The Senior Citizen Savings Scheme Guide for 2024

Posted by Fintra , updated 2023-12-06

Senior Citizen Savings Scheme (SCSS), a government-sponsored savings instrument has been designed exclusively for individuals above the age of 60. The Government of India introduced this scheme in 2004 to provide senior citizens with a secure and steady source of income during their post-retirement phase.

Since SCSS offers guaranteed safe and regular income that's completely risk-free, it's believed to be one of the most lucrative savings schemes in India. The SCSS interest rates payable for July 1, 2023 oonwards are 8.2% per annum that's compounded quarterly and paid. This scheme is risk-free because it's a government-backed investment scheme, and due to this the risk of experiencing a capital loss is negligible. Anyone can apply for SCSS through post offices and public & private banks. It is also eligible for tax benefits under Section 80C of the Income Tax Act of India.

In this blog, Fintra will enhance your knowledge about this scheme by discussing the following topics:

Why Should You Invest in Senior Citizen Savings Scheme (SCSS)?
Eligibility Criteria for Senior Citizen Savings Scheme (SCSS)
Features and Benefits of the Senior Citizen Savings Scheme (SCSS)
Tax Benefits on Senior Citizen Savings Scheme (SCSS)
Disadvantages of Senior Citizen Savings Scheme (SCSS)
How to Open a Senior Citizen Savings Scheme (SCSS) Account?
List of Banks that Offer Senior Citizen Savings Scheme (SCSS) Accounts
Investment Limit for Senior Citizen Savings Scheme (SCSS)
Senior Citizen Savings Scheme (SCSS) Rate of Interest
Calculation of Interest under the Senior Citizen Savings Scheme (SCSS)

Why Should You Invest in Senior Citizen Savings Scheme (SCSS)?

Investing in SCSS is a wise act for senior citizens who are above 60 years because it's a safe and secured way to make money. This scheme is an effective, long-term saving option that offers protection along with added features that are usually associated with any other government-sponsored investment and/or savings scheme. Such schemes are easily availed through certified banks and post offices anywhere in India.

Eligibility Criteria for Senior Citizen Savings Scheme (SCSS)

Following are the eligibility criteria for those who can open a Senior Citizen Savings Account:

Individuals must be 60 years and above.
Individuals who are 55 years old but retired early under a superannuation or Voluntary Retirement Scheme (VRS) rules. Do note that you have to make an investment within a month after receiving the retirement benefits.
Retired defence personnel with a minimum age of 60 years.
Non-resident Indians (NRIs), Person of Indian Origin (PIOs), and members of a HUF (Hindu Undivided Family) aren't qualified for opening an SCSS account.

Features and Benefits of the Senior Citizen Savings Scheme (SCSS)

Opening such accounts have two prime benefits- create a substantial post-retirement corpus, and save on income tax payable. The other benefits and features include:

Assured and substantial returns

The returns on such schemes are known to be substantial and assured because of the Government backing and sovereign debt protection. SCSS is long known to be a scheme providing its subscribers interest at rates that are at par with what is usually offered by other saving schemes like fixed deposit, recurring deposit, etc. Moreover, unlike investments that are linked to markets that at times may fluctuate, such savings accounts are known to be safe and will return the sums assured.

Act as medium-term investments

SCSS is popularly recognised as a medium-term investment because it has an initial maturity period of 5 years. Do note that closing the account earlier and/or withdrawing the amount prematurely can attract penalty charges. A maximum of 3 years may be added to the same tenure if desired. Since SCSS rate of interest isn't subject to market fluctuations, they make good options for medium-term savings.

Flexible investment amounts

The minimum deposit to open an account is Rs. 1000 and a maximum of Rs. 15 Lakh can be invested. The investments can only be done in multiples and with a minimum of Rs. 1,000 are accepted. Do note that only a lump sum and one-time investments are allowed. If the individual holds multiple accounts then the total deposited amount in all such accounts should not exceed the maximum limit.

Quarterly revision of interest rates

The Senior Citizen Savings Scheme's interest rates are revised every quarter, and its derivation depends on various factors like inflation level, the prevalent rates in the market, etc. At times rates might remain the same after revision due to economic conditions being stagnant or no significant change in it.

Fixed income

One advantage of this scheme is that the interest rate that gets declared at the time of investment remains fixed throughout the maturity tenure, it doesn't get affected by alterations in a later quarter.

Maturity tenure

The SCSS scheme's maturity period is 5 years, and it may be extended for another 3 years if desired. If you are desiring to extend the period by 3 years, you have to submit Form B after duly filling it. The extension is only allowed once and upon extension, the interest rates applicable at that quarter will be applied.

