As individuals approach their retirement years, it becomes crucial to plan their finances wisely. The Senior Citizen Savings Scheme (SCSS) is a government-backed savings initiative designed to provide financial security and attractive returns to senior citizens in India.
Interest and Investments in the SCSS account qualify for section 80C of the Income Tax Act, 1961.
From this financial year, the government has doubled the investment limit for this scheme from Rs. 15 lacs to Rs. 30 lacs, making it even more attractive for retiring employees.
Who can open a Senior Citizen Savings Scheme account?
The SCSS account can be opened in an individual's capacity or jointly with a spouse. The criteria for qualifications are:
- Individuals above 60 years of age.
- Retired civilian employees aged between 55 and 60 years and retired defence employees aged between 50 and 60 years, provided the investment is made within one month of receiving retirement benefits.
- The entire deposit amount will only be attributed to the first account holder in a joint account.
The following criteria must be met to make deposits.
- The minimum deposit amount is Rs. 1000, and subsequent deposits must be made in multiples of Rs. 1000. Maximum limit is Rs. 30 Lakh.
- If excess deposits are made, the extra amount will be refunded immediately to the depositor. PO Savings Account interest rate will apply from the date of excess deposit to the date of refund.
Interest rates and payment
The SCSS offers attractive interest rates, which are reviewed from time to time (the current quarter rate is 8.2% pa as of April 2023). The following are other salient features:
- Interest is payable every quarter, starting from the date of deposit until 31st March/30th June/30th September/31st December.
- An account holder will not earn additional interest if the person does not claim the quarterly interest.
- Interest can be drawn through auto credit into a savings account at the same post office, CBS post offices or through Electronic Clearing Service (ECS).
- Interest earned on the SCSS account is taxable if the total interest in all SCSS accounts exceeds Rs. 50,000 in a financial year. No TDS will be deducted if Form 15G/15H is submitted, and the accrued interest does not exceed the prescribed limit.
Premature closure rules
Under certain circumstances, premature closure of a Senior Citizen Savings Scheme account is allowed:
The account can be closed any time after the opening date.
- If the account is closed before 1 year, no interest will be payable, and any interest already paid will be recovered from the principal amount.
- If the account is closed after 1 year but before 2 years from the date of opening, an amount equal to 1.5% will be deducted from the principal amount.
- If the account is closed after 2 years but before 5 years from the date of opening, an amount equal to 1% will be deducted from the principal amount.
- An extended account can be closed after one year from the date of extension without any deduction.
Account Closure on Maturity
Account closure rules:
- After 5 years from the opening date, the SCSS account can be closed by submitting a prescribed application form and the passbook at the concerned Post Office.
- In the unfortunate event of the account holder's death, from the date of death, the account shall continue to earn interest at the rate applicable to PO Savings Accounts.
- If the spouse is a joint holder or a sole nominee of the SCSS account, the account can be continued until maturity, provided the spouse is eligible to open an SCSS account and does not already have another SCSS account.
The following rules apply:
Account holders have the option to extend their SCSS account for a further period of 3 years from the date of maturity. To avail it they must submit a prescribed form and the passbook at the concerned post office.
The account extension can be requested within 1 year of the account's maturity. Initiating the extension process well in advance is advisable to avoid any inconvenience or loss of interest earnings.
An extended SCSS account will earn interest at the rate applicable on the maturity date.
The Senior Citizen Savings Scheme (SCSS) offers a secure and profitable investment avenue for senior citizens in India. Senior citizens can ensure financial stability and enjoy a comfortable post-retirement life by making informed decisions.
Download the Senior Citizen Savings Scheme form here.