The government-backed Senior Citizen Savings Scheme (SCSS) is available to anyone over the age of 60, or 55 if they retired on superannuation or under a voluntary or special voluntary plan, or 50 if they are former military personnel (excluding civil defence personnel). This implies that employees who desire to retire early cannot take use of the SCSS perk. The account can be opened jointly with a spouse only.
All About Tax-Saving
Here is all you need to know about the SCSS.
Maximum deposit amount
The SCSS now permits a deposit of up to Rs 30 lakh. This was announced in the 2023 Budget. If the account holder dies, the spouse, who is a joint holder or the scheme's only nominee, can continue to use the SCSS account by notifying the accounts office (the post office or a bank branch where an account is created).
Tenure of SCSS
The account shall be opened with a minimum deposit of Rs. 1,000 or any sum in multiples of Rs. 1,000 not exceeding Rs. 30,00,000. The tenure of the deposit is 5 years and can be further extended by 3 years.
SCSS interest rate
The government fixes the interest rate on SCSS every quarter. The government has not hiked the interest rate on SCSS for the January-March 2024 quarter. The account holders can earn interest at the rate of 8.2% on their deposits. The interest is payable every quarter and is fully taxable.
Where can one open SCSS account
An SCSS account can be opened at an authorised bank. It is a good idea to check with your bank whether it offers this facility. An SCSS account can be opened at a post office too.
How to open SCSS account
The applicant needs to fill up the account opening form and attach requisite KYC documents, photographs and a copy of the letter received from the employer with respect to the receipt of retirement funds. You can have more than one SCSS account as long as the total deposit across all SCSS accounts does not exceed Rs 30 lakh.
What is the interest on senior citizen scheme taxability?
"There is SCSS tax exemption under Section 80C of the Income Tax Act, 1961. However, SCSS tax benefit is capped at Rs. 1, 50, 000. In case of interest amounting to more than Rs. 50, 000, for a fiscal year, TDS is applicable," as per the Bank of Baroda website.
Also read: Senior citizen savings scheme: What is the SCSS interest rate for the January-March 2024 quarter?
Premature withdrawal
The government has imposed new restrictions on early departure from the plan. According to the new rules, if the account is closed before the one-year investment period expires, one percent of the deposit would be removed. Previously, if the account was closed before the one-year period expired, the interest paid on the deposit in the account was to be recovered from the deposit and the whole balance was to be remitted to the account holder.
No limit on the extension of SCSS
The government has modified the regulations for the SCSS scheme's expansion. The account holder may continue to extend the account for a n number of blocks of three years each. Furthermore, for each extension, an application must be made. Previously, the extension could only once for a three-year block.
Interest rate on extension
As per the new rules, the government has made changes to the interest rate that a person will be entitled to if the plan is extended after five years. According to the new regulation, if the SCSS account is extended on maturity, the deposit will earn the scheme's interest rate on the day of maturity or the date of extended maturity. Earlier, the deposit in an extended account would have earned interest at the rate applicable to the scheme on the date of maturity.
Account closure on maturity
According to the India Post website, “Account may be closed after 5 year from the date of opening by submitting prescribed application form with a passbook at concerned Post Office. In case of death of account holder, from the date of death, account shall earn interest at the rate of PO Savings Account.
In case spouse is a joint holder or a sole nominee, account can be continued till maturity if spouse is eligible to open SCSS account and not have another SCSS Account.”
FAQs
What happens to SCSS after 8 years? ›
The maturity period for the SCSS scheme is 5 years. It can be extended for another 3 years, effectively bringing up the period to 8 years. If an individual is willing to extend such a period by 3 years, he/she shall submit Form B after duly filling it. An extension is allowed only once.
What are the disadvantages of a senior citizen savings scheme? ›
Q3. What are the main disadvantages of the Senior Citizen Savings Scheme (SCSS)? The main disadvantages include a relatively low interest rate compared to other investment options, a long lock-in period, and potential penalties for premature withdrawals.
