Senior Citizen Savings Scheme Interest Rate
Financial freedom is crucial in enjoying your retirement without worrying about finances, cash flow, or expenses. Hence, it is vital to deploy your savings wisely into safe investments that give you a regular income. The Senior Citizens Savings Scheme, also known as SCSS, is one such instrument.
Launched in 2004 by the Government of India, the Senior Citizen Savings Scheme aims to help senior citizens have a regular flow of income. Senior citizens resident in India can invest a lump sum in the scheme, individually or jointly, and get access to regular income along with tax benefits.
The Senior Citizen Saving Scheme is an ideal investment for retirees to earn guaranteed interest without risk to the principal. The Senior Citizen Savings Scheme interest rate is higher than the interest rate of fixed deposits and other instruments. The best part is that the scheme offers guaranteed interest payouts, which you receive quarterly. In the sections below, let us learn more about the SCSS rate of interest, the scheme’s key features, and more.
SCSS Rate of Interest
The government revises the Senior Citizens Savings Scheme interest rate every quarter. Here are a few points about the SCSS rate of interest worth noting:
- The SCSS’s current interest rate for the quarter ending December 2022 is 7.6% per annum. It has increased from the previous interest rate of 7.4%.
- The interest is paid quarterly, from the date of deposit to 31st March/30th June/30th September/31st December on the first working day of April/July/October/January.
- The SCSS interest rate during the tenure of the deposit does not change, even if the rates are revised.
- If the interest payable every quarter is not claimed by an account holder, such interest does not earn additional interest. Hence, there is no benefit of compounding in this scheme.
- If the earned interest is in a fraction of a rupee, it is rounded off to the nearest rupee. For this purpose, any amount of fifty paisa or more is treated as one rupee and any amount less than fifty paisa is ignored.
- In the event the depositor does not close or extend the account (i.e. within 1 year of the account opening date but before the maturity period of 5 years) by requesting for a period of three years, the account will be classified as matured, and post maturity interest amount at the prevailing rate to a post office saving deposit will be payable only for the period beyond the maturity date but before the closure of the account.
Features of Senior Citizen Savings Scheme
Let us look at the key features of the scheme:
- The SCSS scheme is for senior citizens above the age of 60.
- Individuals aged 55-60 who have taken a VRS or Superannuation can also invest in the scheme. However, you must invest within one month of receiving the retirement benefits.
- Defence personnel in the age bracket 50-60 are eligible to invest their retirement fund into the scheme. However, the SCSS deposit must be made within a month of retirement.
- You can add your spouse as a joint holder; no other family member or person is eligible to be enlisted as a joint holder.
- In case of a joint account, the age of the first account holder shall be considered to determine the eligibility for the account and there shall be no age-limit for the second applicant.
- Only Resident Indians can invest in the scheme; NRIs or HUFs cannot invest in SCSS.
- The minimum amount you can invest in SCSS per year is Rs 1,000, and the maximum deposit limit is Rs 15,00,000 .
- You can open multiple accounts, but the collective deposit amount across all accounts should not exceed Rs 15,00,000.
- The scheme’s tenure is five years and can be extended by another three years after maturity.
- The interest rate remains unchanged for five years, irrespective of any revision. If the deposit tenure is extended, the latest SCSS interest rate will be applicable for the next three years.
Account Opening Process
SCSS accounts can be opened at a post office or designated bank branches. You can fill out Form 1 and submit your age proof, identity & address proof along with cash or cheque (more than 1 lakh).
- You can make partial withdrawals after one year from the scheme. A charge of 1.5% will be deducted as a penalty if the account is closed before two years.
- However, if the account is closed after two years, a penal cost of 1% is deducted.
- No penalty deduction shall be made in case of premature closure of an account at any time due to the death of a depositor.
- In case an SCSS account has been extended once, the account holder can close the account without penalty after one year from the date of extension
- Multiple withdrawals from an account is not allowed.
- The contributions to SCSS are tax deductible under Section 80C, up to a limit of Rs. 1,50,000.
- The interest earned from SCSS is added to the interest income in your overall earnings.
- According to section 80TTB of the Income Tax Act, you can save up to Rs. 50,000 on interest earned in one FY. TDS (Tax Deducted at Source) is deducted when the annual interest amount exceeds Rs.10,000.
- In case of premature withdrawals, the principal amount along with the interest accumulated will be added to the ‘gross total income of the individual and becomes taxable.
- In case premature withdrawals are made due to the death of the depositor, the principal amount withdrawn by the nominee is exempted from the taxes. However, taxes will be levied on the interest earned.
The current SCSS interest rate is higher than many other savings schemes or fixed deposits. With government backing, SCSS is one of the best fixed-income, low-risk investment options for senior citizens. It ensures that you continue earning a certain amount well into your retirement.
Can I add my spouse as a joint holder if she is not a senior citizen?
Yes, a joint holder can be added; only the primary holder must be a senior citizen or VRS beneficiary per SCSS rules.
How can I claim the interest on my SCSS account?
The accrued interest is directly credited into your savings bank or post-office account. Standard account statements will be provided to you via SMS or email.
Is the SCSS rate of interest fixed for five years?
The Senior Citizens Savings Scheme is a deposit scheme with a tenure of five years. Interests are paid quarterly, and you, with a joint holder, can invest a maximum of Rs. 15 lakhs in the scheme. Upon maturity, you may extend the plan by another three years. However, the interest rate remains unchanged for the first five years.
Can I close my SCSS account within a year of the account opening?
Premature withdrawals are allowed only after one year. However, a penalty of 1.5 % is charged if you withdraw the corpus between the first and second years. After two years, a 1% penalty will be applicable.