The Buyt Desk
Senior Citizen Savings Scheme (SCSS) is a government-backed saving instrument for senior citizens of India. It was introduced in the year 2004 to provide senior citizens with a steady and secure source of income after retirement. In contrast to the interest rate of a mere 3% earned on a savings bank account, the SCSS account fetches a far higher interest rate on the savings invested in it.
Eligibility:
You can open an SCSS account at any Post office or some select public/private sector banks. The age eligibility for an SCSS account is as follows:
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Individual of 60 years of age.
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An individual between the ages of 55 and 60 who took VRS (Voluntary Retirement Scheme) can open the account within 1 month of receiving the retirement benefits.
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Retired defence personnel of 50 years of age.
You may be the sole account holder or have a joint account with your spouse. The age of the first applicant is considered for a joint account. Moreover, the amount deposited in the account is attributable to the first account holder only. You can open an individual and joint account, both with the maximum deposit of Rs.15lakhs.
Deposit:
One time deposit of a minimum amount of Rs.1, 000 or any sum in multiples of 1000 with a maximum limit of Rs.15lakhs can be made to open an SCSS account. You can deposit cash up to Rs.1 lakh to open the account but submit a cheque or demand draft for the payment over Rs.1 lakh.
Interest rates:
The interest rate for an SCSS account is revised every quarter. Currently, it is 7.4% per annum.
The interest accumulated until 31st March/ 30th June/ 30th September/ 31st December from the date of opening of the account is paid on the first working day of April/July/October/January. If the interest amount is not withdrawn on the due date, it may be claimed any day after the due date. No additional interest will be earned if the amount is not claimed after it is credited to the account every quarter. Thus, the benefit of compounding is amiss in an SCSS account.
Taxability:
The deposit in an SCSS account enjoys a tax deduction of up to Rs.1.5 lakhs under Section 80C of the Income Tax Act. TDS applies to the interest earned every quarter under the senior citizen saving scheme if greater than Rs.50, 000. To prevent TDS deduction if your income is non-taxable, fill the form 15H and submit it to the bank.
Maturity and Extension:
The account opened under the scheme has a maturity period of 5 years. Further, an extension of 3 years is allowed but can be availed only once. The extension can be applied within one year after the completion of the primary maturity period.
Premature Closure:
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Premature closure before one year from the date of opening earns no interest. The balance amount is returned after recovering the interest paid on the deposit for the period the account was held.
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When the account is closed after 1 year but before 2 years from the date of opening, the balance amount, after deduction of 1.5% of the deposit, is paid back to the account holder.
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When the account is closed on or after 2 years from the date of opening, the balance amount, after deduction of 1% of the deposit, is paid back to the account holder.
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In case of extended maturity, the account can be closed, and the amount can be withdrawn after completion of 1 year from the date of maturity without any penalty.
Closure:
The deposit made at the time of opening the account is paid back after the maturity period.
In the case of death of account holder before maturity or extended maturity:
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The account is closed, and the deposit amount with interest as applicable until the account holder’s death is refunded to the nominee or the legal heir.
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In the case of a joint account, or where the spouse is the sole nominee, he/she may continue the scheme provided he/she is eligible to hold the account on the day of death of the deceased account holder.
