All You Need To Know About Senior Citizen Savings Scheme

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How we wish if we could stop time and never get old! How many people do you think enjoy the idea of getting old? If it were up to us, we would always be young, dynamic, fit and at the prime of our lives. No matter how you hate the idea of getting old, retirement from work is an inevitable part of life. After all, age comes to us all.

It is only for this reason, that right from a young age, people are advised to start planning for retirement. Planning for your future in advance is a good way to avoid any shocks later when you are old and weary. 

We hope that along with everything else, you have planned your retirement as well. We know you wouldn’t want any of your retirement wishes to go unfulfilled. If not, then we urge you to create a plan so that you have a thick security blanket to cover yourself with, in case any financial problems arise post retirement. One such saving instrument offered by the government to take care of senior citizens of the nation when they are retired is the Senior Citizen Savings Scheme or SCSS. Let’s tell you more about it:

What is the Senior Citizen Savings Scheme?

Senior Citizen Savings Scheme is a saving instrument offered by the government of India to senior citizens of the country. As per the law, a “senior citizen” means a citizen of India, who has attained the age of sixty years or above. SCSS was introduced in 2004 to help senior citizens with their post retirement plans. It works as a cushion ensuring that 60+ aged individuals have a steady source of income at hand.

What are the Features of Senior Citizen Savings Scheme?

SCSS is very popular among the senior citizens of our nation and for good reasons. Here are some of the best features of Senior Citizen Savings Scheme:

• Minimum & Maximum Deposit in SCSS 

The minimum amount you can deposit in a SCSS account is Rs. 1,000 and after that you can deposit in multiples of Rs. 1,000 up until Rs. 15 lakhs. The catch is that you have to deposit it all in one go in the form of a lump sum.

For example, if Mrs. Anjana gets Rs. 12 lakhs as her retirement benefit money then she can deposit all this money directly into a SCSS account and earn interest on it for the next 5 years or 8 years if she wishes to extend her maturity date.

• Fixed SCSS Interest Rate

The interest rate of the amount is fixed at the rate of the quarter during which you opened that account. 

For example, you deposited the money in the first quarter of 2018-19 when the interest rate was 8.3%. You will be earning the same interest rate on your money as long as the account is active even if the interest rate changes to 8% in the next quarter or 8.5% in the next. This means that your income will be fixed.

• Quarterly Revision of SCSS Interest Rate

The Ministry of Finance changes the interest rate offered by SCSS every quarter (3 months). The interest rate depends on several factors such as the prevalent rates in the market, and inflation rates. It is not mandatory that the rates undergo any change even after revision especially if all the affecting conditions don’t change.

A person who invested in Q2 of Financial year 2018-19 would get an interest rate of 8.3% on his deposit till the maturity date while a person who had invested in Q3 of the same year would get 8.7% as the interest rate till maturity.

• Payment Mode in SCSS

If your deposit amount is less than Rs. 1 lakh then, you can open a SCSS account with cash however for deposits above Rs. 1 lakh you will have to apply with a cheque or a Demand Draft (DD).

• Maturity Period of SCSS

The maturity period of a SCSS deposit is 5 years. After maturity, you can get an extension for 3 years more making the tenure a total of 8 years. 

If you are willing to extend the period by 3 years, you will have to submit Form B after filling it. The 3 year extension is allowed only once. However,  on extension the interest rates applicable at that quarter would apply. 

For example if Mrs. Anjana wishes to extend her maturity date by three years then after filling Form B she can do it.

• Nomination Allowed in SCSS 

Nomination facility is available at the time of opening an SCSS account. You can nominate one person or more than one person when you open an account. You can do that by submitting an application as part of Form C. This submission is also accompanied by submitting your passbook to the branch.

In the event of death of the account holder, the amount due shall be paid to the nominee. Nomination facility is also available in case of joint account holders.

Eligibility for Senior Citizens Savings Scheme

For being eligible for the Senior Citizens Savings Scheme, as the name would suggest, you need to be a senior citizen. 

1. You need to be an Indian citizen above the age of 60 to apply for SCSS.
   
   
2. No Hindu Undivided Family (HUF) members, Non-residential Indians (NRIs) or Person of Indian Origin (PIOs) are allowed to open a SCSS account.
   
