Senior Citizens Savings Scheme (SCSS) Details
Senior Citizens Savings Scheme launched in 2004, is an initiative by the government of India for ensuring the financial security and regular income of senior citizens in India. The scheme offers the highest returns among the other available small savings schemes. This scheme also comes with tax benefits.
Under this scheme, the individual has to deposit a single/lump-sum amount in registered banks or post offices. For the next 5 years from the depositing of the amount, every quarter the investor will receive quarterly interest payments on the amount deposited. At the time of maturity, which is, 5 years from the date of opening of the account, the investor will receive the deposited amount.
This scheme is ideal for Senior Citizens who want a regular & steady income along with availing tax benefits.
Eliglbility For SCSS Scheme
Following are the eligibility conditions to get enrolled into the Senior citizens savings schemes:
- Any Indian Resident individual of the age 60 years & above can enrol into this scheme.
- Individuals of the age between 55-60 years, who have been retired on superannuation or under the Voluntary Retirement Scheme can also enrol into this scheme. However, in this case the account must be opened within a period of 30 days from the receipt of the retirement benefits.
- Retired Defence Service Employees above the age of 50 years are also eligible to register for this scheme.
- Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to open a Senior Citizen Saving Scheme account.
Read Also: Tax Saving Options Under Section 80C
Senior Citizens Savings Scheme Interest Rates
The interest rate for the Senior Citizen Saving Scheme account is 7.4% per annum for the 1st quarter of the Financial Year 2020-21, which is April 2020 to June 2020. The interest is payable on 30th June 30th September 31st December and 31st March. The interest rates are subject to revisions every quarter by the government.
Following were the historical rates for Senior Citizens Savings Account:
|Financial Year||Interest Rates(p.a.)|
Interest payments are made every quarter, i.e. April-June, July-September, October-December, and January-March to the SCSS Account holders.
The main features of the Senior Citizens Savings Scheme are discussed below:
An individual can open any number of Senior Citizen Saving Scheme accounts with post offices or banks, but the maximum amount of investment (including all accounts) should not exceed the limit of Rs.15 Lacs.
The individual can also open a joint account but only with the spouse, and the first depositor of the joint account will be the investor.
The period of maturity of this scheme is 5 years. Investors can get their account extended by further 3 years through an application to the bank or post office within 1 year of maturity.
3. INVESTMENT LIMITS
Only a Lump-sum investment or a single payment is allowed for the deposit in the account.
The minimum amount that can be deposited is Rs.1000 and then in multiples of that.
The maximum amount that can be invested in the account is Rs.15 lacs individually or in a joint account.
4. PREMATURE WITHDRAWALS
Premature withdrawals/closures are allowed, but the depositor has to pay the applicable penalties.
The penalty amount depends on the tenure such that:
(i) If closed before 1 year, no interest will be payable and if paid already will be recovered.
(ii) If the amount is withdrawn after one year, a penalty of 1.5% of the deposit will be charged
(iii) If the amount is withdrawn after 2 years, a penalty of 1% of the deposit will be charged.
5. NOMINATION FACILITY
Nomination facility is available in the Senior Citizens Savings Scheme. The depositor can name the nominees at the time of opening of account and also has the option to add or name the nominees during the scheme.
6. TRANSFER OF ACCOUNT
The depositor can open a senior citizen savings account in any of the 1.55 lac Post Offices in the country. The accounts can be easily transferred from one Post Office branch to the other or even a post office branch to any Bank on request of the depositor.
Investments made in Senior Citizen Savings Schemes are eligible to be claimed for tax deductions on the deposited account by an investor up to an amount of Rs.1.5 lacs as per Section 80C of Income Tax Act,1961.
Interest payments are fully taxable in the hands of depositors. However, Senior citizens can claim tax deductions on the total interest income as per Section 80TTB up to Rs.50,000 in a fiscal year (including interest income from all accounts whether with banks, cooperative societies, or post offices). TDS is deducted at source if the interest earned is more than Rs.50,000 p.a.
Benefits of Investing in Senior Citizens Savings Schemes
Given the scheme is backed by the government, it is one of the safest forms of investment with regards to the security of the deposited amount and the interest income. So, it is ideal for investors who do not want to take too much risk and want the safety of capital.
- Regular Income
Senior Citizens Savings Scheme provide regular and steady income to the depositors. It is very helpful for retired individuals or senior citizens for meeting their regular expenses with the interest payments from the account.
- Higher Returns
This scheme offers much higher returns than other small savings schemes available in the market. This makes it worth for the depositors by getting higher returns on their invested amount.
- Tax Benefits
Tax benefits associated with the scheme are also one of the attractive reasons to invest in the SCSS. The depositors can claim tax deductions from the government on the amount they are investing as per Section 80C of Income Tax Act,1961.
- Flexibility of Investment
Individuals can make an investment of amount as low as Rs.1000 and in multiples thereafter up to Rs.15 lacs. This makes it possible for everyone even the ones with lower incomes to invest in these schemes for earning a regular income every quarter.
Along with that, depositors have the option to extend the maturity period of investment by another 3 years after the end of 5-year maturity.
How to Open a Senior Citizens Savings Account
One can open a Senior Citizens Savings Account with any of the registered providers like banks or Post Office. The investor or depositor can directly go to the bank branch or post office and fill up the Form A for opening the senior citizen savings account.
Also, there is an option to download the form online from the bank’s websites and post office website, the individual can take a print of the downloaded form, fill it and can submit in the branch at which they want to open the account.
Along with the form, the individual has to submit the following self-attested documents:
- Passport size photographs
- Pan Card
- Identity, Age, and Address Proof (Adhaar Card, Birth Certificate, driving license, telephone bill, voter ID, senior citizen card, passport). Any one of the documents for each proof required.
