The Senior Citizens Savings Scheme (SCSS) is a saving instrument that is offered by the Government of India to Indian citizens aged over 60 years.
The deposit in the scheme is matured after 5 years from the date of account opening, and it can be extended once by an additional 3 years.
In also addition, the above extension option is currently available just once and the extension request has to be made within 1 year of maturity of the SCSS account.
The scheme is available by Public, Private sector banks, and India Post Offices.
The interest rate for the scheme for April to June 2020 has been set at 7.4%, which is the highest interest in India among various small saving schemes. Interest in SCSS account deposits is calculated and credited quarterly. This rate of interest is reviewed quarterly by the Ministry of Finance and subject to periodic change.
What is the Minimum and Maximum SCSS Deposit Limits?
Depositors are allowed to make a lump sum deposit with a minimum deposit of ₹ 1000, and deposits that are greater than ₹ 1000 have to be made in multiples of ₹ 1000. The maximum SCSS limit deposit is ₹ 15 lakh.
If deposits in the SCSS accounts can be made in cash, and this is allowed only for amounts less than ₹ 1 lakh. And if the deposit amount for Senior Citizens Savings Scheme exceeds ₹ 1 lakh, then using a cheque/demand draft for making the deposit is mandatory.
Eligibility for SCSS
To avail of this saving scheme for Indian senior citizens, they have to meet the following key conditions:
- The scheme is available to any resident individual aged 60 years and above.
- An Indian citizen who has attained 55 years but is less than 60 years old are also eligible to apply for the senior citizen’s savings scheme provided they have retired under applicable superannuation or VRS rules. In such cases, the account should be open within 1 month of the receipt of retirement benefits.
- The scheme is also available for the retired defense personnel irrespective of the above-mentioned age limits subject to fulfillment of other terms & conditions.
- Non-Resident Indians and Person of Indian Origin (PIOs) are not entitled to open a Senior Citizens Savings Scheme account.
- Hindu Undivided Family (HUF) members are not entitled to open the account under these rules.
Tax benefit under the Senior Citizens Savings Scheme
As per the Income Tax Act, 1961 the depositor can claim tax benefit up to ₹ 1.5 lakh under section 80C under the scheme.
Interest in SCSS is fully taxable. In case the interest amount earned is more than ₹ 50,000 for a fiscal, then TDS is applicable to the interest earned. This limit for TDS deduction on SCSS investments is applicable from AY 2020-21 onwards.
How to Open an SCSS Account?
- Open an account through post office: Investor can open a Senior Citizens Savings Scheme account at all India Post Offices. The interest earned from the SCSS account is automatically credited to the investor’s linked savings account at the same post office.
- SCSS account Registration at Banks: The SCSS account is also offered at select Public or Private sector banks. In also addition, in case you are a senior citizen and plan to complete your SCSS registration at a bank, then you will have to follow the applicable account opening procedure.
- SCSS Application Form Download Online: Senior Citizen’s Application Form is available through the offline route at India Post Offices as well as via the online route. If you are planning to open your SCSS account at an India Post Office, you can download the SCSS application form from the official India Post website. For offline registration, you may also obtain the paper form from designated branches of participating banks under the SCSS scheme in India.
Interest rate on an SCSS account
The interest rate for the scheme for April to June 2020 has been set at 7.4%, which is the highest interest in India among various small saving schemes. Interest in SCSS account deposits is calculated and credited quarterly. This rate of interest is reviewed quarterly by the Ministry of Finance and subject to periodic change.
The accrued interest can be directly credited into the depositor’s savings bank account held with the bank branch.
How to Fill Senior Citizen’s Savings Scheme Application Form?
Now, an SCSS account can’t be opened online, therefore after downloading the SCSS application form, you have to print it, fill it out and submit the completed SCSS Application form (at the post office/bank) along with applicable supporting documents.
The SCSS application form requires you to fulfill KYC information at the time of opening a Senior Citizen’s Savings Scheme account such as:
- Applicant name and PAN
- Name of the primary applicant’s father/mother/husband/wife
- In the case of a joint SCSS account with a spouse, you have to mention the name, age, and address of your spouse.
- Cheque/demand draft amount and number (if applicable)
- Nominee name, age, and address
- List of Banks offering SCSS Account
Penalties if amount withdraw from SCSS before it’s maturity
Premature withdrawal of SCSS is allowed but penalties are applicable in such cases based on the time elapsed among account opening and withdrawal.
The penalties if the amount withdraws from SCSS before its maturity are as follows:
- 5% of the deposit amount is deducted as a penalty if an exit from the scheme occurs before completion of 2 years from the date of account opening.
- 1% of SCSS deposit deducted as a penalty if an exit from the scheme occurs among 2 years to less than 5 years from the date of account opening.
Benefits of Investing in SCSS
- Good Returns– The SCSS scheme has a high-interest rate of 7.4% per annum. That is higher than most tax savings instrument in Sector 80C.
- Medium-Term Investment (MTI)– The SCSS scheme comes with an initial maturity period of 5 years however this can be further extended to another 3 years. This encourages senior citizens to have this saving scheme as a medium or a long-term investment product in their financial kitty.
- Tax Benefit- The investment under this scheme is tax-deductible under Section 80C, of the Income Tax Act, 1961 up to ₹ 1.5 lakh per annum.
- Flexibility in the amount of Investment – An individual can invest any amount in multiples of ₹ 1,000 up to the maximum limit of ₹ 15 lakhs. Whereas, only one-time lump sum investments are allowed.
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