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Senior Citizen Savings Scheme (SCSS)

SCSS, short for Senior Citizen Savings Scheme 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. 

Features of the Senior Citizen Savings Scheme

The characteristics of SCSS are discussed below – 

Quarterly revision of interest rates

The interest rate offered under the Senior Citizen Savings 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. 15 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 penalty. If account closure takes place after 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.

For instance, 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 payment 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 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 deposit, recurring deposit, etc.

Calculation of Interest under the Senior Citizen Savings Scheme

Interest is compounded quarterly and disbursed at 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. A demonstration of interest calculation and the maturity amount is provided below:

Mr. Amit deposits Rs. 10 Lakh under SCSS on 1st April 2020. In that respective quarter of the Financial Year 2020 – 21, the interest rate offered was 7.4%. Hence, the total interest he is eligible to earn at maturity is Rs. (1000000 * 7.4% * 5).

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 the 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:

  • Fill in the name of the Post Office branch in the top left corner of the form.
  • If you already have a Post Office savings account, enter the account number.
  • Enter the Post Office branch address in the ‘To’ field.
  • Copy and paste the account holder’s photo.
  • Now, fill in the first blank field with the account holder’s name and select the ‘SCSS’ option from the drop-down menu.
  • 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.
  • Select the account holder type, such as self, minor with guardian, or person of unsound mind with guardian.
  • Choose whether the account is single, either or survivor, or all or survivor.
  • 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.
  • Enter the account holder’s personal information (s).
  • At the bottom of the table, mark the cells where you have submitted the needed document proofs.
  • Signatures of all account holders are required at the end of Page 1 and Page 2 of the form.
  • Mention the nomination for the account, as well as the nominee’s contact information. To confirm this information, include 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 Senior Citizen Savings Account are 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 an HUF or Hindu Undivided Family do not qualify for opening an account for the scheme. 

The 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).

FAQs

  • Will penalty charges be applicable for partial withdrawals?

If individuals make partial withdrawals from their SCSS account after one year of account opening, then penalty charges will not apply.

  • Is the joint account facility available under this scheme?

Yes, the joint account facility is available only if an individual opens an account with his/her spouse.

  • What is the mode of deposit if the deposit amount is Rs. 15 Lakh?

If the deposit amount is higher than Rs. 10 Lakh, then the deposit shall be made through cheque.

      4)   Is it possible to prolong a SCSS account?

Yes, a depositor can prolong their SCSS for a term of three years within one year of maturity.

   5) Is there a cost for nomination, modification of nomination, or cancellation of nomination?

There is no fee.

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