The government issued a notification on November 7, 2023, making several important changes in the popular Senior Citizen’s Savings Scheme (SCSS). As per the notification:
1. More time to invest retirement benefits: A retired individual of more than 55 years of age but below 60 years of age will now have three months’ time to invest retirement benefits in the SCSS. Earlier, a retired individual had to invest within 1 month of the receipt of retirement benefits.
2. Investment by spouse of government employee: The government has further eased the rules for investment in SCSS for spouse government employees who died while on duty. The new rules allow the spouse of a government employee to invest the financial assistance amount in the scheme. This will be allowed if the government employee who has passed away attained the age of 50 years and died while being on the job. This benefit is being given to all central and state government employees eligible for retirement benefits or death compensation.
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3. Scope of retirement benefits defined: The government has also specified the scope or meaning of the retirement benefits. As per the notification, retirement benefit means any payment received by the individual due to retirement or superannuation. This includes provident fund dues, retirement or superannuation or death gratuity, commuted value of pension, leave encashment, savings element of group savings linked insurance scheme payable by the employer on retirement, retirement-cum-withdrawal benefit under Employees’ Pension Scheme (EPS) and ex gratia payments under a voluntary or special voluntary retirement scheme. This definition of retirement benefits will also apply to the benefits received by a government employee who died on the job for the purpose of investment in this scheme.
4. Deduction on premature withdrawal: The government has inserted new rules on premature withdrawals from the scheme. As per the new rules, one percent of the deposit will be deducted if the account is closed before the expiry of one year of the investment. As per the earlier rules, if the account was closed before the expiry of one year, interest paid on the deposit in the account was to be recovered from the deposit and the entire balance was paid to the account holder.5 . No limit on the extension of SCSS: The government has revised the rules for the extension of the SCSS scheme. The account holder can continue to extend the account for n number of block – the block being of three years each. Further, the application has to be submitted for every extension. Earlier, the extension was allowed only once.The extension will be considered from the date of maturity or from the end of each block period of three years, irrespective of the date of application received. The application for an extension can be submitted within a period of one year from the date of maturity or from the date of the end of each block period of three years.
6. Interest on extension of scheme deposit: The government has also revised the interest that an individual will be entitled to if they extend the scheme after maturity of five years. As per the new rule, in case the SCSS account gets extended on maturity, the deposit will earn an interest rate applicable to the scheme on the date of maturity or on the date of extended maturity.
As per the old rules, the deposit in an extended account would have earned interest at the rate applicable to the scheme on the date of maturity. As the account could not have been extended more than once, therefore, the interest to be applied on the second extension was not specified. This change is merely a clarificatory rule as multiple extensions have now been allowed.
7. Maximum deposit amount: The maximum deposit amount in the scheme shall not exceed the allowed deposit limit. This includes 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 each block period of three years. As per the notification, “The deposit made at the time of opening of account shall be paid on or after the expiry of five years or after the expiry of each block period of three years where the account was extended under paragraph 8 from the date of opening of account. Provided that after the closure of the existing account or accounts, new accounts or accounts may be opened again as required by the depositor subject to the maximum deposit limit.”
As the account could not have been extended more than once, therefore, the deposit made on the second extension was not specified. This change is merely a clarificatory rule as multiple extensions in the scheme have now been allowed.
The SCSS now allows a maximum deposit of Rs 30 lakh. This was announced in Budget 2023. If the account holder passes away, the spouse, being joint holder or sole nominee of the scheme, can continue with the SCSS account by informing the same to the accounts office (post office or a bank branch where an account is opened).