Senior Citizen Saving Scheme

What is the Senior Citizen Saving Scheme?

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.

Who is eligible to invest in this scheme?

• The minimum investment age has been set at 60 by the Government.
• You are also eligible if you are between 55 to 60 years old and have opted for voluntary retirement or company retirement. Under this provision, investment must be done within one month of receiving retirement benefits.
• 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

What is the investment limit under this scheme?

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.

What documents are required to open an account under the Senior Citizen Savings Scheme?

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

• An account opening form duly filled and signed. The form is available online as well as with the post offices. You can access the online form from the link mentioned below: https://www.indiapost.gov.in/VAS/DOP_PDFFiles/form/ApplicationFormForOpeningSCSS.pdf
• 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

Step-by-step process to open an account under the Senior Citizen Saving Scheme:

Opening an account under this scheme is very simple. Gather the required documents and follow the process to open an account:

• Visit any post office or bank which has been authorized to open an SCSS account
• Fill the account opening form, link to which has been mentioned above. You can also acquire the same form from any post office
• 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.

How much interest is paid on the investments under this scheme?

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:

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

Maturity period and 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.

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.

Tax exemptions under this 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.

Nomination facility under this scheme:

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

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. You can access the form from:
  https://www.incometaxindia.gov.in/Forms/SENIOR%20CITIZENS%20SAVINGS%20SCHEME%20RULES,%202004/103120000000014318.pdf
• 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 offers 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:
  1. Punjab National Bank
  2. Indiana Bank
  3. Punjab National Bank
  4. State Bank of India
  5. Syndicate Bank
  6. Canara Bank
  7. UCO Bank
  8. Allahabad Bank
  9. Bank of Maharashtra
  10. State Bank of Mysore/Patiala/Bikaner/Jaipur/Travancore/Hyderabad
  11. IDBI Bank
  12. Vijaya Bank
  13. United Bank of India
  14. Indian Overseas Bank
  15. Union Bank of India
  16. Dena Bank
  17. Central Bank of India
  18. Corporation Bank
  19. Bank of India
  20. Bank of Baroda