Know All About Senior Citizen Savings Scheme to Retire Smartly

investment

As a young investor, there are various options in the market to choose from. You have the liberty to diversify your investment portfolio and also experiment a little with the available plans. However, as you grow in age, gradually these options narrow down. You would always think twice before investing your hard-earned money. 

But investments are imperative if a ‘comfortable retirement’ is your goal. Planning smartly for your retirement is not as difficult as it may seem. Even if you did not plan your retirement early, the Senior Citizen Savings Scheme (SCSS) can come to your rescue. A popular scheme among the retirees, Senior Citizen Savings Scheme provides income, financial safety along with tax benefits. In this article, we are going to understand the A-Z of Senior Citizen Savings Scheme, read on.

What is the Senior Citizen Savings Scheme? 

Senior Citizen Savings Scheme is a type of saving scheme for citizens who are over 60 years of age. An individual can invest in this plan alone or along with their spouse. Being a government-backed scheme, this is a no-risk option where you can safely park your retirement corpus. The rate of interest of this scheme is fixed and reviewed by the Ministry of Finance on a quarterly basis. 

Features of the Senior Citizen Savings Scheme

Let us take a look at the highlights of this scheme:

  1. The scheme is offered for a period of 5 years, it can then be extended for 3 more years after maturity
  2. An investment of up to INR 15 lakhs per individual is allowed. However, it should be noted that investment more than the amount one receives on retirement can not be made
  3. The investments are tax exempted under Section 80C of the Income Tax Act
  4. The minimum deposit is INR 1,000 and in multiples of INR 1,000
  5. Any number of accounts may be opened, however, the total amount must not breach the limit of investment
  6. The account may be held individually or as a joint account along with your spouse
  7. If both partners, husband and wife, are above 60 years of age, they can each invest INR 15 lakhs, individually, that is a total of INR 30 lakhs
  8.  When the account is joint, the spouse is the joint holder, his/her age is not an eligibility criterion and is taken into account 
  9. The computation of interest is done on a quarterly basis and compounded and paid annually
  10.  The rate of interest keeps changing as the Ministry of Finance reviews it on a quarterly basis

Who can Invest in a Senior Citizen Savings Scheme?

Let us take a look at the eligibility criteria of SCSS:

  • An Indian citizen above the age of 60 years
  • Retirees over 55 years who have applied for Voluntary Retirement Scheme
  • Retired defence personnel can apply for this scheme after the age of 50 years, but before the age of 60

Note: HUF (Hindu Undivided Family) members, NRIs (Non-Resident Indians) are not eligible for this scheme.

Benefits of Senior Citizen Savings Scheme

When you invest in SCSS, you can avail the following benefits:

  1. Safe Way of Investing
    As this scheme is backed by the government, it is considered to be one of the most secure and safe ways of investing your money.
  2. High Returns
    With the launch of this scheme, the government also aimed to offer a high-return scheme to the retirees, especially in the current scenario of falling interest rates all around. Generally, the rate of interest is higher than that of a fixed deposit or other such plans. 
  3. Fulfils your Financial Requirements
    There is a lock-in period of 5 years, which is suitable if you have medium-term investment goals, such as your child’s higher education or part payment of your home loan
  4. Tax Benefits
    The investments up to INR 1.5 lakhs are tax exempted under Section 80C of the Income Tax Act
  5. Simplified Investing
    A simple saving scheme, the SCSS has easy purchase and claim procedures. The investment can be made easily at your nearest post office or authorised bank

How to Invest in a Senior Citizen Savings Scheme?

 

If you wish to invest in this scheme, follow the steps given below:

  • You need to visit any preferred authorised bank or India Post office and get the application for opening an account under the SCSS. This application is called Form A. You can also get this form online, from the official website of India Post or an authorised bank branch
  • Fill in the form carefully, it would require - personal details, deposit details, nomination details, etc
  • Sign this form and submit it along with the needed requirements (list given below)
  • After verification of your paperwork, your request will be processed

Documents necessary for the Senior Citizen Savings Scheme


The documents that would be required when opening an SCSS account are listed below:

