What is the Senior Citizen Savings Scheme?

5 Year Senior Citizen Saving Scheme is a safest tax saving investment option for senior citizens aged 60 years old or above. It’s a government-backed scheme, to provide security in the old age.Hence, the risk of losing your investments is almost negligible. As the name suggests the original maturity period is five years which can further be extended for 3 years.

The 5 Year Senior Citizen Saving Scheme account can be opened with any post office, private banks or public sector banks. It aims to provide

  • Safest option to invest lump sum retirement funds
  • Regular earrings (quarterly) to senior citizens after retirement

Investing under this scheme also provides tax deduction under section 80 C of the income tax.To know the documents required, tax benefits, opening procedure etc read further.


What are the benefits of investing in 5 year Senior Citizen Saving Scheme (SCSS)?

5 year Senior Citizen Saving Scheme (SCSS) offers following benefits to its investors :
  • Tax Benefit: Amount invested is eligible for tax benefit upto Rs 1.5 lakhs under section 80C
  • Extended Period: Even after the lock in of five year if you want you can further extend the time period of your investments by 3 years
  • Joint Holding Permissible: You can hold senior citizen saving scheme account with your spouse
  • Nominees: You can have one or more nominees to your senior citizen saving scheme account
  • Lump Sum Investment: Gives you a secure option to invest your lump sum money received at the time of retirement.So, it’s one time payment.
  • Mode of Deposit: Deposit can also be made in cash or DD. Electronic transfers are not compulsory. However, a deposit above 1 lakh has to be done by cheque.
  • Multiple Accounts: Holding more than one 5 year senior citizen saving scheme account upto the aggregate limit of Rs 15 lakh is allowed.
  • Good Returns: Offers a good return with the current interest rate offered being 8.6% compounded and paid quarterly

Who can invest in SCSS?

The minimum investment age for individuals has been set at 60 by the Government.

Early retiree’s can also invest between 55 to 60 years of age if they have opted for voluntary retirement or company retirement. Under this provision, investment must be done within one month of receiving retirement benefits.
Please note that NRIs and HUF (Hindu Undivided Family) are barred from investing in this scheme.50 years or above Defence personnel can also invest in this scheme


How much interest is paid under SCSS?

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. For the quarter ending 31st March 2020, the interest rate has been fixed at 8.6% p.a. The interest rate is fixed on the investment according to the rate fixed for that quarter. If you are extending your account post-maturity, then the interest 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:

Interest Rate on Senior Citizen Savings Scheme for FY 2019-20(AY 2020-21)
Interest Period FY 2019-20 When the interest is calculated When the interest is paid/credited Interest Rate compounded and paid quarterly
April-June 2019 30th June 2019 1st July 2019 8.7% p.a.
July-Sep 2019 30th September 2019 1st October 2019 8.6% p.a.
Oct-Dec 2019 31st December 2019 1st January 2020 8.6% p.a.
Jan-March 2020 31st March 2020 1st April 2020 8.6% p.a.

Example for interest rate calculation on SCSS

Let us consider an example to understand the interest calculations better :

Amount Invested in senior citizen saving scheme - Rs 5,00,000
Calculate interest on senior citizen saving scheme for FY 2019-20
Particulars Amount Invested Rate of Interest Amount of interest
April -June 500,000 8.70% 10,875
July - Sep 500,000 8.60% 10,750
Oct - Dec 500,000 8.60% 10,750
Jan - March 500,000 8.60% 10,750
Total 43,125

Note: It's better to reinvest interest amount to earn more interest.


What is the investment limit under this scheme?

Let us understand the various investment limits under Senior Citizen Saving Scheme one by one

  • Minimum Amount: The minimum investment required is Rs 1000 and further in multiples thereof.
  • Maximum Amount: 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.
  • Number of Accounts: There is no limit on the number of accounts that can be maintained by a senior citizen. 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.
  • Investment in Cash: 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.

Please note that before making an investment either at a post office or bank, you need to have a functional savings account to receive returns after every quarter.


How to open a 5 year Senior Citizens Savings Account?

Opening an account under this scheme is very simple. Gather the required documents and follow the Step-by-step process to open an account under the 5 year Senior Citizen Saving Scheme:

  • Visit any post office or bank which has been authorized to open a senior citizen saving scheme account.
  • Fill the account opening form.
  • Collect all the documents, self-attest them, and submit them along with the filled account opening form
  • 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.

What documents are required to open an SCSS account?

There is a list of documents that you need to be eligible to open an account under the senior citizen saving scheme. Documents required are:

SCSS opening form 1
SCSS opening form 2
  • An account opening form duly filled and signed. The form is available online as well as with the post offices.
  • Permanent Account Number of the account holder.
  • Address proof.
  • A recent photograph of the depositor. In case of a joint account, pictures of both partners.
  • KYC documents.
  • Proof of age: any official document certifying your age.
  • In case of retirement from service, a certificate from your employer is needed. The certificate should contain the following information:- the reason for retirement, benefits you are entitled to post-retirement, the position held while employment, and the duration of your employment.
  • Document stating the date of allocation of the retirement benefit to the retiree.

What are tax exemptions under SCSS - on Maturity, premature withdrawal and extension?

