What is Senior Citizens Savings Scheme or SCSS?
The Senior Citizens Savings Scheme, also known as SCSS, is a government scheme which was brought about in October of 2004. It is a five-year scheme, but primarily for the senior citizens of the country. Furthermore, the Senior Citizens Savings Scheme gives a quarterly interest at about 9% pa. Since it has the Central Government’s backing, it is a risk-free scheme with assured returns and apt for people above the age of 60 years.
Why should you invest in Senior Citizens Savings Scheme?
- Since this scheme has the government’s backing, it is considered safe and reliable. The scheme’s interest rate is also updated quarterly. There are no fluctuations as in mutual funds. Hence, your money will be safe here as it is one of the most reliable investment options.
- Since the scheme focusses towards the senior citizens and elderly, it is very simple and easy to follow. Thus, the entire process of making a Senior Citizens Savings Scheme is uncomplicated. The account can also be opened at any authorized bank or post office in the country. The SCSS account is also transferrable all across the country.
- The return rate for Senior Citizens Savings Scheme is great. Currently, at 8.6% pa, this return rate is better than having a savings or fixed deposit account.
- When opening an SCSS account, you can also file one or more nominees. This is easily done by submitting an application as part of From C as well as the passbook to the bank.
- This scheme also provides tax benefits. Tax deduction of up to Rs 1.5 lakh is claimable under Section 80C of the Income Tax Act, 1961.
- The scheme is flexible as well. The tenure for the scheme is flexible with an average tenure of five years, which can also be extended to three more years.
A Comparison with Fixed Deposit
In fixed deposit schemes, any banks can at the most give up to 7% interest rate. Also, there is no provision of any tax savings on fixed deposit schemes. Meanwhile, the Senior Citizens Savings Scheme has always had an interest rate close to 9%. This interest rate is updated quarterly as well and currently stands at 8.6%.
Eligibility for Senior Citizens Savings Scheme
The following individuals or groups are eligible to opt for SCSS:
- Any senior citizen of India who is either 60 years of age or above.
- People who have taken Voluntary Retirement Scheme (VRS) or Superannuation and are also between 55 to 60 years of age. In this case, the investment for SCSS must be completed within one month of retiring.
- Retired defence personnel with a minimum age of 50 years.
- HUFs and NRIs are not eligible to invest in this scheme.
What is the amount of investment?
- The maximum amount which one can deposit in the Senior Citizens Savings Scheme is capped to either their retirement benefits received or Rs 15 lakh (whichever is lower).
- The minimum investment can be Rs 1000. But any amount between Rs 1000 to Rs 15 lakh can be invested in multiples of Rs 1000.
- Investments below Rs 1000 can be given in cash itself. But investments above Rs 1 lakh need to be given in cheque.
- People between 55 to 60 years of age can invest in SCSS only from their retirement benefits and within three months of retirement. This investment can include their:
- provident fund dues
- retirement or superannuation gratuity
- commuted pension value
- savings element of Group Savings linked Insurance scheme payable by the employer to the employee on retirement
- the retirement-cum-withdrawal benefit under the Employees’ Family Pension Scheme
- ex-gratia payments under a voluntary retirement scheme.
- People above 60 years of age have no restriction on the source of funds for investment.
What is the Tenure of SCSS?
- The standard tenure of this scheme is five years but it can be extended to three more years.
- Although, premature withdrawals are not allowed for the first year. After one year, early withdrawal is allowed but with some penalty.
- If one prematurely withdraws after a year, but before two years from the start date, the charges are 1.5 per cent of the total invested amount.
- After 2 years but before 5 years, will have a penalty of 1 per cent of the invested amount.
- Withdrawal after 5 years, has no penalty.
- No charges are levied in case of premature closure of account due to the depositor’s death.
Maturity and closure options
- After the standard tenure of five years, one can close the account and withdraw all the money. For this, one needs to submit Form E along with the passbook to the bank.
- After 5 years, the SCSS account can be extended for another 3 years. But this is only possible within one year of maturity. This is possible by submitting Form B to the bank.
- The extension will come into effect only from the maturity date and not from the submission of the application date.
- If the account is neither closed or extended after 5 years, then the account is treated as matured. One can close the account at any time. Interest on the account will be paid at the rate applicable to the deposit under the Post office Savings Accounts, up to the end of the month preceding the month of the closure of the account.
- After 8 years you can re-register for this scheme, for another 5 plus 3 years.
How is interest computed in the
Senior Citizens Savings Scheme?
The interest calculation for the scheme happens quarterly. So payment is received on 31st March, 30th June, 30th September and 31st December.
For calculating the quarterly payment, the interest rate is divided by 4 and multiplied by the principal amount.
Thus, quarterly payment = (P * R/(4 * 100)) = 1,00,000 * 8.6/(4* 100)
= 100000 *(2.325/100)
= Rs 2150
Thus, for Rs 15 lakh investment at 8.7% pa, the quarterly payout is Rs 32,625 or Rs 10,875 monthly.
Tax savings with Senior Citizens Savings Scheme
Any investment under SCSS has the benefit of Section 80C of the IT Act, 1961. Although, this has the limit of up to Rs 1.5 lakh investments and includes EPF, PPF, Insurance, etc.
For interest earned up to Rs 50,000, there is no TDS deduction. For interest earned above Rs 50,000, TDS will be deducted. If you fall under the exemption bracket then you can fill Form 15G (for people under 60 years) or Form 15H (for people above 60 years) to save TDS deduction.
There is also a facility of nomination filing available. The person can either at the time of opening the account or later, nominate one or more people. These nominees will be eligible to receive the depositor’s payment upon his demise.
- Names of one or more people can be specified as nominees.
- Nomination can be done even after opening the account.
- The nomination can also be changed or cancelled later by filling Form C.
- In case of a
jointaccount, the joint holder is entitled to the amount in case of death of the primary account holder. The nominee(s) would have a claim only after the death of both the joint holders.
How to open a Senior Citizens Savings Account?
An SCSS account can be opened in any of the authorized banks or post office branch across India with the following documents:
- Form A has to be filled for opening an SCSS account.
- Identity proof like PAN card or passport has to be presented. Aadhaar is not valid for this.
- Address proof such as Telephone or Electricity bill or Aadhar card is mandatory.
- Age proof document is also required. This could be in the form of a Passport, Senior Citizen Card, a Birth Certificate issued by the Corporation or registrar of births and death, Voter ID card, PAN card etc.
- 2 Passport size photographs.
- In the case of retirees, a certificate from the employer, stating the retirement was on superannuation or otherwise, retirement benefits, employment held (designation) and the period of employment.
- Proof of date of disbursal of the retirement benefits.
- All the above documents must be self-attested.
Where can you open an SCSS account?
Following are the banks where an SCSS account can be opened:
1. Allahabad Bank
2. Andhra bank
3. Bank of Maharashtra
4. Bank of Baroda
5. Bank of India
6. Corporation Bank
7. Canara Bank
8. Central Bank of India
9. Dena Bank
10. IDBI Bank
11. Indian Bank
12. Indian Overseas Bank
13. Punjab National Bank
14. State Bank of India
15. Syndicate Bank
16. UCO Bank
17. Union Bank of India
18. Vijaya Bank
19. ICICI Bank
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