Everything you need to know about Senior Citizens Savings Scheme (SCSS)
The Senior Citizen Savings Scheme is a government-backed fixed deposit scheme for senior citizens. It allows them to gain benefits post-retirement. The scheme provides a steady flow of income along with tax benefits. This makes SCSS one of the safest and most sought-after investment opportunities.
What are the eligibility criteria?
To apply for the Senior Citizen Savings Scheme, you must come under any of the following categories:
- An individual over the age of 60 years.
- Retired defense personnel over the age of 50 years.
- An individual in the age bracket of 55-60 years has opted for VRS.
It is important to note that this scheme is not available for HUFs and NRIs.
How do you benefit from SCSS?
Safe alternative
Since it is a government-funded scheme, it is reliable and safe. It also implies guaranteed and steady returns. The account holders earn interest every quarter. This amount gets added to the investment, which further increases the returns.
Tax benefits
Exemption under Section 80C is available for the investment. The maximum limit for deduction here is Rs. 1,50,000. However, the interest earned is fully taxable, calculated as per the applicable tax slab. If more than Rs. 50,000 is earned as interest, then TDS is applicable on it.
Higher returns
SCSS provides interest at 7.4% per annum. This rate is higher than that applicable on alternate short-term investment opportunities, such as FDs and savings accounts.
Simple process
Opening a Senior CItizen Savings account is a straightforward process. It comes with no complicated documentation and paperwork.
How to open a Senior Citizen Savings Account?
The process
A Senior Citizen Savings account can be opened in any authorized bank. The process is hassle-free and uncomplicated. Opening an account in a public or private bank gives you 24*7 customer support. Similarly, this fixed deposit for senior citizens can be opened in any post office. You can also open a joint account, but only with your spouse.
To opt for the Senior Citizen Savings Scheme, you need to fill out an account opening form. The facility to open this account online is not available as of now. You must visit your preferred bank or post office for the same. The following self-attested documents are required:
- Identity proof such as Aadhar Card, Passport, or PAN Card.
- Proof of address, which can again be your Aadhar Card.
- Proof of age — this includes your 10th certificate, Aadhar Card, birth certificate, voted ID, etc.
- Your KYC documents.
- 2 recent passport-size photographs.
Amount of investment
To open a Senior Citizen Savings account, the minimum amount required is Rs. 1000. You can invest any amount as per your plan and convenience. However, the amount invested should be less than what you have received at the time of retirement. There is a maximum limit of Rs. 15 lakh on the amount that can be deposited.
The amount must be deposited in one installment when opening the account. You can pay cash for an amount less than Rs. 1 lakh. For any higher amount, a cheque or demand draft must be issued. This amount is kept under the scheme and regular interest is earned on it.
Interest rate applicable
The current interest rate applicable on the SCSS is 7.4%. This is much higher as compared to what an ordinary savings account or fixed deposit would provide. The interest rate is announced every quarter and is regulated by the Ministry of Finance.
Tenure of the scheme
The Senior Citizen Saving Scheme has a tenure of 5 years. This can be extended by up to 3 years. For this, all the account holder has to do is submit a form to the concerned bank or post office. This extension can only be granted once. If you want to close your account after taking an extension, you can do so only after one year.
Premature withdrawal
Unlike a fixed deposit, the Senior Citizen Savings Scheme allows for premature withdrawal after one year. There is a minimal penalty attached to this. If you withdraw the amount after one year but before two years are completed, there is a charge of 5% on the deposit amount. However, after the completion of two years, the penalty is just 1% of the deposit amount.
In case the account holder passes away before the maturity date, the amount is transferred to the legal heir. For this, the nominee has to fill out a form and provide the death certificate of the primary account holder. Once this process is completed, the account is closed.
Final verdict
The Senior Citizen Savings Scheme is an excellent investment option for retired individuals. It provides safe and guaranteed returns, which are more than in any alternate option. It provides a safety net to make the period after retirement stress-free.
