Is the Senior Citizen Savings Scheme right for your retirement planning?

The Senior Citizens Savings Scheme is a savings scheme introduced by the Government of India to help senior citizens find a safe financial investment platform.

This scheme, launched by the Government of India, offers financial security to citizens over 60. SCSS is among the most desired post-retirement saving plans. Not only does this scheme provide safety to one’s savings during old age, but it also earns one a steady income in the post-retirement phase.

It’s an open post office savings scheme designed for every senior citizen in the country. Accounts can be opened at post office branches or authorised banks. Here is the latest guide on the Senior Citizen Savings Scheme!

How it Works

Supposing an individual invests ₹1.5 lakhs under SCSS, he or she can claim that as a deduction from their gross taxable income, thereby reducing their tax payment for the year.

Comparing Senior Citizen Savings Scheme Interest Rates with Other Options

As of 2024, the SCSS has an interest rate of 8.2%, effective between 1 April 2024 and 31 March 2025. Thus, it remains one of the most attractive fixed-income saving instruments for senior citizens. The Ministry of Finance revises the interest rates applicable to SCSS every quarter to the prevailing market conditions.

Calculation of Interest for SCSS

The SCSS interest is transferred at the start of every year. These are January 1, April 1, July 1, and October 1. Some of the key parameters that have been used in the SCSS Interest calculation are:

The principal amount.
The rate of interest of the deposited amount.
The period over which the amount will be invested.

Comparison with Other Saving Instruments

Fixed Deposits: Major banks in 2024 have offered rates between 6.5% and 7.5% as a percentage for senior citizens, based upon tenure and specific policies of the banks.
Post Office Monthly Income Scheme (POMIS): The Government of India provides POMIS, another very popular saving scheme, at an interest rate of 7.4% as of 2024.
Public Provident Fund (PPF): The PPF offers an annual 7.1% interest rate compounded until 2024.

SCSS is better as it offers a return value of 8.2%.

Senior Citizen Savings Scheme Eligibility Criteria

Investments under the Senior Citizen Savings Scheme lay down the following eligibility criteria:

1. Minimum and Maximum Age Criteria: The investor must meet the minimum age criteria of 60 years.

Exemptions:

An SCSS can be opened if someone between 55 and 60 has retired on superannuation. However, within one month after that, he/she should open an SCSS account by depositing a minimum of ₹1,00,000/- in it.
SCSS is also available to retired defence personnel who are 50 or older but less than 60. They must invest their money in SCSS within one month of receiving their retirement benefits.

2. Other Conditions:

SCSS is strictly for Indian residents only. This scheme does not allow NRIs and PIOs to take part in the scheme.
HUFs are also not permitted to open an SCSS account.

3. Eligibility for Joint Accounts

A senior citizen can open a joint SCSS account with his spouse. There are specific rules for joint accounts:

The first account holder must meet the age eligibility criteria, but the spouse’s age is not a limiting factor.
Deposits in the joint account shall be credited entirely to the first account holder’s account.
The maximum permissible investment in the SCSS accounts is ₹30 lakhs.

4. Aadhaar and PAN are now mandatory for SCSS Accounts

When opening an SCSS account, the applicant must furnish his Aadhaar number and PAN.

Minimum and Maximum Investment Required for Senior Citizen Savings Scheme

Minimum Investment:

Generally, it is ₹1,000, which will enable a retired person with little savings to begin from where they are still getting highly attractive interest rates.

This can be invested in multiples of ₹1,000, making it quite accessible for senior citizens to structure their savings according to their needs and preferences.

Maximum Investment:

Up to 2024, any individual’s maximum investment in SCSS is ₹30 lakhs. This has been increased from ₹15 lakhs to ₹30 lakhs in Budget 2023-24. The government has capped this at an appreciable amount instead of higher and boundless participation to ensure its benefits are fairly spread to the eligible population.

Senior Citizen Savings Scheme Tenure and Maturity

The SCSS provides a fixed investment tenure, thus ensuring predictability and stability in financial income for the senior citizen. Here are some details:

Initial Tenure:

The SCSS has a 5-year tenure. Upon completion, the amount built up can be either reinvested or withdrawn.

Early Withdrawal:

Premature withdrawal of money is possible based on some conditions:

Within one year but before two years—however, the amount withdrawn attracts a penalty of 1.5% of the deposit
After two years, the penalty would be only 1% of the deposit.

Tax Benefits of the Senior Citizens Savings Scheme

Knowing these tax benefits and implications is crucial for retirees, enabling them to make informed decisions.

Tax Deduction Under Section 80C

One of the most attractive tax benefits relating to SCSS is its deductions under Section 80C of the Income Tax Act, 1961. A senior citizen can claim a deduction of up to ₹1.5 lakhs in a financial year for his investments under SCSS.

