Senior Citizen Saving Scheme (SCSS) 2023: Interest Rates, Eligibility, Benefits
In retirement, most people desire a stable income with minimal risk to the principal amount since they do not have any active earnings and depend on their earned corpus.
To address the financial needs of senior citizens in the country, the Government of India launched a saving scheme for senior citizens known as SCSS (Senior Citizen Saving Scheme). The plan is designed exclusively for seniors above 60 or who have attained the age of 55 or more but less than 60 and have retired under superannuation.
The Senior Citizen Saving Scheme offers attractive interest rates with fixed returns. It allows you to efficiently safeguard your financial future and those of your near and dear ones. This article will highlight the Senior Citizen Saving scheme, helping you understand how to invest in it, the eligibility criteria, its prime features, and more.
What is Senior Citizens Savings Scheme?
The Senior Citizen Savings Scheme (SCSS) is a government-backed scheme to give guaranteed fixed returns on a one-time investment to retired senior citizens. It was announced in 2004 to ensure a secure and steady income stream for the country’s elderly.
Senior citizens can deposit a one-time amount in their Senior Citizen Savings Scheme account. They earn a fixed interest rate on the deposit, and the interest amount is paid out every quarter. This periodic fixed-interest payment guarantees the depositor’s regular income. The Senior Citizen Saving Scheme interest rate is reviewed every quarter by the government and updated periodically. The principal amount deposited is secure and can be redeemed at maturity after 5 years.
How Does SCSS work?
With respect to an overview of the Senior Citizen Saving Scheme, here are some of the particulars that paint a picture of the SCS scheme:
- Security and Returns: As a government-endorsed initiative, SCSS assures both the safety of your principal amount and a guaranteed return upon maturity, making it a reliable investment avenue for senior citizens.
- Interest Dynamics: Subscribers benefit from a competitive interest rate set by the government. This interest accrues quarterly and is credited to the investor’s account at the beginning of April, July, October, and January, ensuring a steady income flow.
- Investment Modes: For deposits below Rs.1 lakh, cash payments are accepted. However, for amounts exceeding this, the investment must be made via cheque.
- Scheme Duration: SCSS has an initial tenure of 5 years. If desired, investors have the flexibility to extend this period by an additional 3 years, provided they submit the requisite application in the scheme’s fourth year.
- Nomination Facility: For added convenience, investors have the option to nominate beneficiaries either during the account’s inception or post its creation.
- Account Flexibility: Not limited to a single account, individuals can diversify their investments across multiple SCSS accounts or even opt for a joint account alongside their spouse.
- Investment Caps: While the scheme welcomes investments as low as Rs.1,000, there’s a ceiling limit set at Rs.30 lakh. Further, all deposits must adhere to the Rs.1,000 multiple rule.
- Account Portability: Understanding the dynamic needs of investors, SCSS accounts are transferable between post offices and banks, ensuring seamless banking transitions.
- Early Exit: Should circumstances demand, investors can opt for premature withdrawal post the first year of account initiation. Although no penalties apply within the first year, a 1.5% charge on the principal is levied for exits between one to two years, and a 1% charge for exits post the second year up to the fifth year.
Features of the Senior Citizens Savings Scheme
Following are the features of the SCSS that you must know before investing.
- Eligibility: Indian citizens above the age of 60 years are eligible to apply for an account under the Senior Citizens Savings Scheme (SCSS). People aged 55-60 who have taken voluntary retirement or those who have retired on superannuation can also avail of the SCSS.
- Minimum deposit: The minimum amount you can deposit in an SCSS account is ₹1,000, and the maximum amount is capped at ₹30 lakhs.
- Mode of Deposit: You can deposit cash into your SCSS Scheme account if the amount is ₹1 lakh or less. You must pay through cheque to deposit more than ₹1 lakh.
- Interest: The interest paid under this scheme is compounded and transferred to your savings account every quarter. In the first instance, it is paid on 31st March, 30th September, and 31st December; the interest is paid on 31st March, 30th June, and 30th September.
- Tenure: The tenure of the SCSS scheme is 5 years. You can extend the term once by three years. This extension can be made only within one year of the maturity of the SCSS account.
- Nomination: You can add a nominee to your SCSS account during account creation or afterwards. The nominee will have the authority to withdraw the SCSS amount prematurely in the event of the account holder’s death.
