Senior Citizen Savings Scheme (SCSS) India
Tags: Personal Finance, India, Investment, Passive Income, Retirement

Key Takeaways

Risk — Virtually no risk; Sovereign guarantee

Eligible — People above 60 years who have retirement corpus (few exceptions)

Returns — 7.4% (quarterly income) as on Oct 2020

Maturity — 5 years (can be extended)

Deposit — INR 1000 to INR 15 lakhs

Photo by LOGAN WEAVER on Unsplash

My thoughts: This scheme is a good way to keep the corpus secure while getting some regular income. Should definitely be a part of the investment portfolio for the retirees.

What is SCSS?

Senior Citizen Savings Scheme is a quarterly fixed income scheme by government of India. Individuals can apply for SCSS through post offices as well as public & private banks. SCSS is a government-endorsed scheme, and hence enjoys capital protection through sovereign guarantee.

Returns

The interest rate for SCSS varies quarterly announced by the government. The interest rate applicable during the time of investment remains fixed throughout the maturity tenure and is not affected by alterations in a later quarter.

The current rate of interest is 7.4%

Eligibility

Senior citizens aged 60 years and above are eligible

Retired individuals above 55 years of age under voluntary or special voluntary scheme

Retired personnel of Defence services above 50 years (excluding civil defence employees)

NRIs, PIOs and Hindu Undivided Family are not eligible to open an account

Deposit Limits

The account shall be opened with a minimum deposit of INR 1,000 or any sum in multiple of INR 1,000 not exceeding INR 15 lakhs

Account can be opened by cash for the amount below INR 1 lakh and for INR 1 Lakh and above by Cheque/ Demand Draft only.

In case of Cheque, the date of realization of Cheque in Govt. account shall be date of opening of account.

Maturity

The maturity period for the SCSS scheme is 5 years.

Upon extension, however, interest rates applicable at that quarter would apply. The extension can be done within one year of maturity.

Upon extension, however, interest rates applicable at that quarter would apply. The extension can be done within one year of maturity.

Only one extension is allowed, and such extended accounts can be closed after one year of extension without any penalty

Taxes

TDS is deducted at source on interest if the interest amount is more than INR 50,000/- p.a

Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007

Disbursal

Quarterly disbursals of interest payment will be credited to an individual’s account on the first date of April, July, October, and January.

The account holder must remember that if the investment is done via a post office then he/she must have an operating post office savings account to receive the credit of the quarterly interest. The same goes for investment done through a bank.

The credit of the interest on investment done through a post office is not possible in the account holder’s bank savings account.

If the interest payable every quarter is not claimed by an account holder, such interest shall not earn additional interest.

Account closure

Premature closure is allowed,

(i) If closed before 1 year , no interest will be payable, if paid already will be recovered.

(ii) after one year on deduction of an amount equal to 1.5% of the deposit to be deducted

(iii) after 2 years 1% of the deposit to be deducted.

In the case of extended accounts, an individual can close their account after the first year without incurring any penalty.

The deposit made at the time of opening of the account shall be paid on or after the expiry of five years or after the expiry of eight years where the account was extended from the date of the opening of the account.

No charges are levied in case of premature closure of account due to the depositor’s death.

Nominee

The depositor may nominate a person or more than one person

Nomination made by the depositor can be cancelled or varied.

Individuals can register a nominee when they are opening their accounts under the Senior Citizen Savings Scheme or at a later date.

In the case of joint holding, the nomination form should be signed by all the account holders.

There is no limit on the number of times an investor can change his nominee

It must be noted that the principal amount on premature withdrawal by the nominee or legal heirs is not taxable in their hands in the event of the death of the depositor. Any interest paid into the account of a depositor after the date of his demise, will be taxable in the hands of the nominee or legal heirs.

A depositor can also appoint a minor as his nominee. He just needs to provide the guardian’s details, along with the minor’s date of birth.

Other Features

A depositor may operate more than one account in individual capacity or jointly with spouse. Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts.

The depositor can also transfer his account to another post office or to a bank. He can avail this facility by submitting the duly filled transfer form to his current deposit office, i.e., the post office or bank. A nominal fee is charged to avail this facility

While opening an SCSS account, the depositor must furnish all the required information. If the information furnished by him is false then the account will be closed immediately and the deposited amount will be refunded after the deduction of interest already paid (if any) to him/her

Government Website links:

https://rbidocs.rbi.org.in/rdocs/content/pdfs/SCSSGOL17042020.pdf

https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx