Senior Citizen Savings Scheme(SCSS)- Interest Rate and Benefits

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)

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

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.

KYC documents.

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.

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 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.
2. 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.