- Transfer: You can transfer your SCSS account from one bank or post office branch to another. You can also share your account from a bank to a post office or vice versa.
- Premature withdrawal: You can consider a premature withdrawal after one year from the day you opened the account, but you will need to pay a penalty. A penalty of 1.5% of the total deposit is charged for early withdrawal after one year of deposit and before completing two years. After two years, the penalty is 1% of the total value of the deposit. There is no penalty or restriction on premature withdrawal during the three years of extension post-maturity.
- The number of accounts: There is no restriction on the number of accounts you can open under SCSS. The only limitation is that you can make only a one-time deposit in every account opened under SCSS. Also, the total balance in all the SCSS accounts must not exceed the maximum permissible limit of ₹30 lakhs.
Benefits of Investing in SCSS
- A higher interest payout as compared to PPF and savings accounts.
- Risk-free fixed returns guarantee a steady income stream.
- Security of capital.
- It is convenient to open and manage the account.
- The account automatically transfers to the second account holder in the event of the death of the first holder. The nominee or legal heir can redeem the amount if there is no second holder.
- Tax benefits on both deposit and interest income.
Senior Citizen Savings Scheme Interest Rate
The following are the interest rate criteria under the SCSS scheme.
- The government declares the interest rate payable under SCSS quarterly. It is subject to revision occasionally, depending on several factors, such as the prevalent rates in the market, inflation level, etc.
- The current interest rate is 8.2% annually for the July-September fiscal quarter of 2023–24.
- Interest remains fixed for the tenure of the scheme until maturity. Even if the rates are revised in the interim, it applies only to new subscriptions. Existing deposits continue to enjoy the prevailing rate during account creation.
- The interest is disbursed every quarter in your savings account.
Documents Required to Open SCSS Account
The following documents are required to open an SCSS account:
- Form A: SCSS account opening form is available at any post office or designated bank; you can also download it online.
- Two passport-sized photographs.
- Documents verifying your age.
- Identity proof documents. (PAN Card, Ration Card, Aadhar Card)
- Address proof documents (passport, Voter ID, phone bill, etc.).
- In the case of retirees, a certificate from the employer stating.
- The retirement was on superannuation or otherwise.
- Retirement benefits
- Employment held (designation)
- The period of employment.
How to Fill the Senior Citizen Saving Scheme Form- Post Office?
To open an account with a post office, you can download the Senior Citizen Saving Scheme form online and submit the filled-out copy at the post office. Alternatively, you can request the post office for the SCSS form. On the form, you need to provide:
- Post Office branch name & address.
- Your Post office account number in case you hold an account.
- You need to select the SCSS scheme from the list of other schemes.
- Select the account type.
- Select the mode of holding as Single/Joint/Either or Survivor.
- Fill in your name and personal details.
- Mention the deposit amount clearly in words & figures.
- Tick the documents to be submitted from the list of documents.
- Add nominee details and contact information.
- Secure the sign of all holders in the form.
- After filling in all details, you must attach your KYC document copies and furnish a cheque or cash to open the account.
How to Open a Senior Citizen Savings Account?
You can open a Senior Citizen Savings account at any post office or select bank branches. The account opening process is simple and hassle-free.
- Visit a post office or authorised bank where you have a savings account.
- Request a Senior Citizen Saving Scheme form and fill in the relevant details. Alternatively, you may download the form from the India Post or the bank website to open the account.
- Attach the required documents while submitting the form, with the deposit amount in cheque or cash.
- Your application will be processed by the bank or post office personnel.
- Once the payment is processed, your Senior Citizen Saving Scheme (SCSS) account will be created.
Eligibility to open a SCSS Account
The eligibility criteria for opening a Senior Citizen Deposit Scheme account are as follows:
- Any Indian citizen aged 60 years or above can invest in a senior citizen savings scheme. However, unfortunately, Hindu Undivided Families (HUFs), Persons of Indian Origin, and Non-Resident Indians (NRIs) cannot invest in the scheme.
- Other than these, the following people can invest in the SCSS scheme, provided they do so within one month of receiving the retirement benefits:
- People aged 55-60 can invest if they have retired as per the Voluntary Retirement Scheme.
- People above 55 years who retired before the announcement of the SCSS scheme can also invest.
- Retired defence personnel in the age group of 50-60 years can invest in this scheme.
