Senior Citizens Savings Scheme (SCSS)

Senior Citizen Savings Scheme is a government-backed savings method for Indian citizens over the age of 60. In 2004, the government of India launched this scheme to deliver a sustained and stable income source for senior individuals for their post-retirement stage. This is one of India's most competitive investment plans, which gives its investors good returns. Though it is a government-sponsored savings instrument the risk of the capital loss is minimal. The investment matures after 5 years from the date of issuance and which can be expanded periodically by 3 years additionally. 

This is an innovative and long-term saving method that offers security and additional benefits that are strongly correlated with every savings or investment scheme funded by the government. The scheme's sole purpose is to enable retirees with financial assistance in terms of providing a continuous stream of income. The applicable interest rate is guaranteed and received quarterly per fiscal year.

Eligibility Criteria

You have to meet the following criteria to avail SCSS.

• You must be a citizen of India.
• This scheme is not available for non-residential Indians (NRIs)
• Every Indian resident aged 60 years are eligible for SCSS. 
• Retired people in the 55-60 year age range who have qualified for Voluntary Retirement Scheme (VRS) or Superannuation are entitled to take advantage of the scheme if they register for the same after one month of receiving their pension benefits.
• Retired defence personnel aged 50 years or more
• With a minimum deposit amount of Rs.1000 this scheme can be made viable.

Documents required

To open an account under SCSS an individual must submit the following documents with self-attested. 

• Aadhaar Card
• Voter ID card
• Passport
• PAN Card
• Utility bills such as telephone bill, electricity bill etc.
• Birth certificate/senior citizen card
• 2 recent passport-sized colour photographs

Where to Open SCSS Account.

The top public sector banks along with Post Office provide the facility for a Senior Citizen's Savings Scheme account. ICICI bank is a major private-sector bank providing this account to senior citizens.

Features of Senior Citizens Savings Scheme

You must keep in mind the below-listed benefits and characteristics of SCSS before investing.

Interest rates are revised quarterly: 

The interest rate issued under the Senior Citizen Savings Scheme is assessed every quarter, and its conjugation depends on many parameters such as market, inflation level and more. Interest rates remain the same after revision due to static economic conditions or no significant change at all.

Fixed income: 

The interest rate announced at investment period remains fixed during the term of maturity and is not influenced by subsequent quarter modifications.

Minimum and maximum deposit: 

Under the Senior Citizen Scheme, eligible persons require a minimum deposit of Rs.1,000 to open an account. At the same period, the quantum investment is fixed at Rs. 15 Lakh or the amount earned as a retirement advantage, whichever is lower. One can only open a joint account with his/her spouse under this scheme. Moreover, if a person maintains different accounts under this scheme, the cumulative amount deposited in all such accounts shall not cross the maximum cap.

Tenure of the scheme: 

For the SCSS scheme the maturity term is 5 years. This may be prolonged for another 3 years, thereby significantly extending the period to 8 years. If a person wants to prolong this time by 3 years, he / she must submit Form B after duly filling it out. An extension is permitted only once. Moreover, interest rates applicable at that quarter would apply upon extension.  

Premature withdrawal: 

Under the Senior Citizen Savings Scheme an individual can withdraw from their account prematurely one year after issuance of account.1.5% of penalty from the deposited amount will be deducted in case an individual closes his/her account before the 2 years of completion. 1% of the deposited amount is levied as a penalty if an individual closes his/her account after completion of 2 years.  However, no penalty will be charged if the investor dies before the maturity of his/her account. 

Quarterly disbursal: 

Account holder of the Senior Citizen Savings Scheme is entitled for a quarterly disbursement towards their accumulated amount. On the first day of April, July, October, and January the interest payment will be applied to an individual’s SCSS account. 

Method of deposit: 

If the amount is less than Rs . 1 Lakh, an individual may opt to deposit their money in cash, but if it exceeds Rs. 1 Lakh the individual has to pay via cheque.

Nomination: 

While opening an account under Senior Citizen Savings Scheme one can nominate an applicant. In case the primary account holder dies before the maturity of his/her account, the nominee will be entitled to claim the due amount.

Capital security: 

SCSS is approved by the government, and thus, money invested in it maintains truly outstanding security and assurance.

Stable returns: 

SCSS has been identified to reimburse its investors with high-interest rates as compared to other saving schemes such as bank FD, RD etc. 

Minimum and Maximum Deposit Limits

Borrowers with a minimum deposit of Rs.1000 are permitted to render a lump sum deposit in multiples of Rs.1000 . The cumulative investment on the SCSS cap is Rs.15 lakh. Although deposits may be made in cash in the SCSS accounts, this is not permitted for amounts above than Rs . 1 lakh. in case of deposit sum for Senior Citizens Savings Scheme is more than Rs. 1 lakh, it is compulsory to use a cheque or demand draft to make the deposit.  

Premature Withdrawal of SCSS

Premature withdrawal of Senior Citizen's Savings Scheme is authorized but in these situations, charges are applied depending on the period between opening and withdrawing of the account. SCSS's penalties for premature withdrawal are listed below:

• In case an exit from the scheme occurs before completion of 2 years from the date of account opening a 1.5 per cent of deposit amount deducted as a penalty
• If a withdrawal initiated between 2 years to less than 5 years from the date of account opening a 1% of SCSS deposit penalty will be deducted.

Tax implications under SCSS

Subject to Section 80C of the Income Tax Act, 1961, contributions made in a Senior Citizen Savings Scheme qualify for income tax deduction benefit up to Rs. 1.5 Lakh.

Interest earned on SCSS is taxable but TDS will be applied only if the interest amount earned is more than Rs. 50,000 per annum.  

Calculation method of SCSS

Deposits made to an account of the Senior Citizens Savings Scheme are accrued and paid out quarterly. Such reimbursements are automatically transferred to the savings account carried with the post office / bank, where this savings account has been initiated for senior citizens.

Things To Consider Before Investing In SCSS

Due to the double-dip recession of high inflation followed by falling interest rates, all senior citizens find it tough to reach all ends. The interest rates on fixed deposits provided by banks have dropped to about 6 per cent. The govt-guaranteed Senior Citizen Savings Scheme (SCSS) provides a safer solution in such a scenario. Only an individual citizen over 60 years under the FEMA (Foreign Exchange Management Act) can set up an account under the SCSS scheme. Both single or a joint account with your spouse only can be opened under SCSS. Since eligibility under this scheme is determined in regard only to the primary holder, a spouse below the age of 60 can also be nominated.

Also, the spouse can open her / his account as the primary holder under SCSS, unless the conditions are met. You can open an SCSS account through any post office or the approved branches of permitted banks. Under SCSS a HUF is not eligible to open an account. This account can be opened for those who have taken voluntary retirement or retired on superannuation between the age of 55 to 60. In such situations, the account must be activated within one month from the date from which the retirement benefits are received. The same can be accessed even after 50 years of age in the case of a retired defence services staff. Deposits made by those under the age of 60 shall be entitled to pension benefits, up to a cap of 15 lakhs. 

 

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