Senior Citizens Savings Scheme (SCSS): Eligibility, Interest Rate & Benefits

Senior-Citizens-Savings-Scheme

Everyone now-a-days plan for their retirement right from their first day at work. They are conscious about generating a steady income source which were support them financially in their post requirement period. Apart from their Employee Provident Fund schemes, they also look for various other ways to invest their money. However, they are skeptical to invest in funds as there is a high risk of losing the money.

There are certain schemes in the market which are safe as compared to various other instruments such as Mutual Funds, Equity Shares, and Debenture etc. This schemes provide a reasonable rate of interest and qualifies as a steady source of wealth creation for senior Citizens. One of such financial instruments for senior Citizens is the SENIOR CITIZENSS SAVINGS SCHEME (SCSS).

What is Senior Citizens Savings Scheme (SCSS)?

Senior Citizens Savings Scheme (SCSS) is a government subsidized savings instrument for Indian citizens above the age of 6o years. This scheme was introduced in 2004 by the Government of India to generate a steady and reliable source of income for the senior citizens to support them financially in their post retirement period.

It is one of the best and attractive savings scheme in India. It offers decent returns to its investors. The SCSS interest rate for April to June 2020 was 7.4%. Since it is a government backed savings instrument, the capital risk involved is also negligible, making it one of the most attractive funds in India.

SCSS is available through both Public and Private sector financial institutions. SCSS can be availed through post offices and banks.

Features of Senior Citizens Savings Scheme (SCSS)

Features of Senior Citizens Savings Scheme

The various features of the Senior Citizens Savings Scheme (SCSS) are discussed below:

1.Interest rates are revised quarterly.

Under this scheme, the interest rates are revised quarterly. The interest rate depends on many factors such as the current rates in the market, inflation, etc. However due to the immobile economic conditions of the country, the interest rate tends to remain the same even after revision.

2.Source of Fixed Income.

The interest rate under SCSS doesn’t change much.  The interest rate offered during the time of investment remains the same throughout the maturity period. The rates are not affected by the quarterly revisions because of the stagnant economic condition of the country.

3.Maximum and minimum deposit.

The minimum amount of investment under the Senior Citizen Savings Scheme is Rs 1,000. The maximum amount that can be invested in the SCSS scheme is Rs 15 Lakhs or the amount of money received as retirement benefits by the individual whichever is lower.

Suppose a person gets Rs 14 Lakhs as his retirement benefit. Then in his case, the maximum amount that he can invest in SCSS will be Rs 14 lakhs.

4.Maturity Period.

The maturity period for the SCSS scheme is 5 years. This tenure can be exceeded by another 3 years i.e. 8 years (5years + 3years). If an individual wants to extend his maturity period then he will have to submit the Form B to his/her bank. However the interest rate will remain the same.

This means suppose Mr X who deposited Rs 200000 in April 2011 when the interest rate was 9%. Now after 5 years (2016) when she will extend her maturity period by 3 years she will still earn the interest rate of 9% irrespective of the interest rate of that quarter in 2016.

5.Withdrawals and closure of account.

Apart from withdrawals on maturity, an individual under the SCSS scheme can withdraw prematurely after one year from the date of opening of the SCSS account.

Premature account closure is also possible under the SCSS scheme but with a fine. If an individual closes his account before the completion of 2 years from the date his account was created, a fine of 1.5% of the total amount deposited will be deducted. Again, if a person wants to close his account after the completion of 2 years but before the maturity period, then he will be fined 1% of the total amount deposited in his account.

6.Mode of Deposit.

If the amount of money to be deposited is less than 1 lakhs then the individual can deposit it by cash. If the amount of deposit exceeds Rs 1Lakhs then the individual will have to deposit the same by cheque.

7.Nomination Facility.

Under the SCSS scheme, the account can register a nominee. In case of death of the account holder, the nominee will receive the entire amount on the date of maturity.

8.Risk Factor.

Since the Senior Citizens Saving Scheme is backed by the government of India, the risk element present is negligible. Risk of Capital loss is not at all present under this scheme.

Eligibility for Senior Citizens Savings Scheme

Elgibility of SSSC

The following individuals are eligible for the Senior Citizens Savings Scheme:

  1. Indian Senior Citizens aged 60 years or above.
  2. Senior Citizens who have opted for the Voluntary Retirement Scheme (VRS) in the age bracket 55-60.
  3. Retired defense personnel above the age of 50 years.
  4. Hindu Undivided families and Non-Resident Indians are not allowed under this scheme.

Benefits of Senior Citizens Savings Scheme

1.Low or No Risk of Capital loss.

Being a government-backed scheme, SCSS comes with all the protection. The funds are invested carefully which makes the risk of capital loss very negligible.

2. High rate of Interest.

The scheme has an interest rate of 7.4% per annum which is very high as compared to various schemes of the same level.

3.Mid Term Investment.

The account comes with an initial maturity term of 5 year this can be further extended to another 3 years. This makes the maximum maturity period 8 years. Therefore the SCSS is a very reliable and trusted mid-term and long-term source of income generation for senior citizens.

4.Tax Deductions under Income Tax Act 1961.

Tax deductions can be availed under the SCSS scheme. The investment done under this scheme is tax-deductible under Section 80C, of the Income Tax Act, 1961 up to Rs. 1.5 lakh per annum.

5.Flexibility in Investment.