The various tax deductions and benefits are available under the 5 year Senior Citizen Savings Scheme

Tax Deduction Tax Benefit Particulars
Section 80C Upto Rs 1.5 lakh Tax benefit for investments made under the Senior Citizen Savings Scheme.*
Section 80TTB Upto Rs 50,000 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 annual interest amount exceeds Rs.10,000.
Notes*
  • At the time of maturity - the investment made is exempt in the year of investment but withdrawals are taxable.
  • At the time of premature withdrawal
    1. On death of depositor - if premature withdrawal is made due to death of depositor then principal amount is not chargeable to tax but tax is still levied on interest amount received by legal heirs or nominee.
    2. In other cases - if the amount invested in senior citizen savings scheme is withdrawn before maturity except in case of death then, the complete amount received i.e. principal and interest is taxable.
  • In case of extension - No tax benefits are available

What is the tax treatment in case of premature withdrawals?

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.


What is the Maturity period? What happens in case of premature withdrawals?

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:

  • Premature withdrawals are allowed only after one year of account opening.
  • If you are withdrawing after one year but before two years of account opening, then the charges levied on the deposits will be 1.5%.
  • In case you are withdrawing after two years from account opening, then 1% charges will be levied on the deposits.
  • If the account is being closed prematurely due to the death of the depositor, then no charges will be levied on the deposits.

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.

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.


What is the Nomination facility under SCSS?

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.


Other important information regarding the Senior Citizen Savings Scheme

You have the facility of transferring your account from one post office/bank to another post office/bank. All you need to do is fill the ‘account transfer form’ and submit it where you have your savings account. You will be charged a nominal amount to fulfill this transfer facility.
It is important that you are furnishing correct information in the form while opening an account. If false information is discovered by the officials, your account will be rendered inoperative immediately. Your investment amount will be refunded to you but after deducting the accumulated interest already credited to your account.
You can open your account at any post office across India. Apart from the post office, the Government authorized 24 public sector banks and 1 private bank to offer the benefits of Senior Citizen Saving Scheme. ICICI bank is the only private limited bank which offers this facility. Under public sector banks, these banks have the authority to open accounts under SCSS:

  • Punjab National Bank
  • Indiana Bank
  • Punjab National Bank
  • State Bank of India
  • Syndicate Bank
  • Canara Bank
  • UCO Bank
  • Allahabad Bank
  • Bank of Maharashtra
  • State Bank of Mysore / Patiala / Bikaner / Jaipur / Travancore / Hyderabad
  • IDBI Bank
  • Vijaya Bank
  • United Bank of India
  • Indian Overseas Bank
  • Union Bank of India
  • Dena Bank
  • Central Bank of India
  • Corporation Bank
  • Bank of India
  • Bank of Baroda

Senior Citizen Saving Scheme


FAQ's on Senior Citizen Saving Scheme (SCSS)

Q- Is senior citizen savings scheme (SCSS) interest rate compounding or simple?

Ans. SCSS interest rate is compounded which is payable quarterly.


Q- Can senior citizen saving scheme under post office or SBI be considered as collateral for loan?

Ans. No SCSS under post office or SBI cannot be considered as collateral for loan.


Q- How many accounts can be opened in single name in senior citizen saving scheme?

Ans. A senior citizen can invest in this scheme by opening either an individual or a joint (along with the spouse) account.You can invest in any number of SCSS accounts limiting to threshold adding all the accounts.


Q- Can a senior citizen saving scheme A/C be transferred from one branch to another of the same bank?

Ans. Yes. Just like PPF account senior citizen saving scheme account can be transferred from one branch to another branch of the same bank, one bank to another bank and bank to post office and vice versa is also possible.


Q- Can a senior citizen invest Rs. 150000 in the Senior Citizen Savings Scheme (SCSS) every year to get 80C deduction under the Income Tax Act of India?

Ans. An amount deposited under the Senior Citizens Savings Scheme Rules, 2004 is eligible for deduction of Rs.1.50 lakhs under section 80C of the Income Tax Act, 1961.


Q- Is an extension of investment under the post office senior citizen savings scheme eligible for an 80C benefit on extension?

Ans. Initial maturity term of investment is 5 years however this can be further extended to another 3 years.


Q- Can I pay from a third party account for senior citizen saving scheme account opening?

Ans. To open a SCSS account, senior citizens can visit the post office or bank branch and fill up the form. The form should be accompanied with KYC documents—age proof, address proof, identity proof and payment instrument i.e. cheque for the deposit amount. Also, the nomination can be made while opening the account or at a later date.


Q- If someone has already invested Rs.15 lakhs in the Senior Citizen Saving Scheme in the State Bank of India, can he/she apply for ? 15 lakhs more in the Senior Citizen Saving Scheme in the post office?

Ans. An individual can invest a maximum amount of Rs 15 lakhs, individually or jointly in an SCSS account (in multiples of Rs 1,000). The amount invested i cannot exceed the money received on retirement. Hence, the individual can invest lower of Rs 15 lakhs or the amount received as a retirement benefit,. The account for an amount below Rs 1 lakh in cash and for an amount exceeding Rs 1 lakh by cheque


Q- Are NRI senior citizens eligible to avail senior citizen FD rates on NRO/NRE fixed deposits?

Ans. All the resident and NRI senior citizens above the age of 60 years are eligible for fixed deposit schemes offered by the banks and post offices. NRI senior citizens can open a fixed deposit under the non-resident external (NRE) and non-resident Ordinary (NRO) category.


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CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.