Taxation of Interest Income

While the initial investment under SCSS qualifies for a tax deduction, the interest on that investment is wholly taxable. The interest earned through SCSS is added to the account holder’s total income and taxed accordingly based on the income tax slab applicable to him.

TDS on Interest Income from SCSS

When the total interest earned from SCSS during the year exceeds ₹50,000, it would attract TDS. This threshold is the same as in the Income Tax Act under Section 194A for a deduction on interest liable for exemption for senior citizens.

Exemption from TDS with Form 15H

For senior citizens with gross income less than the basic exemption, the government has the tool of Form 15H, which will protect them against TDS on SCSS interest. Eligibility for submission of Form 15H:

For a senior citizen, when the aggregate annual income and interest credited to SCSS amounts to less than ₹3 lakhs for 60 years of age or more, one may submit Form 15H to claim exemption from TDS.
Exemption limits are ₹5 lakhs for individuals aged 80 years or more.

Major Features of the Senior Citizens Savings Scheme

The major SCSS features and benefits encompass the following:

Inflation Protection

The SCSS interest rate stands at 8.2% for the year 2024, which is in complete contrast to the Reserve Bank of India’s estimated inflation rate of 5.5%. This would not only safeguard the savings of senior citizens from being eroded by inflation but also provide a steady, risk-free income over the years.

High Interest Rate

As of the calendar year 2024, SCSS provides a comparative rate of interest of 8.2% a year, which the government revises and declares quarter-wise. The rate is much higher than most other fixed-income investments available to senior citizens, such as fixed deposits and post office schemes.

Nomination Facility

The facility to nominate may be provided when the account is opened under the Senior Citizen Savings Scheme or later. In the case of an account holder’s death before the account’s maturity, the nominee is entitled to receive the due amount.

Number of Accounts

Under SCSS, individuals are entitled to open several accounts. A new account may be opened by himself or in a joint account with his spouse. However, the joint account may be opened only with the spouse, and the opening depositor shall be the first investor who has opened or otherwise deposited money into that joint account.

Liquidity Benefit

Liquidity is a fundamental requirement for senior citizens, and SCSS balances long-term investment with flexibility. Although SCSS has a lock-in period of five years, it offers the facility to withdraw prematurely as and when needed.

Mode of Deposit

The individual can deposit the money in cash if the amount is below ₹1 Lakh but has to pay the amount via cheque if it is above ₹1 Lakh.

Fixed Income

Interest declared at the time of investment remains constant for the maturity tenure and is not operable through any change in a subsequent quarter.

Step-by-Step Guide to Opening Senior Citizens Savings Scheme

Here is the Senior Citizens Savings Scheme application procedure:

Investors can open an SCSS account either at the authorised bank branch or the post office branch. The SCSS application form can also be downloaded and filled out.

Here are the critical steps to follow:

Step 1: After filling out the downloaded form, investors must submit it at the nearby bank branch or, if allowed, can upload it on the website.

Step 2: As stipulated, they must submit the required documents.

Step 3: Then, they must submit the deposit money, after which the application for opening their SCSS account will be processed.

Documents Needed

Proposed investors will require the following documents for opening SCSS account:

Proof of identity
Proof of address
Proof of age
Photographs
PAN card
If the investor is a retiree who has not attained 60 years, he/she must submit proof of retirement, like the retirement order or VRS certificate.

Maintenance of SCSS Account

Once the account is opened, the holder gets quarterly interest payouts, which can be received directly in his savings account.

The account holders can control their accounts online using internet banking facilities offered by the participating banks. Thus, managing accounts has been easy for senior citizens who wish to maintain digital accounts.

Conclusion

The Senior Citizen Savings Scheme provides easy access with a well-defined procedure. It facilitates the investment process for the senior citizen through a reliable financial instrument that offers security, steady income, and government support.

Integrate with the PowerUp Money app to understand and ease the SCSS process. You can track and manage returns and get instant interest rate updates and withdrawal notifications all in one place.

FAQs

Under SCSS, how many accounts can be opened under a senior citizen?

Investors can open more than one account under one scheme, but the total deposit amount must not exceed ₹30 lakh.

How do I transfer a SCSS account from a post office to a bank?

Investors who want to transfer their SCSS account from a post office to their authorised banks, simply need to fill out and submit Form G, along with necessary documents, to the post office.

Is there an extension option in SCSS investments?

One of SCSS’s unique features is the extension facility, which provides an additional 3 years after the initial term of 5 years. An account holder can extend the same by submitting an application within one year from the original maturity date.

Disclaimer: The information provided is for informational purposes only. PowerUp is not responsible for any errors, omissions, or outcomes related to using this information.