   
3. Individuals who are 55 years old but have retired early under a superannuation or Voluntary Retirement Scheme (VRS) are eligible to avail the scheme provided they apply for the same within one month of gaining their retirement perks.
   
   
4. Retired army personnel of any age can apply for SCSS provided they satisfy all other conditions.

What are the Benefits of Investing in Senior Citizen Savings Scheme?

Here’s a list of the many benefits of SCSS:

1. Highly Secure

SCSS being a government powered scheme is extremely safe and reliable. It comes with all the protection associated with all government schemes i.e. sovereign debt. Your investments are completely safe in the hands of the government.

2. Easily Accessible

SCSS account can easily be opened in any authorized bank or post office, in India. The account is transferable across India as well. You can invest an amount as less as Rs. 1,000 into your SCSS account and thereon in multiples of Rs. 1,000 up to Rs.15 lakhs. 

3. Higher Returns

The returns offered by SCSS are generally above the range of 8% which is higher as compared to those offered by other tax saving investment schemes under Section 80C.

4. Tax Benefit

The principal amount deposited in a SCSS account is eligible for tax benefits offered under Section 80C of the IT Act, 1961, up to the limit of Rs. 1.5 lakhs. Remember, that this exemption is applicable only if you continue to follow the last year’s tax regime. It is not allowed if you choose to file tax returns under the new system introduced in the budget of 2020.

5. Flexible Tenure

Though the initial tenure of keeping a SCSS account is 5 years, you can extend your tenure up to 8 years by taking 3 add on years. This means that you will earn the interest on your investment amount for 8 years. It is a medium term investment based on the lock in period of 5 years. 

What are the Documents Required to Apply under SCSS?

Here is a list of documents you need to apply for SCSS. Make sure that all these documents are self-attested:

1. PAN card
2. Aadhaar Card
3. Voter ID card or Passport
4. Telephone or Electricity bill
5. Birth certificate/senior citizen card
6. 2 passport-sized photographs

How to Open an Account under Senior Citizen Savings Scheme?

The steps to open an account under Senior Citizen Savings Scheme is simple:

1. Visit your nearest bank or post office to get the form.
2. Fill the Form A with the required details.
3. Produce an ID proof like a PAN, passport, driving license, or Aadhar card.
4. You will also need an address proof like Telephone or Electricity bill and 2 passport size photographs. 

Remember to bring a few self attested photocopies of all the documents as well.

Where to Open an SCSS Account?

As said above, you can open an SCSS account either at an authorized bank or at a Post Office branch. If the bank offers, you can open the SCSS account online on the bank’s internet banking portal or mobile banking app. However, in case of a post office there is no option to open the SCSS account online.

Historical Senior Citizen Saving Scheme Interest Rate

Here’s a list of Senior Citizen Saving Scheme interest rates through the years:

Period	Interest Rate
FY 2017-18 (Q3)	8.3%
FY 2017-18 (Q4)	8.3%
FY 2018-19 (Q1)	8.3%
FY 2018-19 (Q2)	8.3%
FY 2018-19 (Q3)	8.7%
FY 2018-19 (Q4)	8.7%
FY 2019-2020 (Q1)	8.7%
FY 2019-2020 (Q2)	8.6%
FY 2019-2020 (Q3)	8.6%
FY 2019-2020 (Q4)	8.6%
FY 2020-2021 (Q1)	7.4%
FY 2020-2021 (Q2)	7.4%
FY 2020-2021 (Q3)	7.4%
FY 2020-2021 (Q4)	7.4%
FY 2021-2022 (Q1)	7.4%

What is the Current SCSS interest rate?

The interest on SCSS is calculated on a quarterly basis and is revised by the Ministry of Finance. The current interest rate applicable to SCSS is 7.4% p.a. This interest rate is applicable from 1st July, 2021 until 30th September, 2021.

Since the interest rate is calculated at the end of every quarter, the interest income is transferred on the 1st date of every quarter ie. 1st April, 1st July, 1st November, and 1st January. This quarterly disbursal of interest income is a great way to support the account holders who can use this money, as and when needed.

Here’s an example of how the interest income is calculated:

Mrs. Anjana deposits Rs. 12 lakhs into a SCSS account at the rate of 8.30% during the 1st Quarter of Financial Year 2018 – 19 (April to June). Then, she will get a total interest income of (12,00,000 x 8.30% x 5) of Rs. 4,98,000 at the end of the 5 year maturity period.