- You can also open a joint account with your spouse, the second account holder. The second account holder need not be a senior citizen. You cannot, however, open a joint SCSS account with anyone other than your spouse.
Tax on SCSS
A deposit of up to ₹1.5 lakhs in a Senior Citizen Savings Scheme account is exempt from paying tax as per section 80C of the Income Tax Act. Interest income from SCSS is taxed in the following manner:
- If the primary account holder is aged less than 60 years, you’re exempt from paying taxes for up to ₹40,000 of interest income as per section 80 TTB. Beyond this amount, you will be taxed on your interest income per your income tax slab. You can prevent a deduction of TDS up to the exemption limit and avoid the hassle of filing for refunds later by submitting Form 15G annually to the branch.
- If the primary account holder is aged over 60 years, you’re exempt from paying taxes for up to ₹50,000 of interest income. Beyond this permissible limit, the income is taxed per your income tax slab. You can submit Form 15H annually to the branch to prevent TDS deduction and the hassle of filing for refunds later.
Also, a TDS of 20% is deducted for both the above categories of investors if an incorrect PAN is submitted. If you are eligible for refunds due to the above exemptions, you can apply by filing the ITR.
Furthermore, senior citizens aged 75 and above are exempt from filing income taxes if they receive income only from pension and interest payments.
Disadvantages to Investing in SCSS
Despite being an excellent instrument to guarantee returns post-retirement, there are Senior Citizen Savings Scheme has its shortcomings:
- Lower rate of return compared to many market-linked instruments.
- Penalty on premature withdrawal in case of emergency.
- You cannot open this account online.
List of Banks that Offer SCSS
Currently, the following banks are designated to open an SCSS account:
- State Bank Of India.
- ICICI Bank.
- IDBI Bank.
- Indian Bank.
- Indian Overseas Bank.
- Canara Bank.
- Punjab National Bank.
- Bank Of Maharashtra.
- Bank Of Baroda.
- UCO Bank.
- Union Bank Of India.
- Central Bank Of India.
SCSS is an excellent investment option for senior citizens looking for good interest income, the safety of principal, and liquidity. Moreover, quarterly interest payments ensure a regular income for retirees. Hence, the Senior Citizens Savings Scheme is a wise choice if you or a senior family member are searching for ways to create a stable income post-retirement.
Frequently Asked Questions
Can an SCSS account be extended?
Yes, you can extend the tenure of your SCSS account by three years, but only upon maturity; the extension is allowed only once.
Does SCSS offer a joint account facility?
Yes, you can open your SCSS account jointly with your spouse. However, opening an SCSS account with anyone else is not allowed. The primary account holder will have to be a senior citizen, and there is no age limit for the second account holder.
Can I invest Rs 30 lakhs in SCSS?
The maximum limit for investment in SCSS is Rs 15 lakhs or retirement benefits (whichever is lower) per individual. If the deposit amount is more than the ceiling specified, a refund of the excess deposit will be made to the account holder.
Can I deposit multiple times in SCSS?
Once you open a Senior Citizen Deposit Scheme account, you cannot make another deposit in the same account. However, you can open another deposit account if the total investment amount is Rs 15 lakhs in all the accounts.
Is interest in SCSS fixed for five years?
Once the SCSS deposit is created, the interest rate applicable remains constant, even if you decide to extend the account tenure by 3 years post-maturity.
Can the SCSS account be transferred?
You can transfer your SCSS account to a different post office or bank branch. You have to submit a duly filled Form-G along with your passbook. The transferor bank approves this request, which transfers the balance to the transferee account. You have to pay a fee of Rs. 5 per lakh for the deposit transferred for the first time and Rs. 10 per lakh transferred from the next time onwards.
Is the joint account facility available under SCSS?
Yes, the joint account facility under SCSS is available, but only with the spouse.
How can I open a senior citizen savings schemes account online?
While you can’t initiate an SCSS account online directly, many banks allow online applications to streamline the process, followed by in-branch verification.
How many accounts can be opened under SCSS?
An individual can open multiple SCSS accounts, either singly or jointly with their spouse.
What is the mode of deposit if the deposit amount is Rs. 15 Lakh?
For a deposit amount of Rs. 15 Lakh in SCSS, the mode of deposit should be via cheque.
Can I take a loan against my SCSS account?
No, loans cannot be availed against deposits held in the SCSS account.