Senior Citizen Savings Scheme(SCSS)- Interest Rate and Benefits
Senior Citizen Savings Scheme account is a retirement benefits account that is backed by the government. Senior Citizen Savings Scheme provides a risk-free investment option with a regular income for the senior citizens of India. We can call it an apt investment choice for senior citizens above 60 years of age. If you are looking forward to investing your lump sum retirement funds and getting good returns, then the Senior Citizen Savings Scheme is meant for you.
As per budget 2023 amendments, “The maximum deposit for senior citizen saving scheme has been enhanced from Rs 15 lakhs to Rs 30 lakhs”.
What is the Senior Citizen Savings Scheme?
Senior Citizens Savings Scheme (SCSS) is a government-backed retirement benefits scheme designed to provide regular income to senior citizens. It is a safe investment option with a higher interest rate than other fixed-income options. It is a post office savings scheme specifically designed for senior citizens, providing a risk-free investment option with regular income.
Post office Senior Citizen Saving Scheme account can be opened with any post office, private bank, or public sector bank. SCSS aims to provide
- Safest option to invest lump sum retirement funds
- Regular earnings (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 features of under the Senior Citizen Saving Scheme (SCSS)?
Tax Benefit: The amount invested is eligible for tax benefits upto Rs 1.5 lakhs under section 80C. Thus offers the highest safety and tax-saving benefits.
Extended Period: Even after the lock-in of five years, if you want, you can further extend the period of your investments by 3 years.
Joint Holding Permissible: You can hold a senior citizen savings scheme account with your spouse.
Maximum and Minimum Deposit Amount: The minimum deposit amount under SCSS is Rs.1,000, and the maximum is Rs.30 lakh. These deposits can be made in multiples of Rs.1,000.
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. It is a government-backed savings scheme and provides the safest and most reliable investment options.
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 made by cheque.
Multiple Accounts: Holding more than one 5-year senior citizen saving scheme account up to the aggregate limit of Rs 30 lakhs is allowed.
Good Returns: Offers a good return with the current interest rate offered to be 8.2% compounded and paid quarterly
Transfer of Accounts: An SCSS account can be transferred from a post office to a bank and vice versa.
Premature closure: Individuals can withdraw the amount after one year of opening account. There is no charge for premature closure of the account within one year of opening it. However, a 1.5% charge will be deducted from the principal amount if the account is closed after one year but within two years of opening it. A 1% charge will be deducted from the principal amount if the account is closed after two years but within five years of opening it.
Who can invest in the Senior Citizen Saving Scheme?
The Senior Citizen Saving Scheme (SCSS) is a savings scheme designed specifically for senior citizens of India who are 60 years or above. However, some eligible individuals who have attained the age of 55 years or more but less than 60 years and have retired under a voluntary or special voluntary retirement scheme can also invest in the SCSS.
In addition, individuals who are above 50 years of age and below 60 years and have retired from defense on superannuation or under a voluntary or special voluntary retirement scheme can invest in the SCSS within one month of the date of receipt of retirement benefits.
Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) are not eligible to invest in the Senior Citizen Saving Scheme.
What is the interest rate of the Senior Citizen Savings Scheme for FY 2023-24?
The Ministry of Finance determines the interest rates under the Government of India. The finance department reviews and revises the interest rates every quarter of the financial year. The current interest rate is fixed to 8.2% p.a. This interest rate is applicable from 1st quarter of FY 23-24. The interest will be paid quarterly.
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 to your account:
Interest Rate on Senior Citizen Savings Scheme for FY 2022-23(AY 2023-24)
|Interest Period FY2022-23||When the interest is calculated||When the interest is paid/credited||Interest Rate compounded and paid quarterly|
|April-June 2022||30th June 2022||1st July 2022||7.4% p.a.|
|July-Sep 2022||30th September 2022||1st October 2022||7.4% p.a.|
|Oct-Dec 2022||31st December 2022||1st January 2023||7.6% p.a.|
|Jan-March 2023||31st March 2023||1st April 2023||8% p.a.|
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 2022-23
|Particulars||Amount Invested||Rate of Interest||Amount of interest|
|July - Sep||500,000||7.4%||9,250|
|Oct - Dec||500,000||7.6%||9,500|
|Jan - March||500,000||8%||10,000|
Note: It's better to reinvest the interest amount to earn more interest.
