Senior Citizen Savings Scheme are eligible to receive quarterly disbursals against their deposited amount.

Interest payments will be credited to an individual’s account on the first date of April, July, October, and January.

  • Mode of Deposit

An individual can choose to deposit their money in cash if the amount is below Rs. 1 Lakh but has to pay in cheque if it exceeds Rs. 1 Lakh.

  • Nomination Facility

Individuals can register a nominee when they are opening their accounts under the Senior Citizen Savings Scheme or at a later date.

In the event of an account holder’s death, before the account matures, the nominee will be eligible to receive the due amount.

  • Security of Capital

SCSS scheme is a government-endorsed scheme, and hence, capital invested in it enjoys superlative security and guarantee.

  • Substantial Returns

SCSS has been historically known to provide its subscribers interest at rates that are at par with what is offered by other saving schemes such as fixed deposits, recurring deposits, etc.

Calculation of Interest under the Senior Citizen Savings Scheme

Interest is compounded quarterly and disbursed every quarter on the first date of April, July, October, and January. The primary components used for its calculation are – 

  • The principal or deposit amount
  • Interest rate
  • Maturity period

The maturity period is fixed, while the other two components are variable. The interest rate under which an individual invested is considered for interest calculation.

Benefits of SCSS

Here are some of the major benefits of Senior Citizen Savings Scheme-

  • Assured Returns: Since SCSS is a government-backed scheme, it provides guaranteed returns.

  • Tax Benefits: For SCSS, an individual can claim a tax deduction under Section 80C up to Rs 1,50,000 pa.
  • Easy Investment Process: Opening an SCSS account is fairly easy. It can be opened in simple steps at any authorized bank or any post office in India.

  • High Rates of Interest: SCSS offers high-interest rates on the principal sum.

How to Open an Account under the Senior Citizen Savings Scheme?

An SCSS account can be opened with a post office or any of the private or public banks in India. The procedure for both is similar and is mentioned below – 

Step 1: Visit your nearest bank branch or Post office branch.

Step 2: Duly fill up Form A.

Step 3: Submit the original and photocopies of all the necessary documents, broadly address and identity proof.

Step 4: Produce age proof.

Post Office SCSS Form

The SCSS application form is available at any Post Office branch or on the Post Office’s official website. The procedure for completing the application form is as follows:

  • Step 1: Fill in the name of the Post Office branch in the top left corner of the form.
  • Step 2: If you already have a Post Office savings account, enter the account number.
  • Step 3: Enter the Post Office branch address in the ‘To’ field.
  • Step 4: Copy and paste the account holder’s photo.
  • Step 5: Now, fill in the first blank field with the account holder’s name and select the ‘SCSS’ option from the drop-down menu.
  • Step 6: You do not need to pick any of the choices in the ‘Additional Facilities Available’ section because they are only applicable if you are applying to open a savings account.
  • Step 7: Select the account holder type, such as self, minor with a guardian, or a person of unsound mind with a guardian.
  • Step 8: Choose whether the account is single, either or survivor, or all or survivor.
  • Step 9: Proceed to field number 2, where you must enter the deposit amount in both figures and words. If you’re presenting a check, make a note of the check number and date.
  • Step 10: Enter the account holder’s personal information.
  • Step 11: At the bottom of the table, mark the cells where you have submitted the needed document proofs.
  • Step 12: Signatures of all account holders are required at the end of Page 1 and Page 2 of the form.
  • Step 13: Mention the nomination for the account, as well as the nominee’s contact information. To confirm this information, including the signatures of all account holders.

How to Open SCSS Account in a Bank Offline

Step 1: Go to the Bank branch closest to you or the Bank branch where you have a savings account.

Step 2: Request an application form and fill it out with your personal information.

Step 3: Submit the application form, along with any supporting documentation, to the bank’s officials, along with the deposit amount in cash or check.

Step 4: The Bank professionals will process your application and the payment received. The SCSS account will be created once the payment is processed.

Banks Offering the Senior Citizen Saving Scheme

Eligibility under SCSS

The category of individuals who are eligible to open an account under the Senior Citizen Savings Account is mentioned below – 

  • Individuals of and above the age of 60 years.
  • Individuals who are of 55 years of age but have retired early under a superannuation or Voluntary Retirement Scheme (VRS) rules.
  • Retired defence personnel provided they have satisfied other terms and conditions.

Non-resident Indians or NRIs, persons of Indian Origin or PIOs, and any member of a HUF or Hindu Undivided Family do not qualify for opening an account for the scheme. 

Documents Required to Apply under SCSS

An individual needs to produce the following documents to open an account under SCSS – 

  • Aadhaar Card
  • Voter ID card
  • PAN card
  • Passport
  • Telephone bill
  • Electricity bill 
  • Birth certificate/senior citizen card
  • 2 passport-sized photographs

These documents need to be self-attested. 

Tax Implications of Senior Citizen Savings Scheme

SCSS is one of the most beneficial investment options for senior citizens, given its security of capital, high returns, and also the tax benefit it attracts. 

The principal amount deposited in an SCSS account is eligible for tax deductions under Section 80C of the Income Tax Act, 1961, up to the limit of Rs. 1.5 Lakh. However, this exemption is applicable only under the existing tax regime. It is not allowed if an individual chooses to file tax returns under the new system introduced in Union Budget 2021. 

The interest received is, however, subject to taxation as per the applicable slab of the concerned taxpayer. Besides, if an individual’s interest income in a year exceeds Rs. 50,000, then it is subject to Tax Deducted at Source (TDS).

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