Since, 1 year is 4 quarters and the maturity date is 5 years, a person will receive interest income spanning over a period of (4 x 5 = 20) quarters. The interest income for every quarter will be (4,98,000/20) which will be Rs. 24,900 every quarter.

Banks for SCSS

Here’s a list of authorized banks where you can open a SCSS account:

1. Allahabad Bank
2. Andhra bank
3. State Bank of India
4. Bank of Maharashtra
5. Bank of Baroda
6. Bank of India
7. Corporation Bank
8. Canara Bank
9. Central Bank of India
10. Dena Bank
11. IDBI Bank
12. Indian Bank
13. Indian Overseas Bank
14. Punjab National Bank
15. Syndicate Bank
16. UCO Bank
17. Union Bank of India
18. United Bank of India
19. Vijaya Bank

A private sector bank that offers this account to senior citizens is ICICI Bank. 

What is the Tax on Senior Citizen Savings Scheme?

Investments under SCSS are eligible for tax deduction under Section 80C of the IT Act, 1961 just like EPF, NSC or NPS. Tax benefits under Section 80C are limited up to Rs. 1.5 lakh per annum for all investments. Remember that this benefit is available only in the year in which deposits are made. If you choose to extend the maturity date to 8 years, there will be no benefit under Section 80C for an existing account after 5 years.

In case of premature withdrawal, you’ll not be able to avail the  tax benefits on the scheme. Adding to that, tax is deducted at source (TDS) on the interest if the amount is more than Rs. 10,000 pa.         

Please note that premature withdrawal by nominee or legal heir is not taxable in their hands in the event of the death of the depositor. However, any deposit made after the death of the depositor is taxable in the hands of the legal heir or nominee.

How do you Make a Premature Withdrawal from SCSS Account Deposit?

Premature withdrawal of SCSS account deposit is allowed. If an individual makes partial withdrawals after one year of account opening, then penalty charges will not apply.

Premature Closure of SCSS Account 

1. Premature closure up to 1 year is not allowed. 
2. In the second case, premature closure from 1 year up to 2 years is allowed. Charges will be deducted at the rate of 1.5% of the balance deposit amount.
3. Premature closure on or after expiry of 2 years is also allowed. Charges will be deducted at the rate of 1% of the balance deposit amount.

Closure of SCSS Account 

You can close your SCSS account at the time of maturity by giving your closure form and account passbook. If you do not close the account nor file for an extension, the account will be treated as mature. 

After maturity, you can close the account at any time you wish. Post maturity you are subject to receive interest as per the ongoing interest rate from time to time. This interest will be paid until the end of the month preceding the month of the closure of the account.

Extension of SCSS Account 

Senior Citizen Savings Scheme account has a maturity date of 5 years, calculated from the date of account opening. You can however extend the account maturity date for an additional 3 years after the original 5 years. The extension option is currently available just once and the extension request has to be made within 1 year of maturity of the SCSS account.   

What is the Maximum Amount one can deposit under SCSS?

The maximum amount one an invest in the SCSS account is up to Rs.15 lakh.

How do you Open a Joint Account in SCSS?

You can have a joint account with ONLY your spouse in the Senior Citizen Savings Scheme. Note that in case of a joint account, the age of the first depositor should be above 60 years. There is no age limit for the second applicant. 

What will be the Share of the Joint Account Holder in the deposit in an account?

The whole amount is attributed to the first depositor or applicant. The addition of a spouse as a joint account does not matter in this case.

Can Both the Spouses Open Separate Accounts?

Yes, individual accounts can be opened as well, provided the deposit limit is a maximum of Rs. 15 lakh. Of course, it has to adhere to the rules of the scheme.

Senior Citizen Savings Scheme vs. Fixed Deposit

SCSS is a much better investment option as compared to a Fixed Deposit since the interest rates for SCSS have been historically higher than those offered by Fixed deposit accounts. Historical data shows that the interest rates offered by SCSS is higher than 8% while that of FD remains in the range of 7 to 7.5%. 

In addition to that since the interest is paid quarterly, you’ll be getting a quarterly income in addition to your whole principal amount that you will get at the end of the 5 year tenure. However, in case of FD the whole amount is blocked till maturity.