Post Office Senior Citizen Saving Scheme (SCSS)

The Department of Posts (DoP) of India not only plays a vital role in communication, it also helps individuals subscribe to different types of saving schemes. You can open a savings account or a fixed deposit account with the post office and also invest in different types of guaranteed income schemes.

One such scheme, which is offered by the post office, is the Senior Citizen Saving Scheme (SCSS). This is a fixed income saving scheme especially meant for senior citizens, i.e. individuals aged 60 years and above. 

Let’s have a detailed look into the Senior Citizen Saving Scheme and understand its different aspects.

What is the Post Office Senior Citizen Saving Scheme?

Post Office Senior Citizen Saving Scheme is a long-term saving scheme for senior citizens. This is a Government-sponsored scheme, which is suitable for investors looking for risk-free returns. The Senior Citizen Saving Scheme offers a guaranteed rate of return on the amount invested and helps you build a good corpus over time.

Salient Features of Post Office Senior Citizen Saving Scheme

Here are some of the salient features of the Post Office Senior Citizen Saving Scheme –

• The investment plan duration of the scheme is 5 years. You can also extend the investment tenure by another 3 years if you want. To do so you would have to submit a written request to the post office in a specified format. This format should be submitted within a year before the maturity of the account. If you have extended the investment tenure, you can close the account prematurely after the completion of one year of the extended period.
• You can open one or more accounts in your name only. You can also open a Post Office Senior Citizen Saving Scheme account jointly with your spouse.
• If you are opening the account by depositing cash, the maximum amount which you can deposit by cash is limited to INR 1 lakh. For amounts exceeding INR 1 lakh, you need to invest through a cheque drawn from your bank account.
• A nomination facility is available in the SCSS account wherein you can nominate a family member to receive the proceeds of the account in case of death.
• You can transfer the SCSS account from one post office to another.
• Besides the post office, you can also open an SCSS account with a bank.

Eligibility to Invest in a Post Office Senior Citizen Saving Scheme

To open a Post Office Senior Citizen Saving Scheme Account you have to fulfill certain eligibility parameters. The main parameter is the age of the depositor and the other parameter is the investment amount. So, here are the eligibility parameters to open an SCSS account with a post office –

1. You should be aged 60 years and above to be eligible to open this account.
2. If you are aged 55 years and above but below 60 years, you can open the SCSS account provided that you have retired on superannuation or under the VRS (Voluntary Retirement Scheme). Moreover, you should invest in the SCSS scheme within a month of receiving the retirement benefit and the amount which you invest in the scheme should not be more than the retirement benefit that you have received.
3. If you are retired Defence Services personnel, not including Civilian Defence employees, you can invest in the SCSS scheme after attaining 50 years of age. However, there are certain terms and conditions that should be fulfilled before you would be allowed to invest.

• The minimum amount which you can invest in the scheme is INR 1000 and the maximum is INR 15 lakhs.
• Only Indian residents can invest in the Post Office Senior Citizen Saving Scheme. Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) are not eligible to invest in the scheme and open an account in their name.

Interest in Post Office Senior Citizen Saving Scheme

As mentioned earlier, the Post Office Senior Citizen Saving Scheme is a fixed interest scheme. The interest of the scheme is fixed by the Government and is reviewed every quarter. The rate of interest for the quarter which began on 1st October 2020 is 7.4% per annum.  

The interest on the scheme is calculated quarterly and paid to the depositor on the first working day of April, July, October and January.

Taxation of Post Office Senior Citizen Saving Scheme

The money that you invest in the Post Office Senior Citizen Saving Scheme is allowed as a deduction under Section 80C of the Income Tax Act, 1961. You can claim a maximum deduction of INR 1.5 lakhs under this Section.

The interest income which is earned from the deposit would be taxable in your hands at your income tax slab rates. Moreover, a TDS would be deducted if the aggregate interest income exceeds INR 50,000. The rate of TDS is 10% if you provide your PAN Card details otherwise it would be 20%. 

Premature Withdrawal from the Post Office Senior Citizen Saving Scheme

The investment tenure for the Post Office Senior Citizen Saving Scheme is 5 years over which the scheme acts like a fixed deposit scheme. Premature closure of the SCSS account is allowed. However, if you do so, the following implications would be applicable –

• If you close the account before the completion of one full year, no interest would be paid on your deposit. If the interest has already been paid on a quarterly basis, it would be recovered by deducting the amount from the deposit amount payable on the closure of the scheme
• If you close the account after the completion of one year of investment, a penalty would be levied. About 1.5% of the amount deposited would be deducted from your deposit before it is refunded on closure
• If you close the account after the completion of two years of investment, a penalty would be levied though its rate would reduce. In such cases, 1% of the deposit amount would be deducted as a penalty before the amount is refunded

Benefits of the Post Office Senior Citizen Saving Scheme

Investing in the Post Office Senior Citizen Saving Scheme is seen as a beneficial option for senior citizens because of the following factors –

• The scheme offers attractive returns which, in some cases, is even higher than the returns offered by bank fixed deposits
• The rate of return is guaranteed and independent of fluctuations in the market
• The capital which is invested remains protected and does not reduce when the market falls
• The interest payments on a quarterly basis provide a source of income for senior citizens
• Since the invested amount is tax-free under Section 80C, senior citizens can plan their taxes and reduce their taxable incomes by investing in the scheme
• The Post Office Senior Citizen Saving Scheme is backed by the Government making it a safe investment avenue
• The investment tenure is not very long allowing senior citizens the benefit of liquidity
• Since multiple accounts can be opened, senior citizens can invest in the scheme multiple times individually or jointly

Opening a Post Office Senior Citizen Saving Scheme Account

If you want to open an account under the Post Office Senior Citizen Saving Scheme, you have to fill and submit Form A. 

Along with the form, a copy of the following KYC documents should be self-attested and submitted– 

• Identity proof like PAN Card, passport, Voter ID Card, Aadhaar card, etc.
• Address proof like utility bills, property deed, rent agreement, passport, Aadhaar card, etc.
• Age proof like passport, PAN Card, Aadhaar card, Voter’s ID Card, birth certificate, etc.
• 2 passport-size photographs

The Post Office Senior Citizen Saving Scheme is, therefore, a good scheme for senior citizens who want to invest in risk-free avenues which give them a regular source of income. Understand the details of the scheme before you invest so that you know what to expect from your investment.