This scheme is for anyone who is 60 years old or above. It is one of the most popular savings schemes for senior citizens. This scheme qualifies for tax exemptions which minimize the tax outflow of senior citizens. Since it is a government-backed scheme, the risk of losing your investments is almost negligible.
There is no limit on the numbers of account that can be maintained by senior citizens. You can either invest in a single account under your name or a joint account with your spouse. Joint depositor under Joint account cannot be a son or daughter, it has to be the spouse. But the total sum of money in all the accounts should not exceed the maximum limit. A maximum of Rs. 15 lakhs can be invested in this scheme but all in the denominations of Rs. 1,000. You have to make sure that the amount you are investing is less than what you received upon your retirement. This means that you can either invest Rs. 15 lakhs in this scheme or the money you received as your retirement benefit, whichever is lower in value.
If the investment amount is below Rs. 1 lakh then it can be opened by cash. If the investment amount is greater than Rs. 1 lakh, then the investment needs to be done via cheque. The investment date for cheque deposits is determined when the amount is reflected in the government’s account.
There is a list of documents that you need to be eligible to open an account under the SCSS. Documents required are:
Opening an account under this scheme is very simple. Gather the required documents and follow the process to open an account:
Once your account is opened, you will be given your account’s ‘passbook’. Your passbook will include your account number, account opening date, your (depositor’s) name, your address, your photograph, and your account’s tenure. It will also contain information on the deposits made along with interest rate which is payable after the end of every quarter.
The interest rates are determined by the Ministry of Finance, under the Government of India. The interest rates are reviewed and revised every quarter of the financial year by the finance department. As per 1st January 2019, the interest rate was fixed at 8.7% per annum. The interest rate is fixed on the investment according to the rate fixed for that quarter. Interest rate once fixed cannot be changed according to the other revised rates. Interest rates for the new investments will be based on the rates determined for that quarter. If you are extending your account post-maturity, then the interest is prevailing at that time will be applicable
The interest rate is calculated and paid on different dates. Check the table below to know when your returns will be credited in your account:
|When the interest is calculated||When the interest is credited|
|31st March||1st April|
|30th June||1st July|
|30th September||1st October|
|31st December||1st January|
Before making an investment either at a post office or bank, you need to have functional savings account to receive returns after every quarter.
5 years is the tenure or maturity period of Senior Citizen Saving Scheme. If you want, you can extend the maturity of the account for 3 more years but this needs to be done before the account reaches maturity. Under this scheme, premature withdrawals are allowed but they come with certain conditions like:
Upon maturity, you can either close your account and receive the maturity amount or you can extend the tenure of your account by 3 more years. If you wish to close your account, you will have to submit a ‘Closure form’ along with your account passbook. For the extension of the account after maturity, a duly filled ‘Extension form’ will be required.
You can find the ‘closure form’ for an account under SCSS below: https://www.indiapost.gov.in/VAS/DOP_PDFFiles/form/FormforClosingSCSS.pdf
You can find the account ‘extension form’ at this link: https://www.indiapost.gov.in/VAS/DOP_PDFFiles/form/ApplicationFormforExtensionofSCSS.pdf
If the depositor doesn’t take any action upon maturity, then the deposits will continue to earn interest at the rate determined for the post office savings scheme.
As per section 80C of the Income Tax Act, tax deductions are extended to investments made under the Senior Citizen Savings Scheme. However, these deductions are not infinite and adhere to the upper limit of Rs. 1.5 lakhs per annum. No additional benefits are extended if the account is extended post the maturity period. If the amount is withdrawn prematurely, you will no longer be able to avail the tax benefits. However, this will not be retrospective in nature and your previous returns will not be affected. Financial experts suggest that instead of investing the entire amount at once, invest each year to avail maximum tax benefits.
In case of premature withdrawals, the principal amount along with the interest accumulated will be added in the 'gross total income' of the individual and becomes taxable. In case the premature withdrawals are made due to the death of the depositor, the principal amount withdrawn by the nominee/legal heir is exempted from the taxes. However, taxes will be levied on the interest earned on the deposits after the death of the depositor.
The interest which is generated on the deposits is taxable. But senior citizens can claim deductions on this as well. According to section 80TTB of the Income Tax Act, you can save up to Rs. 50,000 in one financial year. TDS (Tax Deducted at Source) is applicable on an interest amount above Rs 50,000 per annum.
While opening the account, you can name a nominee in the account opening form. It is important that you are appointing a nominee as it comes handy in a dire situation like the sudden demise of the depositor. You can also appoint a ‘minor’ as your nominee. For appointing a minor as your nominee, you will need to submit the birth certificate and the details of the minor’s guardians. Appointing and changing nominee can be done ‘n’ number of times since the process is free of charge.
If you fail to appoint a nominee while opening your savings account, then fret not. You also have the facility of appointing a nominee during the tenure of your account. All you need to do is, fill the ‘nomination form’ and submit it where you have your savings account. In case of nominating a nominee for a joint account, consent of all the depositors will be required in the form of signatures on the nomination form.
The nomination form is available at this link: https://www.indiapost.gov.in/VAS/DOP_PDFFiles/form/FormforNominationofSCSS.pdf
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