The Senior Citizen Savings Scheme is a government savings scheme launched for the senior citizens of India aged 60 or above. This scheme is one of the most preferable options for earning a steady income post-retirement. Currently, the SCSS interest rate stands at 8.2%.
SCSS or Senior Citizen Savings Scheme is a government-backed investment instrument that aims to monetarily benefit the senior citizens of India. Individuals aged 60 years and above can invest in this scheme to get assured regular monthly income and tax benefits post retirement. You can invest in a lump sum in this scheme and enjoy the interest on the invested amount post-maturity.
Here are some of the most important features of SCSS:
|Investor Eligibility||1. Indian residents above the age of 60|
2. Retired individuals above 55 (voluntary and special voluntary retirement scheme)
3. Retired individuals above 50 (defence personnel)
|Investment Range||₹1,000 to ₹30 lakh|
|Account Opened In||Post offices and branches of authorised banks|
|Current SCSS Interest Rate||8.2% p.a. (April-June, 2023)|
|Tenure||5 years, once extendable to 3 years|
|Major Benefits||1. Assured Returns|
2. Returns typically above prevailing FD rates
3. Tax deduction benefits up to ₹1.5 lakh under Section 80C
|Premature Withdrawal||Allowed, with the following penalties:|
1. No interest if SCSS account closed within 1 yr
2. 1.5% penalty if account closed between 1 year and 2 years
3. 1% penalty if account closed between 2 years and 5 years
The following are the prominent features of SCSS:
The current interest rate for Senior Citizen Savings Scheme is 8.2% p.a. This rate is applicable for the quarter April to June, 2023.
If you are thinking about investing in SCSS, the following list of benefits will help you know why this scheme could be a suitable option for you.
As the government backs this scheme, it is already a safe scheme with guaranteed returns making it a great option for senior citizens.
This scheme also comes under Section 80C of the Income Tax Act, making the maximum investment amount of up to ₹1.5 lakh tax-deductible in a financial year.
The current Senior Citizen Savings Scheme interest rate is 8.2%, which could be higher than many other bank fixed deposit rates.
For the SCSS account holders, the interest is paid quarterly in the months of April, July, October and January.
Although Senior Citizen Savings Scheme comes with a maturity period of 5 years, the investments could be withdrawn after paying applicable penalties.
Assuming the same interest rate throughout the tenure of 5 years, here are the following calculations:
As this is a scheme only for senior citizens, SCSS has the following eligibility criteria:
An SCSS account can be opened at a post office or at the branches of an authorised public or private bank.
A Senior Citizen Savings Scheme account cannot be opened online. Interested investors should visit a post office or a branch of an authorised bank to do the same. They should fill out and submit the SCSS form along with KYC documents and two passport-size photographs. They can deposit up to ₹1 lakh in their SCSS account in cash; however, they need to give a cheque for a higher deposit amount.
Visit the nearest branch of any of the authorised public or private banks
Fill the SCSS form, along with the required KYC documents and two passport size photographs.
Deposit the principal amount at the bank branch (in cash if amount is less than ₹1 lakh, otherwise through a cheque)
The authorised banks including State Bank of India, Union Bank of India, Punjab National Bank, ICICI Bank, Bank of Baroda, etc.
You can also download the SCSS form online by clicking on the link:
SCSS investments qualify for a tax deduction benefit of up to ₹1.5 lakh in a financial year under Section 80C of the Income Tax Act, 1961. However, since it’s a one-time lump sum investment, this tax exemption can be enjoyed only once during the year of SCSS account opening.
The SCSS interest income, however, is taxable as per the investor’s tax slab rate. Also, TDS would apply if the interest income exceeds ₹50,000 in a year.
Investors could liquidate their SCSS account at any time before the maturity period of 5 years. However, a penalty would be imposed depending on the timing of the premature withdrawal, as follows:
The following table will help you understand the basic differences between SCSS and fixed deposits. This will help you choose the option that is best suited for you.
|Attributes||Senior Citizen Savings Scheme||Fixed Deposit|
|Maturity period||5 years||Ranges from 7 days to 10 years|
|SCSS Interest rate||8.2% (April-June, 2023)||3.5%-8% p.a. For senior citizens depending on bank, tenure and amount|
|Premature withdrawal||Allowed, with applicable penalties||Allowed, with applicable penalties. Not allowed for tax-saver FDs|
|Tax deduction benefits (on investment)||Up to ₹1.5L u/s 80C||Up to ₹1.5L u/s 80C only for tax-saver FDs|
|Tax Benefits (on return )||Taxable||Taxable|
Senior Citizen Savings Scheme usually offers higher rates than prevailing FD rates for senior citizen depositors, despite many banks offering comparable FD rates in recent months. Both are liquid investments as both allow premature withdrawal after paying the applicable penalty. However, tax deduction benefits are only available on SCSS and tax-saver FDs but not on normal FDs. Also, SCSS does not allow deposits higher than ₹30 lakh; if you want to invest a higher amount, FDs could be a better low-risk investment option.
You can, however, consider investing in both for assured returns at minimal risk.
Senior Citizen Savings Scheme offers guaranteed returns and a steady income for the elderly after retirement usually at rates higher than prevailing FD rates. Therefore, to have financial stability in the future, one can consider investing in this scheme. However, investors should keep in mind that despite 80C tax deduction benefits on the year of account opening, SCSS returns are fully taxable as per the investor’s tax slab.
That said, if you’re looking to diversify your investments, you may consider investing in a range of mutual funds from Navi Mutual Fund across market caps, asset classes and geographies. Investments starting at just ₹10!
You have to link your SCSS account with your post office savings or bank account before March 31 2022, as announced by the government. This has to be done because the interest on your SCSS account will be credited directly to your bank or PO savings account.
There is no fixed date for the interest rate to change on SCSS. However, this decision is taken by the Monetary Policy Committee via a meeting which is held 4 times a year at an interval of 3 months. The first meeting is generally held in the first quarter of every financial year.
You can open an SCSS account with SBI in a few simple steps. However, the very condition for having more than one SCSS account is the total deposit amount of all the accounts taken together should not exceed Rs.15 lakh.
In the event of the sudden demise of the account holder, the available amount at the time of the unfortunate event is transferred to the legal heir or nominee. Therefore, the nominee or the legal heir can apply for transfer along with the account holder’s death certificate.
Individuals can only open a joint account with their spouse under SCSS. However, there is no age limit for the second account holder.
The maturity period of SCSS is five years. Post maturity, individuals can apply for an extension of another three years but only within the year of maturity.
As of now, there are no such options. You have to visit a bank or post office, submit the form and issue the cheque to open an SCSS account. However, you could choose to download the form online.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
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