Investment under the SCSS scheme are very flexible. One can invest any amount from Rs1000 up to Rs 15 Lakhs.

6. Premature Withdrawals in case of emergencies.

The option of premature withdrawals is also available for any emergencies. However a certain fine is applicable in case of premature withdrawals.

7.Easy availability.

This scheme can be availed from any Private or Public sector banks. This scheme can also be availed by visiting any post office.

Senior Citizens Savings Scheme Interest Rate.

SCSS Interest rate

Senior Citizens Savings Scheme has a high interest rate as compared to various other savings instruments available for senior citizens. SCSS as of April 2020 has been offering an interest rate of 7.4% per annum for the period of April to June (first quarter) for the financial year 2020-21.

Here is a table showing different Senior Citizens Savings Scheme Interest 2020-21 to 2017-18:

Data Source: National Savings Institute

Time Period Interest Rate (% annually)
April to June (Q1 FY 2020-21) 7.4
Jan to March (Q4 FY 2019-20) 8.6
Oct to Dec 2019 (Q3 FY 2019-20) 8.6
Jul to Sep 2019 (Q2 FY 2019-20) 8.6
Apr to Jun 2019 (Q1 FY 2019-20) 8.7
Jan to March 2019 (Q4 FY 2018-19) 8.7
Oct to Dec 2018 (Q3 FY 2018-19) 8.7
Jul to Sep 2018 (Q2 FY 2018-19) 8.3
Apr to Jun 2018 (Q1 FY 2018-19) 8.3
Jan to March 2018 (Q4 FY 2017-18) 8.3
Oct to Dec 2017 (Q3 FY 2017-18) 8.3
Jul to Sep 2017 (Q2 FY 2017-18) 8.3
Apr to Jun 2017 (Q1 FY 2017-18) 8.4

Withdrawals and Maturity of SCSS

The maturity period for the SCSS scheme is 5 years. This tenure can be exceeded by another 3 years i.e. 8 years (5years + 3years). If an individual wants to extend his maturity period then he will have to submit the Form B to his/her bank.

Apart from withdrawals on maturity, an individual under the SCSS scheme can withdraw prematurely after one year from the date of opening of the SCSS account.

Premature account closure is also possible under the SCSS scheme but with a fine. If an individual closes his account before the completion of 2 years from the date his account was created, a fine of 1.5% of the total amount deposited will be deducted. Again, if a person wants to close his account after the completion of 2 years but before the maturity period, then he will be fined 1% of the total amount deposited in his account.

How to open a SCSS account and the documents required.

SCSS account

To open a Senior Citizens Savings Scheme Account the customer/individual need to approach the authorized bank or post office. There they will be asked to fill up a form (Form A) along with a KYC with documents for age proof, identity proof, PAN, Adhaar etc.

The documents required for opening a SCSS account are :

  1. Form A  has to be filled for opening an Senior Citizens Savings Scheme Account.
  2. Identity proof like PAN card, Passport to be presented.
  3.  Address proof such as Telephone bill, Aadhaar card, Voter-ID. Adhaar card is mandatory.
  4. Document for proof of age is required. This could be in the form of a Passport, Senior Citizen Card, a Birth certificate, Voter ID card, PAN card etc.
  5.  2 Passport size photographs.

Banks offering SCSS Scheme

These are the various banks which offer SCSS Account:

  1. State Bank Of India
  2. Bank of Maharashtra
  3. Allahabad Bank
  4. Andhra Bank
  5. Bank of Baroda
  6. Punjab National Bank
  7. UCO Bank
  8. Indian Overseas Bank
  9. United Bank of India
  10. Corporation Bank
  11. Syndicate Bank
  12. Indian Bank
  13. United Bank of India
  14. Central Bank of India
  15. Canara Bank
  16. Dena Bank
  17. Additionally, an eligible individual can also visit his nearest branch of India Post to open a Senior Citizens Savings Scheme Account.

Tax Implications of SCSS

Under the section 80C of the Income Tax Act 1961, SCSS is availed for tax deductions up to the limit of Rs 1.5Lakhs. However, interest received on SCSS is fully taxable in the hands of the recipient. TDS is applicable if interest is more than Rs50,000 per year.

FAQ’s on SCSS

FAQ's Of SCSS

1.What is SCSS?

Senior Citizens Savings Scheme is a scheme backed by the government of India which aims to create reliable source of income for individuals for their post retirement period.

2.Eligibility of SCSS?

A senior citizen of India above the age of 60years is eligible for this scheme. In case of defense personnel, the minimum age is 50 years.

3.Interest rate for SCSS?

For the quarter April to June of the financial year 2020-2021, the SCSS interest rate was 7.4%.

4.Are premature withdrawals available in SCSS?

Yes premature withdrawals are  available in Senior Citizens Savings Scheme but with a certain fine varying to 1 – 1.5% on the amount deposited/invested.

5.Is Joint account facility available in case of SCSS?

Yes, joint account is available in SCSS but only if the individual opens the account with his/her spouse.

6.What is the mode of deposit for SCSS?

If the amount is less than Rs 1 lakhs then the amount can be deposited in cash. If the amount is more than Rs 1 Lakhs then the amount will have to be deposited through a bank cheque.

7.Is there risk present in Senior Citizens Savings Scheme ?

Since SCSS is backed by the Indian Government, the risk factor is almost negligible in this scheme.

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