Senior Citizen Saving Scheme (SCSS)

What is the Senior Citizen Savings Scheme (SCSS)?

The Senior Citizen Savings Scheme is a retirement benefit programme launched by the Government of India for its citizens aged 60 years and above. Introduced in 2004, it offers regular income to senior citizens through interest payments. 

The SCSS scheme provides beneficiaries with a safe investment option that offers higher returns than traditional savings accounts. It is popular among senior citizens looking for a secure alternative to invest their savings and earn a steady income in their retirement years. It is available through authorised banks and Post Offices across India.

The SCSS interest rate is revised every quarter by the government. It has a minimum tenure of five years, extendable up to three years upon maturity. 

How does the Senior Citizen Savings Scheme (SCSS) work?

The scheme works like any other fixed deposit scheme. Resident Indian senior citizens can invest individually or jointly.  

SCSS offers a fixed rate of interest compounded and revised quarterly. Thus, the SCSS interest rate may vary based on the prevailing market conditions. 

Interest earned under the scheme is taxable. The senior citizen scheme interest rate attracts Tax Deducted at Source (TDS) if the interest earned exceeds Rs. 50,000 in a financial year.
 

Features of the Senior Citizen Savings Scheme

1.    Quarterly Revision of Interest Rates
The government revises the SCSS rate of interest every quarter. The interest rates are linked to the prevailing market rates. The scheme offers its investors competitive and inflation-adjusted interest rates. The interest rate remains constant if the prevailing economic condition does not change drastically. 

2.    Fixed Income
The Senior Citizen Savings Scheme offers a fixed income to its investors in the form of interest payments. These payments are made quarterly and can be a regular source of passive income. The SCSS rate of interest declared on investment remains constant throughout the investment period. 

3.    Minimum and Maximum Deposit
According to the SCSS scheme details, the minimum deposit amount is Rs. 1,000. In contrast, the maximum is Rs. 15 Lakhs or the amount of retirement benefit received, whichever is lower. The deposit can be in multiples of Rs. 1,000.

While a depositor can open multiple Senior Citizen Savings Scheme accounts, the total amount deposited has a maximum limit of Rs. 15 lakhs. Additionally, if an account holder has deposited Rs. 15 Lakhs in their Senior Citizen Savings Scheme account, they cannot deposit any additional amount. The government sets the deposit limits, which are subject to change.

For example, if a person receives Rs. 8 Lakhs as a retirement benefit, the maximum permissible deposit limit is Rs. 8 Lakhs, irrespective of whether it is an individual or joint account. However, you can open a joint account only with your spouse. 

4.    Maturity Tenure
The maturity tenure of the Senior Citizen Savings Scheme is five years, which can extend for three years after maturity. The extension must be done within one year of maturity. The account holder must furnish Form B to apply for an extension. They can utilise the extension option only once, and the interest rate for the quarter is applicable. 

For example, you deposited Rs. 15 Lakh under Senior Citizen Savings Scheme in May 2015 at an interest rate of 9.50%. You decided to extend the scheme in May 2020, and the SBI SCSS interest rate 2023 interest rate is 7.50%. Hence, you will be eligible for interest at 7.50% for the extension period. 

5.    Premature Withdrawals and Account Closure
SCSS scheme allows premature withdrawals and account closure subject to certain conditions. You can close the account prematurely within two years of opening. A penalty of 1.5% is levied on the deposit amount. 

If the account closure is after two years from the deposit, the penalty is 1%. In case of the account holder's death, the nominee receives the deposit amount and does not attract any penalty. 

For example, Mr Singh deposited Rs. 10 Lakhs in the Sr. Citizen Savings Scheme on April 1, 2018, and closed it on March 6 2020. Such premature withdrawal will attract a penalty of Rs. 10,500. 

6.    Quarterly Disbursal
The interest earned under the Senior Citizen Savings Scheme is disbursed quarterly, i.e., in April, July, October and January. This ensures that senior citizens have a regular source of income to meet their daily expenses.

7.    Mode of Deposit
The deposit may be through cash, cheque, or demand draft at any designated bank or post office. Deposits above Rs. 1 Lakh must be through a cheque or demand draft. 

8.    Nomination Facility
The SCSS offers a nomination facility to its investors. The account holder can nominate one or more persons to receive the deposit amount in case of the former’s death.

9.    Security of Capital
One of the key features of SCSS is capital security, guaranteed by the Government of India. Thus, the investment is safe and secure, and there is no risk of losing it. Therefore, it is an attractive option for seniors who want to invest.

10.    Substantial Returns
The SCSS rate of interest provides attractive returns to investors and is revised quarterly. As of April 1, 2023, the rate stands at 7.4%. It is substantially higher than most savings accounts and fixed deposits. Senior citizens can earn a return on their investment and ensure financial security.