  • Producing  Aadhar Card is mandatory
  • Identification Proof - Passport, Driving License, PAN Card, Ration Card, School Mark Sheet, Voter ID
  • Age Proof - Passport, School Mark Sheet, Birth Certificate or PAN Card
  • Address Proof - Telephone Bill, Electricity, Ration card, Aadhar Card, Passport, Salary Slip, Bank Statement, ITR File
  • Passport Size Photographs - 2
  • The account can be opened by either paying through cash or a cheque or a Demand draft, however, if depositing amount over INR 1 lakh, the payment has to be via cheque or DD

Rate Of Interest for Senior Citizen Savings Scheme:

 

  • The rate of interest is fixed and revised by the Ministry of Finance
  • Interest is paid on a quarterly basis. It is applicable from the date of deposit to:
    • 31 March or
    • 30 June or
    • 30 September or 
    • 31 December
  • In case, the payable interest is not claimed by an account holder, it would not earn an additional interest
  • Interest may be drawn through auto-credit into a savings account at the same post office through ECS
  • The interest that you earn would be taxable if the total amount exceeds INR 50,000 during a financial year
  • TDS would not be deducted if 
    • Form 15 G/15H is submitted 
    • Accrued interest is not above the prescribed limit

Why is the Senior Citizen Savings Scheme a good investment option?

Introduced by the Government of India, in the year 2004, the Senior Citizen Savings Scheme is considered to be one of the most lucrative saving schemes for people above the age of 60. This government-sponsored scheme offers senior citizens with a regular and safe source of income. There is hardly any risk of capital loss and thus retirees find this a secure way to park their retirement corpus. Simple to understand and operate, this scheme is indeed a great investment option.

Other Investment Products like Senior Citizen Savings Scheme:

 

The following table will help you in making a comparison between the Senior Citizen Savings Scheme and others:

ParameterSenior Citizen Savings Scheme15-year Public Provident Fund AccountFixed Deposit
Eligibility

Single: Above 60 years (Age of joint account holder (spouse) is not considered)

VRS: Above 55 yrs for 

Defence Personnel: Above 50 years, but less than 60 years

Any Indian Citizen


 

Guardian on behalf of a minor


 

Defence personnel above 50 yrs

Any citizen can invest in an FD
Rate of Interest The rate of interest is determined by the Ministry of Finance, all post offices and banks offer the same rateThe rate of interest is determined by the Ministry of FinanceThe rates offered by a particular bank differ from the other one
Amount of Investment 

Minimum: INR 1,000 Maximum: INR 15 lakh


 

Minimum: INR 500 Maximum: INR 1.5 lakh


 

The minimum and maximum amount of investment varies from bank to bank
Frequency of DepositOnce at the time of Account opening Deposits can be in instalments or in a lump sumOnce at the time of Account opening 
Lock-In PeriodAn investment for a period of 5 years is to be made15 years The period ranges between 7 days and 10 years
Partial WithdrawalPartial withdrawal can be made after 2 years of account opening, however, a fine would have to be paid if withdrawal is made before 5 yearsPartial withdrawal after 5 years is optionalThere is no provision for a partial withdrawal 
Number of AccountsMore than one accounts may be opened, however, the total in all accounts cannot breach the specified the investment limitThe account can be for a sole member, there are no joint account holders in a Provident FundMore than one fixed deposits can be opened
Provision of LoanNot availableThe loan can be applied for against the PPF account between the third and fifth yearNot available

Taxation of Senior Citizen Savings Scheme:

 

The tax implication of the SCSS is as follows:

  • The account is eligible for a tax exemption up to INR 1.5 lakhs, under Section 80C of the Income Tax Act
  • The interest that you earn on the SCSS is taxable, thus TDS is applicable in case the earned interest in a financial year is above INR 50,000

Premature Withdrawal options of Senior Citizen Savings Scheme

If for some reasons you wish to make a premature withdrawal, you can do that only after one year of account opening. You would also have to pay a fine for the time elapsed between the withdrawal and the date of opening of an account. The applicable penalties are as follows:

Premature WithdrawalPenalty 
After 1 year but before 2 years of account opening1.5% of the Deposit Amount
After 2 years but before 5 years of account opening1% of Deposit Amount

Conclusion

If you are nearing your retirement and looking for ways of Smart Investments, Senior Citizen Savings Scheme is surely a step in the right direction. This scheme is safe, reliable, government-backed and offers you high returns. For many retirees, the Senior Citizen Savings Scheme has been an ideal place to park the retirement corpus.
 

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