Overview of the Senior Citizens Savings Scheme

While retirement often appears with financial uncertainty, some savings products are safe and ensure promised retirement income. The Senior Citizen Savings Scheme (SCSS), established in 2004, is one such deposit scheme. Introduced by the Government of India, the central objective of the SCSS is to present an assured return (paid every quarter) to senior citizens, and in doing so to generate a guaranteed regular income flow.

Capital Protection and Inflation Protection

The capital in the SCSS is entirely protected as the scheme is backed by the Government of India. It is still not inflation protected, which means whenever inflation is above the prevailing interest rate, the deposit earns no real returns. However, when the inflation rate is beneath the current interest rate, it does maintain a positive real rate of return.

Guarantee

Interest rates are adjusted with G-sec rates of similar maturity, with a measure of 1 percent. The government examines the SCSS rates quarterly. However, once a subscriber has registered, the rates will remain unchanged for the security. For the fourth quarter of FY20-21, the rate has remained set at 7.4 percent, compounded periodically. The payout of business is quarterly.

Exit Option

Premature closing of the account is allowed with a penalty.

Liquidity

The SCSS is liquid, notwithstanding the five-year lock-in. One can make withdrawals subject to requirements and penalties.

Tax Implications

The sum invested in the SCSS on or after April 1, 2007, is eligible for tax deduction under Section 80C of the Income Tax Act. However, the interest earned on the deposit is fully taxable and tax is decreased at source (TDS) if the total interest in a course is above Rs 50,000. However, if the interest is not taxable, one has to provide Form 15H or Form 15G so that no tax is decreased at the source.

Where to Open an Account

The SCSS account can be presented at any head post office or general post office. Select categories of several designated nationalized banks allow the SCSS. ICICI Bank also extends the SCSS.

How to Open an Account

Once you have selected the bank to open the SCSS description, you will first need to start a savings bank account. You will require the following documents:

• An account-opening form, which the bank will give
• Two passport-size photos
• Address and identity proof before-mentioned like the Aadhaar card, passport, PAN (permanent account number) card or declaration in Form 60 or 61 as per the Income Tax Act, 1961, driving license, voter's identity card or ration board.
• Provide original identity proof for verification at the time of account opening.

Points to Remember

• Portability of the account from an individual bank to different is available.
• ECS change of interest to the savings description can be done.
• There is a penalty in the development of the early closure of the account.
• The facility of keeping the deposit in the SCSS account to obtain loans is not allowed as it becomes the object of regular income.
• Premature withdrawal or closing of the SCSS account is approved after the completion of one year from the date of opening the account after subtracting a penalty for early withdrawal or closure. The penalty ranges from 1-1.5 percent, depending on the achieved ownership of this account.
• If the account is secured after the first year and before the end of the second year, an amount equal to 1.5 percent of the deposit is subtracted as a penalty.
• If the account is concluded on or after the second year, an amount equal to 1 percent of the film is subtracted.

Features at a Glance

Eligibility: You require to be a resident Indian to open an account

Entry age:

• 60 years
• 55 years for those who have departed on superannuation or under a voluntary or special voluntary system
• The retired workers of defense services (excluding civilian-defense employees) are ready to invest irrespective of the age limit subject to the fulfillment of stipulated conditions

Minimum Investment: Rs 1,000

Maximum Investment: Rs 15 lakh (Rs 30 lakh combined with a spouse); Films ought to be in multiples of Rs 1,000

Interest

• 7.4 percent per annum compounded periodically
• The interest is paid on the last working celebration of April, July, October, and January

Tenure: Five years; can be increased by three more years

Account-holding classes

• Individual
• Jointly with mate
• Multiple accounts supported

Nomination Facility: Available