Senior citizens can save money through the Senior Citizens’ Savings Scheme (SCSS), a government program that pays out interest on a quarterly basis. A single person or a couple can open this account at a bank or post office. It matures in five years and has an extra eight years of extension facility.
Who is eligible for investment in SCSS 2004 Scheme
A resident of India who is at least 60 years old.
Who can open
Below are the criteria to open SCSS, as per India Post website:
i) An individual above 60 years of age.
(ii) Retired Civilian Employees above 55 years of age and below 60 years of age, subject to condition that investment to be made within 1 month of receipt of retirement benefits.
(iii) Retired Defense Employees above 50 years of age and below 60 years of age, subject to condition that investment to be made within 1 month of receipt of retirement benefits.
(iv) Account can be opened as individual capacity or jointly with spouse only.
(v) The whole amount of deposit in a joint account shall be attributable to the first account holder only.
Who cannot invest in SCSS
Hindu Undivided Families (HUFs) and non-resident Indians (NRIs) are not permitted to invest in SCSS.
The account may be allowed to continue till maturity on a non-repatriation basis, and the account will be recognized as a Non-Resident account, if the depositor becomes a Non-Resident Indian after opening the account and during the lifetime of the account under the SCSS Rules.
If an account holder does not claim the interest due every quarter, it will not accrue any more interest. Interest can be taken out of a savings account that is open at the same post office or an ECS using car credit. Monthly interest can be credited to a savings account held at any CBS Post Office in the event of a SCSS account.
According to the National Savings Institute, “Interest shall be payable from the date of deposit to 31st March/ 30th June/30th September/31st December on 1st working day of April/July/October/January as the case may be, in the first instance and thereafter, interest shall be payable on 1st working day of April/July/October/January”
For the quarter ending September 31, 2022, the interest rate has been set at 7.4% for the SCSS. The Ministry of Finance makes quarterly decisions regarding the rate of interest of such small savings schemes.
Tax on interest
If the total interest earned across all SCSS accounts exceeds Rs. 50,000 in a fiscal year, the interest is taxable, and TDS at the prevailing rate will be subtracted from the total interest earned.
If form 15 G/15H is presented and accrued interest does not exceed the allowed maximum, no TDS will be taken.
SCSS premature closure rules
According to the India Post website, below are the points when premature withdrawal is allowed
(I) Account can be prematurely closed any time after date of opening.
(ii) If account closed before 1 year, no interest will be payable and if any interest paid in account shall be recovered from principle.
(iii) If account closed after 1 year but before 2 year from the date of opening, an amount equal to 1.5 % will be deducted from principal amount.
(iv) If account closed after 2 year but before 5 year from the date of opening, an amount equal to 1 % will be deducted from principal amount.
(v) Extended account can be closed after the expiry of one year from the date of extension of the account without any deduction.
Here are important FAQs on SCSS, according to the
1. Whether both the spouses can open separate accounts in their individual capacity with separate limit of Rs.15 lakh for each of them
Both the spouses can open individual and / or joint accounts with each other with the maximum deposits up to Rs.15 lakh each, provided both are individually eligible to invest under relevant provisions of the Rules governing the Scheme.
2. Can a nomination be made after the account has already been opened
Yes, nomination may be made by the depositor at any time after opening of the account but before its closure, by an application in Form – 1 accompanied by the Pass book to the deposit office.
Can a nomination be cancelled or changed
Yes, the nomination made by the depositor may be cancelled or varied by submitting a fresh nomination in Form 1 to the deposit office where the account is being maintained.
4. Can nomination be made in joint account also
Nomination can be made in joint account also. In such a case, the joint holder will be the first person entitled to receive the amount payable in the event of death of the depositor. The nominee’s claim will arise only after the death of both the joint holders.
5. Can deposits under the SCSS scheme be made only from amounts received as retirements benefits
In case an investor has attained the age of 60 years and above, the source of amount being invested is immaterial [Rule 2 (d)(i)]. However, if the investor is 55 years or above but below 60 years and has retired on superannuation or under a voluntary scheme or a special voluntary scheme or has retired from the Defence services, only the retirement benefits can be invested in the SCSS.
6. What is the meaning of ‘retirement benefits’ for the purpose of SCSS, 2004
Retirement benefits” for the purpose of SCSS Rules have been defined as ‘any payment due to the depositor on account of retirement whether on superannuation or otherwise and includes Provident Fund dues, retirement / superannuation gratuity, commuted value of pension, cash equivalent of leave, savings element of Group Savings linked Insurance scheme payable by employer to the employee on retirement, retirement-cum-withdrawal benefit under the Employees’ Family Pension Scheme and ex-gratia payments under a voluntary retirement scheme’. (Rule 2 (a) of the Senior Citizens Savings Scheme (Amendment) Rules, 2004 notified on October 27, 2004).
7. Is premature withdrawal of the deposits from the accounts under the SCSS, 2004 permitted
The account holder may withdraw the deposit and close the account at any time subject to the following conditions:-
- If the account is closed before one year after the date of opening of account, interest paid on the deposit in the account shall be recovered from the deposit and the balance shall be paid to the account holder.
- If the account is closed after one year but before expiry of two years from the date of opening of the account, an amount equal to one and half per cent of the deposit shall be deducted.
- If the account is closed on or after the expiry of two years from the date of opening of the account, an amount equal to one per cent of the deposit shall be deducted.
- However, if the depositor is availing the facility of extension of account under Rule 4 (3), then he/she can withdraw the deposit and close the account at any time after the expiry of one year from the date of extension of the account without any deduction.