Premature withdrawals and account closure

One can withdraw funds prematurely from their account only after one year of opening the account. If you desire to close the account before completing 2 years, then 1.5% of the deposited amount will get deducted as a penalty, and if the account closure is done after the completion of 2 years, then 1% of the deposited amount gets levied as a penalty. If the account has been extended, then you may close the account after the first year without incurring penalties. However, if the investor deceases before the maturity of their account, then no penalties are charged.

Quarterly disbursal

Once an account has been opened you are eligible to obtain quarterly disbursals against your deposited amount. The interest payment gets credited to your account on the first date of April, July, October, and January.

Mode of deposit

The investor may choose to deposit the money in cash if the amount is below Rs. 1 Lakh, but if the amount exceeds Rs. 1 Lakh then you've to pay in a cheque.

Nomination facility

There's a nomination facility available while opening the account under the Senior Citizen Savings Scheme or at a later date. If the account holder dies before the account matures, then the nominee is eligible to receive the due amount.

Security of capital

Since SCSS is a government-endorsed scheme, the capital invested in it gets to enjoy superlative security and guarantee.

Tax Benefits on Senior Citizen Savings Scheme (SCSS)

Investment in SCSS are eligible for tax deductions in the following manner:

The principal amount that's deposited towards the scheme and all investments are exempted from Income Tax under Section 80C of the Income Tax Act, 1961. The maximum benefit which can be availed is Rs. 1.5 Lakh per annum.
Do note that if the interest amount crosses Rs. 50,000 in a fiscal, it will then be subjected to TDS (Tax Deducted at Source). This limit is applicable beginning from AY 2020-21 onwards.

Disadvantages of Senior Citizen Savings Scheme (SCSS)

For all its benefits, the SCSS is not without its drawbacks. The disadvantages of this scheme are listed as follows:

One of the biggest drawbacks of SCSS is that the interest earned is subjected to TDS. It obviously upsets the elderly investors to see their money being taxed upon.
There is an upper limit to investment, that is, Rs 15 lakhs. Investors cannot invest more than 15 lakhs even if they wish it and have the means to do so. This often proves inconvenient for many investors.
The subscribers receive interest on the first working day of every financial quarter. These regular payments help retirees who need a stable source of income. However, these payouts prevent them from receiving compounding profits.
The regular payments become redundant in the face of ever-soaring inflation. The cost of living increases every single day, which strips the returns of any real value.

How to Open a Senior Citizen Savings Scheme (SCSS) Account?

One can open a Senior Citizens Savings Scheme account at any of the authorized banks or any branch of an Indian Post Office. To open an SCSS account, you will have to complete the following steps:

Duly fill-up the Form A
Submit necessary documents such as PAN Card, Aadhaar Card, Passport, Birth Certificate, Age Proof, Address Proof, Voter ID Card Senior Citizen Card, 2 recent passport size photograph, and Utility Bills such as Telephone bill
All documents should be self-attested

Once the paperwork is done, your SCSS account will be all set up.

List of Banks that Offer Senior Citizen Savings Scheme (SCSS) Accounts

The banks authorized to handle SCSS accounts are listed as follows:

Investment Limit for Senior Citizen Savings Scheme (SCSS)

The minimum investment limit is Rs 1 lakh and the maximum investment limit is Rs 15 lakhs. Joint accounts are allowed if the co-holder is the spouse.

Senior Citizen Savings Scheme (SCSS) Rate of Interest

The current interest rates payable are 8.2% per annum, compounded quarterly and paid.

Calculation of Interest under the Senior Citizen Savings Scheme (SCSS)

SCSS's interest gets compounded quarterly and is disbursed at every quarter on the first date of April, July, October, and January. Moreover, it's absolutely easy to calculate the interest rate of this scheme. To know the interest amount on the contribution made, you just need to calculate the compound interest on the deposited amount as per the relevant interest rate of the SCSS for that particular quarter. After computation, you will know the interest amount on the deposited amount. The payment is delivered to the savings account of the individual's account every year.

To accurately compute the interest gained and final maturity amount on your investment you can use Fintra’s Senior Citizen Savings Scheme Online Calculator for free.

Conclusion

In conclusion, it can be said that the Senior Citizens Savings Scheme (SCSS) is savings oriented yet remunerative investment instrument. It offers safety and stability, hence. Instead of investing their hard-earned savings in low yielding savings bank accounts or high-risk alternatives like mutual funds, it will be a wise decision for senior citizens to invest their money in this scheme. This scheme acts as a platform for senior citizens to invest their funds in safe, high yielding, and widely popular savings instrument. Senior Citizen Savings Scheme (SCSS) is a preferred fixed-income investment option for people above the age of 60 years. The primary objective of this scheme is to help senior citizens ensure a regular flow of income post-retirement.

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