Calculation of Interest under the Senior Citizen Savings Scheme

The interest under the Senior Citizen Savings Scheme accrues with direct payment to the investor's savings bank account. The SCSS rate of interest is set at the time of investment and remains constant throughout the tenure of the investment. The formula for interest calculation under the scheme is as below:

Interest = Principal amount x Interest rate x Period / 400

For example, if an investor has invested Rs. 10 lakhs in the Senior Citizen Savings Scheme for a tenure of 5 years, and the SCSS interest rate 2023 is 7.4%, then the interest earned would be:

Interest = 10,00,000 x 7.4 x 20 / 400 = Rs. 37,000 per quarter

How to Open an Account under the Senior Citizen Savings Scheme

Senior citizens must follow the following steps to create an account under the Senior Citizen Savings Scheme.

1.    Visit the nearest post office or bank branch offering the scheme. You can visit any public or private bank to create an account.
2.    Obtain the form A application form and fill it in with the required details.
3.    Attach the necessary documents, including identity proof, address proof, age proof, and passport-size photographs.
4.    Submit the form and the documents at the post office or bank branch.
5.    Upon document verification, you will have access to your account.
 

Post Office SCSS Form

To complete the Senior Citizen Savings Scheme application form, individuals can obtain it from any post office branch or download it from its official website. Follow the steps below to get the form.

1.    Fill out the post office branch in the top left corner of the form.
2.    If the applicant already has a post office savings account, they fill out the post office account details.
3.    Enter the branch address in the 'To' field.
4.    Paste the account holder's photograph in the space provided.
5.    Fill in the account holder's name in the first blank field and select the 'SCSS' option from the drop-down menu.
6.    In the 'Additional Facilities Available' section, leave the options blank as they only apply if the applicant is applying to open a savings account.
7.    Choose the account type -  self, a person of unsound mind or a minor with a guardian. 
8.    Select whether the account is single, either survivor or all or survivor.
9.    Fill out the deposit amount in both figures and words in the field number. The applicant must note the check number and date if presenting a check.
10.    Provide the account holder's personal information.
11.    Mark the cells indicating the required document proof submission at the bottom of the table.
12.    The account holders must sign on Page 1 and Page 2 of the form.
13.    Mention the account nomination and provide the nominee's contact information. All account holders must confirm this information with their signatures.

How to Open SCSS Account in a Bank Offline

To open a Senior Citizen Savings Scheme account offline at a bank, senior citizens must follow these steps.

Step 1: Visit the nearest bank branch that offers the Senior Citizen Savings Scheme. 

Step 2: Fill in the account opening form with the required details.

Step 3: Attach the necessary documents, including identity proof, address proof, age proof, and passport-size photographs.

Step 4: Submit the form and the documents to the bank branch.

Step 5: The bank will open the account once the documents are verified.
 

Banks Offering the Senior Citizen Saving Scheme:

Several public and private banks in India offer the Senior Citizen Savings Scheme. 

●    State Bank of India 
●    Punjab National Bank 
●    HDFC Bank 
●    ICICI Bank 
●    Axis Bank
●    Canara Bank 
●    Bank of India 
●    Union Bank 
●    Bank of Baroda 
●    IDBI Bank 
●    UCO Bank 
 

Eligibility under SCSS

To be eligible for the Senior Citizen Savings Scheme, an individual must be an Indian resident and fulfil any of the following conditions.

1.    The individual should be 60 years or above.
2.    Retired personnel of defence services are eligible to invest even if they have yet to turn 60. However, they must fulfil other required terms and conditions. 
3.    Individuals aged 55 years but have opted for early retirement under a superannuation or Voluntary Retirement Scheme (VRS) rule are eligible under this scheme.
 

The Documents Required to Apply under SCSS

1.    Senior Citizen Savings Scheme application form
2.    ID proof (Aadhar, PAN, Passport, Voter ID, etc.)
3.    Address proof (Aadhar, Passport, Voter ID, etc.)
4.    Age proof (Birth certificate, Passport, etc.)
5.    Two passport-sized photographs
6.    Senior Citizen certificate (if applicable)
7.    Telephone or electricity bill 

The applicant must self-attest all these documents before submission. 

Tax Benefits on Senior Citizen Savings Scheme

The senior citizen saving scheme interest rate attracts tax deducted at source (TDS) if the interest exceeds Rs. 50,000 per annum. The tax deducted depends on the investor's tax bracket. The Senior Citizen Savings Scheme investment is eligible for a deduction under Chapter VI-A of the Income Tax Act. The maximum deduction under Section 80C is up to a maximum of Rs. 1.5 lakhs per annum. The maturity proceeds of the scheme are taxable as per the investor's tax bracket at the time of withdrawal.

Why Invest with 5paisa?

The senior citizen saving scheme interest rate attracts tax deducted at source (TDS) if the interest exceeds Rs. 50,000 per annum. The tax deducted depends on the investor's tax bracket. The Senior Citizen Savings Scheme investment is eligible for a deduction under Chapter VI-A of the Income Tax Act. The maximum deduction under Section 80C is up to a maximum of Rs. 1.5 lakhs per annum. The maturity proceeds of the scheme are taxable as per the investor's tax bracket at the time of withdrawal.

Conclusion

The Senior Citizen Savings Scheme is a safe and lucrative investment option for senior citizens. Senior citizen saving scheme interest rate is higher than the interest rate of other fixed-income schemes and tax benefits. However, the primary disadvantage of the senior citizen savings scheme is no exposure to the market, limiting the overall investment return.