Senior Citizens Saving Scheme
Retirement corpus is sacred for a senior citizen. He is looking for investment avenues which are simple to understand and provide good, stable returns with low risk. Launched in 2004 with a view to improve the security and quality of life of senior citizens, Senior Citizens Savings Scheme (SCSS) is an investment scheme with guaranteed returns and the benefit of tax deduction under section 80C of the Income Tax Act. It is one of the most popular schemes for individuals above sixty, due to attractive interest rates, sovereign safety and capital preservation. Apart from this, it is also preferred due to its simple and easy process, flexibility of tenure, transferability of the account, nomination facility, etc.
Features of SCSS
SCSS has a 5-year tenure with an option of extending it for further 3 years. The investor has to invest only one amount in a single deposit, and this should not exceed ₹15 lakhs. All the investment in SCSS must be done within 30 days after the date of retirement. The scheme allows for withdrawals after one year of investment, but will attract a penalty on the same.
The interest rates on SCSS are revised and compounded quarterly. Currently, the interest rates on SCSS stand at 8.7% for Quarter 2 of 2019. This is the highest interest rate among all the small savings schemes in India. This scheme is certified with most banks and post-office. Since SCSS is an India Post product which has extensive outreach all across India, SCSS is made easily accessible to all Indians- even those located in the remotest parts of the country.
Procedure to invest in SCSS
SCSS account can be opened at all Post offices, and at authorised Private and Public Sector Banks. It can only be opened via offline route. There is no facility of online account opening.
Download Application Form
You can download the application form for SCSS from the official website of India Post – https://www.indiapost.gov.in/VAS/DOP_PDFFiles/form/ApplicationFormForOpeningSCSS.pdf
You can also download the form from the websites of authorised banks offering this scheme. After downloading, you are required to print the form and fill it out.
Alternatively, you can obtain a physical copy of the form from any Post Office branch, or from authorised banks’ branches.
Duly fill the Application Form
Fill the form and provide the supporting documents. Important information which is mandatory required to be filled includes:
- Name and PAN details
- Applicants’ Father/Mother/Husband/Wife
- Spouse’s name, age, etc. in case of joint account with spouse
- Cheque/Demand Draft details
- Nominee’s name, age and address.
- In case of more than one nominee, mention the share of SCSS investment for each nominee
Documents required for opening SCSS Account
For opening the account, the following documents are required:
- Application form
- Address proof
- Photographs of the applicant/s
- KYC Form
- Permanent Account Number (PAN)
- For retired people, a certificate from the employer is required, with details regarding superannuation (or otherwise), benefits received, designation and the period of employment.
- The date when retirement benefits were disbursed, with proof.
Advantages of opening the account via bank
Anyone having a savings account with one of the authorised banks can open the SCSS account linked to their savings account. The interest accrued on SCSS can be directly credited into the investor’s savings bank account held with the bank branch. The investor will also be provided with standard account statements through post or email. Apart from this, any queries or grievances of the investor can be easily resolved through the 24×7 customer service offered by the bank’s phone banking services.
Benefits of SCSS
There are several benefits for senior citizens to invest in SCSS over other debt schemes. Some are listed below:
- It is a product with sovereign backing, and hence is completely risk-free. This is critical, because it deals with the entire life’s savings of senior citizens.
- It has the highest interest rate among all guaranteed debt schemes. The interest rate is currently 8.7%
- It enjoys tax exemption up to ₹ 1.5 lacs under section 80C of the Income Tax Act. Apart from that, senior citizens can claim deduction under section 80TTB for the interest earned up to a maximum of Rs 50,000 in a year.
- It is a 5-year product, extendable by 3 years. This means that senior citizens can look at it as a good medium to long term investment without worrying about other investment avenues for a while.
- This scheme is easily available across the country through post offices and designated banks.
- In case of financial emergencies, one can withdraw from the account before maturity, subject to certain penalties.
- One has the flexibility to invest anywhere between ₹1,000 to ₹15 lakh in SCSS. The only limitation is that the amount should not exceed the retirement benefit paid out to the employee, or ₹ 15 lakhs, whichever is lower.
- The SCSS account can be easily transferred from one bank or post office to another.
- Who can invest in SCSS?
Any citizen with the age of more than 60 can invest in SCSS. Apart from that, individuals who have to opt for VRS or Superannuation in the age range of 55-60 are also eligible to invest in SCSS. For retired defence personnel the minimum age to invest in SCSS is 50 years. Non-Resident Indians (NRIs)&Hindu Undivided Families (HUFs) are not allowed to invest in SCSS.
- How much can you invest in SCSS?
Investment amount in the scheme cannot exceed Rs 15 lakh or the amount received on the retirement, whichever is lower. For a joint-account holder investment limit is set at Rs 30 lakh. All the investment in SCSS needs to be done in the multiple of Rs 1000. Any investment above Rs 1 lakh has to be done by cheque.
- How is the interest paid out in SCSS?
The interest accumulated in a Senior Citizen Saving Scheme account is compounded 4 times a year. It is paid on 31 March/30 September/31 December at the first time and after that, it is payable at 31 March, 30 June, 30 September and 31 December every year.
- What are the tax benefits of investing in SCSS?
Under section 80C of the Income Tax Act, up to ₹1.5 lakh deposited in SCSS is exempted from tax. However, the interest received under the scheme is taxable in the hands of the depositors as per the individual’s tax slab. However, senior citizens can claim deduction under section 80TTB for the maximum up to Rs 50,000 in a single financial year.In case of premature withdrawal, the principal and interest amount both are added to the gross income and taxed as per the tax slab without considering for any deduction.
- Are there any penalties for premature withdrawals?
Premature withdrawal is allowed after completion of one year, subject to penalties. Any withdrawal between 1 to 2 years is charged at 1.5% of deposit and after 2 years at the rate of 1% of the deposit amount.
- What happens in case of death of the account holder?
In case of death of the primary account holder, the account will be closed and the entire maturity amount will be transferred to the legal heir/nominee of the deceased. For claiming this amount, the nominee/legal heir has fill out a written application as per the mandated format along with the Death Certificate of the holder to facilitate the account closure. There will be no penalties of premature closure in this case.
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