- In case of retirement on superannuation, or under VRS, a certificate from the employer is required along with the proof of the date on which retirement benefits received by retirees. (As the individual is only eligible if he opens an account within a month of receiving retirement benefits)
Mode of Deposit
The depositor can make deposits in these ways:
- Cash - If the Amount of the Deposit is below Rs.1 lac, then the account can be opened with Cash, Cheque or Demand draft.
2. Cheque/Demand Draft- If the amount of Deposit is more than Rs.1 Lac, then the amount can only be deposited through a cheque or demand draft.
There are many Banks offering Senior Citizens Savings Scheme. Some of them are:
- IndiaPost (All branches of Post Offices across India)
- ICICI Bank
- State Bank of India
- Union Bank of India
- Canara Bank
- Punjab National Bank
Note- The government of India has reduced the interest rates for SSCS from 8.6% in previous quarter to 7.4% for current quarter 1 of FY 2020-21.
Also there were no new announcements in the Budget 2020 with respect to the Full tax exemption on interest rates of SCSS as proposed by SBI Research. However, the government has allocated Rs. 9000 crores for the welfare of the senior citizens in budget 2020.
Other Schemes For Senior Citizens
Pradhan Mantri Vaya Vandana Yojana
Pradhan Mantri Vaya Vandana Yojana or LIC Senior Citizen Scheme is a scheme made specially for senior citizens managed by Life Insurance Corporate of India. The Pradhan Mantri Vaya Vandana Yojana (PMVVY) aims to provide regular pension income to the senior citizens for a tenure of 10 year and comes in the option of monthly,quarterly, semi-annually and annually.
Under this scheme, the investors has to make a lump-sum investment at the start, then for next 10 years he will receive regular payments of interest and the invested amount at the maturity of the scheme.
Features of PMVVY Scheme
Some of the main features of the pmvvy scheme details are highlighted below:
- The individuals above the age of 60 years can enroll into this scheme.
- The interest rate for the scheme is 8.3% p.a. for annual, 8.13% p.a. for semi-annual, 8.05% p.a. for quarter and 8% p.a. for a monthly pension.
- Pre-mature withdrawal is allowed in case of any health emergencies at the penalty charge of 2% on investment.
- The minimum amount required to get Rs.1000 pension per month is Rs.1.5 lacs and there is a maximum investment limit of up to Rs.15 lacs.
- The PM vaya vandana yojana does not offer any kind of tax benefits and investments in it are not eligible for tax deduction under section 80c.
Note: LIC senior citizen scheme scheme was introduced in the 2018 Budget and applications were allowed this 31st March 2020. However, there are proposals being made for extending this schemes as people couldn’t make investments before the deadline due to the lockdowns in place amid Coronavirus Pandemic.
Q1. How to open a Senior Citizen Savings Account?
Ans- Opening a Senior citizen savings account is a very easy and quick process. You just have to reach your nearest registered bank or post office branch, fill a copy of the Form A along with providing them necessary self-attested documents like Pan Card, Adhaar card, Electricity Bill, Voter ID, and passport size photographs etc..
Q2. Can I open a Joint Account for the scheme?
Ans- Yes, you can open a joint account for the scheme but only with your spouse. But the first depositor will be the investor.
Q3. Can I withdraw from the Senior Citizens Savings Account before the maturity?
Ans- Yes, you can make a pre-mature withdrawal but subject to the applicable penalties. Penalty charges will depend on the time of the transaction i.e
Before one year- No interest will be payable
After 1 year- 1.5% penalty of the deposited amount
After 2 years- 1% penalty of the deposited amount
Q4. Can an account be transferred from one bank to another?
Ans. The depositor can transfer his account from one bank branch to other or even to a post office by applying through Form G.
Q5. Can an individual open more than one account?
Ans. Yes, an individual can open any number of accounts but with the maximum investment limit of Rs.15 lacs (including balances of all accounts).
Q6. What happens at the death of the Depositor?
Ans. In the event of the death of depositor or investor, the account shall be closed, and the named nominee will be entitled to the balance amount including the investment account & interest earned. No charges or penalties are applicable to this event.
If there is no nominee in case of an individual account, then the payable amount will be handed over to the legal heir.
In case of a joint account, the joint member, i.e. the spouse will be entitled to receive the payable amount, and only after the death of the joint member will the nominee’s claim arise.
Q7. What schemes are suitable for monthly income needs?
Ans. Some of the popular schemes that provide regular & steady monthly income includes Pradhan Mantri Vaya Vandana Yojana or LIC senior citizen monthly scheme, Post Office Monthly income scheme etc..
PM Vaya Vandana Yojana Interest Rate- 8% p.a. for monthly income
Post Office Monthly Income Scheme Interest Rate- 6.6% p.a payable monthly.
Q8. What are the interest rates for schemes offered by Post Offices?
Ans. The interest rates offered by several Post Office schemes besides SCSS are as follows:
|Schemes by Post Office||Interest rates|
|Post Office Recurring Deposit (RD)||5.8% p.a. (Qtr. Compounded)|
|Post Office Fixed Deposits||6.7% for 5 Year FD|
|Post Office Monthly Income Schemes||6.6% p.a.|
|National Savings Certificates (NSC)||6.8% p.a.|
|Public Provident Fund (PPF)||7.1% p.a|
Q9. Do Private sector banks offer Senior Citizen Saving Schemes?
Ans. Yes, currently only one bank i.e ICICI Bank is offering Senior Citizen Saving Scheme. However, other private sector banks like HDFC Bank offer several types of senior citizens savings accounts which have special features and incentives made exclusively for senior citizens.