Senior Citizen Savings Scheme

Posted by  Fintra Editor , June 17, 2018

Senior Citizen Savings Scheme

As the name suggests, the Senior Citizens Savings Scheme is an investment scheme designed exclusively for the elderly. It is an investment scheme initiated by the Government of India to help senior citizens achieve financial stability during their post-retirement years. SCSS guarantees you a safe and regular income and is completely risk-free. It is also eligible for tax benefits under Section 80C of the Income Tax Act of India.

WHO CAN INVEST IN SCSS?

The Senior Citizens Savings Scheme is available to any Indian citizen who is age 60 years or above. Employees who have taken the Voluntary Retirement Scheme (VRS) can also invest in SCSS, but only if the investment is started within a month of the retiree receiving the retirement benefits. Other than that, retired defense personnel are also allowed to invest, and for them, the minimum age limit is of 50 years.

This scheme is not available for NRIs and Hindu Undivided Families (HUFs).

HOW TO OPEN A SCSS ACCOUNT?

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

AUTHORIZED BANKS FOR SCSS

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

INVESTMENT LIMIT

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.

RATE OF INTEREST

As of 2018, the interest rate for SCSS is 8.3% per annum.

ADVANTAGES OF SCSS

Senior Citizens Savings Scheme is meant to assist senior citizens in their finances so that they can spend their old age in peace and comfort. It is an extremely reliable investment option with benefits like-

  1. This scheme is backed by the Government of India. Thus it is extremely safe. The amount invested is not exposed to the market, hence there is no risk involved. Your money is guaranteed to be secure with you receiving fixed returns on a regular basis.
  2. The return rate of the Senior Citizens Savings Scheme is 8.3% per annum, which is much higher compared to other investment options currently available.
  3. This scheme is available at almost every major Indian bank and all branches of the Indian Post Office. Also, the process to open an account is quite simple and can be done pretty quickly. Also, accounts are transferrable.
  4. Through SCSS, you can claim for tax deductions as it is eligible for tax exemptions under Section 80C. The tax exemption can be as high as Rs 1.5 lakh.
  5. This scheme offers a nomination facility. You can choose your nominee at the time of opening the account.
  6. The maturity period of an SCSS account is that of 5 years but it is not rigid. After the account matures, it can be extended up to 3 or more years.

DISADVANTAGES OF SCSS

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

  1. 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.
  2. 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.
  3. 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 the compounding profits.
  4. 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.

IS PREMATURE WITHDRAWAL/ CLOSURE ALLOWED?

 The tenure of an SCSS account is that of 5 years. However, the rules are pretty flexible. After the completion of the tenure, you can extend it up to 3 years or more. However, you will be allowed only one such extension.

If the account is closed after one year, a deduction charge of 1.5% is made on the deposit. If the account is closed after one year, a deduction charge of 1% is made on the deposit. In case of the death of the subscriber, premature closure of the account is allowed without any charges.

Premature withdrawals are allowed, but only after the completion of one year of the account.

In conclusion, it can be said that the Senior Citizens Savings Scheme is an extremely reliable and secure option. Its safety and stability make it the ideal investment choice for senior citizens. Hopefully, you have found this article to be useful and informative.

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