What documents are required to open a Senior Citizen Savings Scheme account?
There is a list of documents you need to be eligible to open an account under the senior citizen saving scheme. Documents required are:
An account opening form duly filled and signed. The form is available online as well as with the post offices.
(PAN) Permanent Account Number of the account holder.
Address proof like aadhar or telephone bills.
recent 2 passport size photographs of the depositor. In the case of a joint account, pictures of both partners.
Proof of age: any official document certifying your age like PAN, voter ID, birth certificate or senior citizen card.
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 employed, and the duration of your employment.
Document stating the date of allocation of the retirement benefit to the retiree.
How to open a Senior Citizens Savings Account?
Opening an account under SCSS 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 authorized to open a senior citizen saving scheme account.
- Fill out 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, opening date, your (depositor’s) name, address, photograph, and account tenure. It will also contain information on the deposits made and the interest rate payable after the end of every quarter.
What are the tax benefits under the Senior Citizen Savings Scheme?
The Senior Citizen Saving Scheme (SCSS) offers tax benefits under Section 80C of the Income Tax Act, 1961. The investment made in the SCSS is eligible for deduction from taxable income up to a maximum limit of Rs. 1.5 lakh in a financial year, along with other eligible investments like Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS), etc.
Additionally, the interest earned on the SCSS investment is taxable as per the investor's income tax slab. However, as the SCSS is a scheme backed by the government, the interest earned on the investment is exempt from tax deducted at source (TDS) up to Rs. 50,000 in a financial year. If the interest earned exceeds Rs. 50,000 in a financial year, TDS will be applicable on the excess amount.
It is important to note that the SCSS investment is subject to a lock-in period of 5 years, which can be extended for an additional period of 3 years.
5 years is the tenure or maturity period of the Senior Citizen Saving Scheme. If you want, you can extend the account's maturity 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:-
- Premature withdrawals are allowed only after one year of account opening.
- If you withdraw after one year but before two years of account opening, then the charges levied on the deposits will be 1.5% of the deposits.
- If you withdraw after two years from account opening, then 1% of deposits will be charged as a penalty. If the account is 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 must submit a ‘Closure form’ along with your account passbook. A duly filled ‘Extension form’ will be required to extend the account after maturity.
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.
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
- On the death of the depositor - if premature withdrawal is made due to the death of the depositor, then the principal amount is not chargeable to tax. However, tax is still levied on the interest amount received by legal heirs or nominees.
- In other cases - if the amount invested in the senior citizen savings scheme is withdrawn before maturity except in case of death, then the complete amount received i.e., principal and interest are taxable.
In case of extension - No tax benefits are available
What is the Nomination facility under SCSS?
While opening the account, you can name a nominee in the account opening form. You must appoint a nominee as it comes in 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 guardian Appointing and changing a nominee can be done ‘n’ number of times since the process is free of charge.
Fret not if you fail to appoint a nominee while opening your savings account. You also have the facility of appointing a nominee during the tenure of your account. All you need to do is, fill out 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.
FAQs on Senior Citizen Saving Scheme (SCSS)
Q- Is senior citizen savings scheme (SCSS) interest rate compounding or simple?
SCSS interest rate is compounded, which is payable quarterly.
Q- Can a senior citizen saving scheme under the post office or SBI be considered collateral for a loan?
No SCSS under the post office or SBI cannot be considered collateral for the loan.
Q- How many accounts can be opened in a single name in a senior citizen saving scheme?
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?
Yes. Just like a PPF account senior citizen savings 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 an 80C deduction under the Income Tax Act of India?
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?
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 a senior citizen saving scheme account opening?
To open SCSS account, senior citizens can visit the post office or bank branch and fill up the form. The form should be accompanied by KYC documents—age proof, address proof, identity proof, and payment instrument, i.e., a 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?
Previously, this limit was capped at Rs 15 lakh, but now, after the announcement of budget 2023, this limit has been enhanced to 30 lakhs.
Q- Are NRI senior citizens eligible to avail of senior citizen FD rates on NRO/NRE fixed deposits?
All the resident and NRI senior citizens above the age of 60 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) categories.
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