Senior Citizen Savings Scheme (SCSS)

Features of Senior Citizen Savings Scheme

Introduction

Senior Citizen Savings Scheme (SCSS) is a government-backed savings instrument with the highest safety and tax saving benefits offered to Indian residents aged over 60 years. It is the most popular scheme amongst senior citizens of India.

Post retirement, senior citizen look for investment avenues to park their retirement corpus in. They are hesitant to put their hard-earned money in equities, which carry capital loss risk, or products which come with a long lock-in period and don’t offer any income till maturity.  Thus, Retirees look for products that are less risky and can also minimise their tax outgo. This is where SCSS comes in. 

Senior Citizen Savings Scheme (SCSS)

Features of SCSS :

• SCSS is a low risk, high return investment, especially designed for the senior citizen taxpayers. It also helps to bridge the gap between their pension and last drawn salary.
• This is an effective and long-term saving option which offers security and added features that are usually associated with any government-sponsored savings or investment scheme.
• SCSS is available through certified public / private sector banks and post offices across India.

Let us discuss the provisions offered by Senior Citizen Savings Scheme (SCSS) in detail.

1.Eligibility

• Investors must be resident individuals aged 60 years and above
• Retirees who have opted for the Voluntary Retirement Scheme (VRS) or Superannuation in the age bracket 55-60. Here the investment has to be done within a month of receiving the retirement benefits.
• Retired defense personnel with a minimum aged 50 years
• Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not allowed to invest SCSS. 

2.Investment Amount limit

• Minimum : Rs.1,000
• Maximum : up to Rs.15 lakh (in multiples of Rs.1,000). The amount invested in the scheme also cannot exceed the money one receives on retirement. Therefore, one can invest either Rs.15 lakh or the amount received as a retirement benefit, whichever is lower. 
• The SCSS account can be opened by cash for amounts below Rs.1 lakh and by cheque only for amounts of Rs.1 lakh and above.

3.Interest Rate

• The interest rates offered on Senior Citizen Saving Scheme (SCSS) just like other post office saving schemes are reviewed every quarter by the Ministry of Finance. However, the interest payable on an investment is locked on the date of the investment and does not change even if the rate on the scheme as a whole is revised later. 
• Only new investments under SCSS are affected by the change in interest rate. However, if an SCSS account is extended post maturity the interest rate that the extended account will earn will be as per the rate prevailing for that scheme on the date of extension. 
• Senior Citizen Saving Scheme (SCSS) latest interest rate for the quarter July-Sept 2019 is revised to 8.6%, lowered by 0.1% from the earlier interest rate of 8.7%

4.Tenure/ Maturity Period

• The tenure/ maturity period of the SCSS scheme is 5 years and it can be further extended for 3 more years. 
• In order to extend the scheme for another 3 years after the completion of the mandated 5-year tenure, the investor is required to submit the duly filled Form B for the extension of the scheme.
• Only one extension is allowed, and the extension request has to be made within 1 year of maturity of the SCSS account.   

5.Tax benefit & Taxability of Income

• Tax Benefit : Investment in SCSS is eligible for deduction under section 80C up to Rs.1,50,000. However, this tax benefit is under the overall current ceiling of Rs.1.5 lakh per annum fixed for all investments under Section 80C like PPF, Tax saving fixed deposits, EPF, NPS, NSC etc. There will be no additional benefit under Section 80C for the extension of an existing account after five years.

• Taxability of Income : The interest received under the scheme is fully taxable in the hands of the depositors. However, senior citizens can claim deduction under section 80TTB for the maximum up to Rs.50,000 in a single financial year. There is a tax deducted at source (TDS) on the interest payment if the amount is more than Rs.10,000 per annum as per current tax laws. 

6.Withdrawal

• Tenure of SCSS investment is of 5 years and hence, any amount withdrawn after 5 years is exempt from tax.
• Premature withdrawals are allowed, but only after one year and with premature withdrawal penalty charges.  If one prematurely withdraws after a year, but before two years from the start date, the penalty charges are 1.5% of the deposit, and after 2 years it is 1%. For premature withdrawal, benefit of deduction under section 80C is added back to the income of the depositor.
• In case of death of the depositor before maturity, SCSS account is closed and the principal along with the interest on SCSS is given to the nominee or legal heir of the account holder. In such cases, the principal amount is not taxable in the hands of the nominee or the legal heir (as the case may be). The interest received after the death of the account holder will be taxable in the hands of the nominee or legal heir (as the case may be). No charges are levied in case of premature closure of account due to the depositor’s death.

Conclusion

• Since SCSS is an Indian government-sponsored investment scheme, it is considered to be one of the safest and most reliable investment options.
• At interest rate of 8.6% the return rate is very good as compared to a savings or FD account. SCSS investment is also eligible for tax deduction of up to Rs.1.5 lakh under Section 80C.
• The tenure of this investment scheme is flexible with an average tenure of 5 years which can be extended up to further 3 years.
• Nomination facility is available at the time of opening an SCSS account by means of submitting an application as part of Form C.