What is the penalty for withdrawing from SCSS? ›
If you withdraw after completing one year but before two years, 1.5 per cent of the principal will be deducted. If you withdraw after completing two years, a penalty of 1 per cent is applicable.
Can I invest 30 lakhs in SCSS? ›
An individual above 60 years of age can open the SCSS account with a minimum deposit of Rs 1,000 and in multiples of Rs 1,000. The account has a maturity period of five years, which can be extended for another three years. The maximum deposit under the scheme is Rs 30 lakh.
Can SCSS be closed prematurely? ›
Although the SCSS has a five-year tenure, it can be closed prematurely by submitting an application in Form-2. The following penalties are applicable: If you withdraw within one year, you will not receive any interest, and any interest already paid will be deducted from the principal amount.
Which bank is best for SCSS? ›
List of banks that offer SCSS
- ICICI Bank.
- Union Bank of India.
- UCO Bank.
- Indian Bank.
- Punjab National Bank.
- IDBI Bank.
- Indian Overseas Bank.
- State Bank of India.
In the unfortunate event of the death of the SCSS account holder, no penalty will be applied to the account. However, the rules state that the SCSS account must be closed. The deposited amount, along with applicable interest, will be paid to the nominee or the legal heir.
What happens if SCSS is not renewed after 5 years? ›
The SCSS has a fixed tenure of five years, after which the deposited money is returned to the investor. If desired, the account holder could extend the same account for an additional three years. However, this extension was allowed just once.
What is the lock in period for senior citizen savings scheme? ›
If the interest earned exceeds Rs. 50,000 in a financial year, TDS will be applicable on the excess amount. It is important to note that the SCSS investment is subject to a lock-in period of 5 years, which can be extended for an additional period of 3 years.
Elderly individuals who are unable to turn to family for financial support and have no money can become a ward of the state. This may be the case if the senior develops a health emergency and is no longer able to live alone.
Which scheme is best for senior citizens? ›
The Senior Citizen Savings Scheme (SCSS), Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post Office Monthly Income Scheme (POMIS), Senior Citizen Fixed Deposits, National Pension System (NPS), and Equity Linked Savings Scheme (ELSS) are some of the best investment options for senior citizens to secure their financial ...
What happens when SCSS matures? ›
The account can be prematurely closed at any time, after the date of opening. The account may be extended for a further period for 3 years from the date of maturity. The extension can be done within 1 year from the date of maturity.
What are the rules for SCSS scheme? ›
SCSS accounts have a tenure of five years. The account can be closed prematurely at any time after opening, and you can extend it for another three years from the date of maturity within one year of maturity. The income tax deduction can be claimed of up to Rs. 1,50,000 under Section 80C of the Indian Tax Act, 1961.
What are the exit charges for SCSS? ›
The penalty is 1.5% of deposit amount if you exit before 2 years from the date of account opening and the penalty is 1% if exited between 2 years and 5 years. SCSS combines the advantage of government guaranteed investment with above market returns.
Which government bank gives highest interest rate to senior citizens? ›
Senior Citizen Fixed Deposit Rates 2024
| Top Banks | 1 year - less than 2 years | 5 years - upto 10 years |
|---|
| Union Bank of India | 7.25% | 7.00% |
| Central Bank of India | 7.25% | 6.75% |
| Yes Bank | 6.85% | 7.75% |
| Bandhan Bank | 7.75% | 6.60% |
16 more rowsIt caters to individuals aged 60 and above, providing them with a safe and reliable option to grow their savings. The Post Office Senior Citizen Saving Scheme offers an attractive interest rate, currently at 8.2% per annum (as of May 26, 2024), which is among the highest among small saving schemes in India.
What is the lock period of SCSS? ›
It is important to note that the SCSS investment is subject to a lock-in period of 5 years, which can be extended for an additional period of 3 years. However, the extension can be done only once, and the interest rate for the extended period will be the prevailing rate at the time of extension.
