senior citizen saving scheme

Senior Citizen Saving Scheme (SCSS) 2020

Introduction

The Senior Citizen Saving Scheme (SCSS) is a government-backed scheme offered only for the Senior Citizens of India. It offers a rate of interest of 7.4% p.a. This scheme is best suited for senior citizens or retirees who have 2 major investment objectives

(i) Security of Principal amount

(ii) Guaranteed regular income

Eligibility

 As the name suggests, only the Senior Citizen of India fulfilling the following conditions may open an account

  1. Any Senior Citizen completing the age of sixty years or above may open an account
  2. Or any retirees opted for Voluntary Retirement Scheme (VRS) or superannuation and fall into the age bracket of 55 -60 years may open an account. Accounts must be opened within one month of the date of receipt of the retirement benefits. Also, have to submit proof of the date of disbursal of such retirement benefit(s) along with an employer’s certificate indicating the details of retirement on superannuation or otherwise.
  3. Also, Retired personnel of Defense Services (excluding Civilian Defense employees) are attaining the age of fifty years. However, the application must be made within one month of the date of receipt of the retirement benefits.

Limit of holding of Accounts

Individuals may open more than one account under this Scheme. But deposits in all such accounts taken together should not exceed the maximum limit of Rupees Fifteen Lakhs Only.

Mode of Holding

  1. You may open an account as an individual, or jointly with a spouse.
  2. In the case of a joint account, the age of the first application will be considered to determine eligibility. There is no age limit for the second applicant.
  3. Both spouses can open a single account and joint accounts with each other with the maximum deposit of up to fifteen lakh rupees in each account.

Deposit

  1. Minimum Amount: The minimum deposit amount is Rs 1,000/- or any sum in multiples of one thousand rupees.
  2. Maximum Amount: Maximum Amount not exceeding fifteen lakh rupees.
  3. Provided that the deposits in the account are restricted to the total retirement benefits received, or fifteen lakh rupees, whichever is lower.
  4. Also, in one account, only one entry deposit is allowed.

Interest on deposit

  1. This Scheme offers interest at a rate of 7.4% per annum.
  2. Interest is quarterly payable on the first working day of April/July/October/January from the date of deposit.
  3. Also, Interest payable will be credited to the account holder’s savings account.
  4. If the interest payable is not claimed by an account holder then no additional interest is paid over the unclaimed interest amount.
  5. And if the interest is not claimed on the due date, it can be claimed on any date after the due date.

Nomination

  1. An eligible applicant can make one or more people as nominees.
  2. Nominations can also be made in case of joint holder’s accounts.

Premature closure of the account

You may withdraw the deposit and close the account at any time subject to the following conditions as:

  1. If the account is closed within one year from the date of opening of the account, then the interest paid on the deposit in the account will be recovered from the deposit, and the balance will be paid to the account holder.
  2. Or if the account is closed after the expiry of one year but before the expiry of two years then an amount equal to 1.5% of the deposit be deducted and the balance will be paid to the account holder.
  3. In case the account is closed on or after the expiry of two years then an amount equal to 1% of the deposit be deducted.
  4. The account holder availing the facility of extension of account, may withdraw the deposit and close the account at any time after the expiry of one year from the date of extension of the account without any deduction.
  5. Multiple withdrawals from the account are not permitted.

Maturity of account and Extension of Account

  1. The maturity of the account is 5 years.
  2. The deposit amount (Principal amount) be paid on maturity by producing the statement along with the written application.
  3. The account holder may extend the account for a further period of 3 years by making an application within one year from the date of maturity.
  4. Extension of an account shall be available only once. The account holder may close the account any time after one year from the date of extension of the account without any deduction.

Tax Treatment

  1. TDS will be deducted by the bank if the total interest earned on all SCSS accounts in a financial year exceeds Rs 10,000/-.
  2. If the applicant may take the exemption from TDS by submitting the Form 15G/H (if applicable).
  3. Interest earned on all the SCSS account maintained, shall be taxable as per your applicable tax slab.

Where you can open SCSS Account

Accounts may be opened through any

  1. Post Office branch or at
  2. 24 Public Sector Banks. and
  3. 1 Private Sector Bank i.e ICICI Bank Ltd

Forms for opening the senior Citizen Saving Scheme (SCSS) at the post office may be downloaded from here.

Silent Features of Senior Citizen Saving Scheme (SCSS)

  • Eligible entities – Only Senior Citizen (Citizens of India) and Retired persons.
  • Min. Investment – Rs 1000/- or any amount in multiples of 1000
  • Max. Investment – 15 Lakhs
  • Interest Rate – 7.4% per annum
  • Interest Option – Interest is Quarterly payable
  • Tenure –5 years (Premature payment option is available with premature penalty) and can be extended up to 8 Years
  • Maturity payment: deposit amount to be paid on or after maturity.
  • Income-Tax- Interest earned is taxable as per the Income Tax Act, 1961
  • Nomination – nominee may be appointed at the time of making the application or later on.
  • How to Apply – Submission of application to the Post Office or any public Sector Bank branch.

Conclusion

This scheme is only available for senior citizens or retired persons. However, the maximum permissible limit of investment is rupees fifteen lakhs only but still, it is giving a better return as compared to the fixed deposits. Recently, during the first quarter of the financial year 2020-2021, the government has reduced the interest rates for all the small saving schemes. So, the rate of interest for the SCSS for the last quarter for FY 2019-2020 was 8.6% which now has been reduced to 7.4%.

I always suggest to my senior citizen customer to invest some money in this scheme as compared to Fixed deposits and its regular payout option will help them in meeting their monthly expenses while keeping the original investment amount secured.

Well, friends, I tried my best to present the things in a simpler and easier way but still, if you have any query then please write to me at contactus@costindia.in

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