Senior Citizen Savings Scheme (SCSS) is an attractive scheme for senior citizens which offers 8.2% interest for the July-September quarter. An individual can invest up to Rs 30 lakh in SCSS. Interest earned on the SCSS investment is taxable per the investor’s income tax slab. TDS is also deducted if the interest received from the SCSS investment exceeds a specified threshold.
Who can invest in the Senior Citizen Savings Scheme?
Anyone aged 60 and above can invest in this scheme. Retired individuals aged above 55 years but below 60 years can also opt for this scheme if they invest within a month of receiving retirement benefits. The tenure of SCSS is five years, however, if you wish you can extend it for another three years on maturity.
Here’s how and when TDS is deducted from SCSS interest
According to CA Abhishek Soni, co-founder, of Tax2Win, if interest earned from SCSS exceeds Rs 50,000 in a financial year, TDS will be deducted. “However, if your income is below the basic exemption limit then you may submit Form 15G/H and prevent TDS from getting deducted,” he says.
Forms 15G and 15H are self-declaration forms that individuals can submit to declare their income below the basic exemption limit. This helps in avoiding TDS deductions. “Form 15G is a declaration under Section 197A of the Income-tax Act, 1961. It can be submitted by individuals below 60 years of age and Hindu Undivided Families (HUF). Form 15H is a declaration under Section 197A (1C) that can be submitted by senior citizens (aged 60 years and above) to ensure that no TDS is deducted,” says Mihir Tanna, Associate Director- direct tax, S.K Patodia & Associates LLP, a CA firm.
Tanna warns that taxpayers investing in SCSS should not misuse Form 15G/H to prevent TDS deduction. “The post office or bank or the entity where you are investing is not responsible for verifying your total income level. So if you are submitting Form 15G/H then you are declaring that your income is below the basic exemption limit. Rule 10 of Income tax rules to Form 15G states that before signing the declaration/verification, the declarant should satisfy himself that the information furnished in the form is true, correct and complete in all respects. Any person making a false statement in the declaration shall be liable to prosecution under Section 277 of the Income-tax Act, 1961,” says Tanna.
Basic Exemption Limits for the FY – 2023-24:
New Tax Regime – up to Rs 3 lakh
Old Tax Regime – Up to Rs 2.5 lakh (60 years and below)
Up to Rs 3 lakh (More than 60 but less than 80 years)
Up to Rs 5 lakh (More than 80 years)
How to invest in SCSS
Senior citizens and others can invest in SCSS accounts at any bank or post office branch by filling up an application form- FORM-A. This application form along with FORM-D which is a pay-in-slip must be submitted along with age proof of the senior citizen, according to a frequently asked question (FAQ) about SCSS by the SBI.
Do keep in mind that once invested, the interest rate remains fixed for the duration of the SCSS i.e., 5 years. The scheme does not provide any interest on maturity. However, if an investor extends the scheme after maturity, he or she will earn interest according to the interest rate applicable for SCSS at that time.
