Senior Citizens Savings Scheme (SCSS): Features, Benefits, & Eligibility Explained

The Senior Citizens Savings Scheme (2004) has been introduced to secure the financial future of senior citizens, requiring a regular source of income post their retirement. It is backed by the government, allowing investors to invest funds in a lump sum, i.e. one single instalment for a period of 5 years at an interest rate of 8.2% with quarterly payouts. Being an effective part of retirement planning, this scheme provides guaranteed returns, taxation benefits, & a regular source of income, which makes it an appropriate choice for senior citizens.

How Does SCSS Work?

• Initially, deposit any amount between INR 1000 & INR 30,00,000 to open a Senior Citizens Savings Scheme (SCSS) Account in one instalment.
• While investing, it should be considered that the amount of deposit is restricted to the amount equal to the total of retirement benefits received.
• The retirement benefits mean the amount due to an employee from the employer on retirement, which includesgratuity, commuted value of pension, leave encashment, provident fund, etc. It also includes ex gratia payments under VRS, retirement cum withdrawal benefits under EPS, etc.
• The amount received on retirement must be deposited in the SCSS account within one month of its receipt.
• Any amount deposited over & above the limit specified should be returned to the account holder.
• Interest on the amount deposited is received on a quarterly basis.
• If an account holder holds a savings account in the same post office where his SCSS account is held, the interest amount can be deposited automatically through the auto-credit option.
• It allows for the premature closure of the SCSS account.
• It also allows an account holderto get this facility extended by up to 3 years from the maturity date.
• The extension facility can be availed within one year of the maturity date.

How to Open an Account under the Senior Citizen Scheme?

1.By Visiting the Bank

• Visit any nearest bank branch or the branch where you maintain your savings account.
• Fill out the application form with all the details required.
• Submit the same along with the documents & deposit the money either in cash or by cheque.
• The application will be processed once the payment is verified.
• Your SCSS account is now open.

2.By filling out the Post Office SCSS Form online

• Enter the details, such as the branch name of the post office on the top left side & the account number of the post office savings account.
• Also, provide the branch address of the Post office.
• Upload the photograph of the account holder.
• Input the name of the account holder, & from the drop-down menu, choose the option “SCSS’.
• Pick any of the options from “Additional Facilities Available”.
• Choose the type of account holder, i.e. minor with a guardian, self, or a person of unsound mind with a guardian.
• Choose the type of account, i.e., single, survivor, or both.
• Provide the amount to be invested both in numbers & in words.
• If the payment mode is cheque, enter the details of the cheque, such as cheque number & cheque date.
• Provide the personal details of the account holder.
• Tick the documents that have been uploaded.
• The account holder is then required to sign Pages 1 & 2.
• Also, provide the nominee’s details along with their contact details, with the account holder’s signature to verify the correctness of the details provided.

How to Close a Senior Citizens Savings Scheme Account

• If an account holder wants to close their account within 1 year of its opening, the interest disbursed earlier would be recovered from the deposit amount. Hence, the remaining balance would then be provided to the account holder.
• If an accountholder closes their account at any time after one year but before the end of two years from its opening date, they would be disbursed the payment after 1.5% of the deposit amount is deducted.
• If an accountholder closes their account within one year of the extension date, 1% of the deposit amount would be deducted.
• However, if an account holder closes their account after one year of the extension date, no amount will be deducted.
• This withdrawal facility is permitted only once.
• The interest on the deposit amount would be paid upto the date before the closure date, after deducting the penalty.

Tax Implications

• According to Section 80C of the Income Tax Act of India, 1961, a deduction of up to INR 1,50,000 can be availed on the principal amount deposited in the SCSS account.
• The interest amount received will be taxable according to the applicable income tax slab. Additionally, if the annual interest amount received exceeds INR 50,000, the TDS will also be deducted on the interest amount.

Difference between SCSS & Fixed Deposit

Risk-averse individuals prefer both SCSS & fixed deposits, but these investment plans also differ on certain parameters when considered for a retirement plan. Let us discuss the differences between the two in detail:

Conclusion

The scheme is drafted for senior citizens, offering them a regular source of income post their retirement. This plan is backed by the government of India, hence it is safe & secure. Also, it offers tax benefits with guaranteed returns, hence it becomes an appropriate option for senior citizens.