Senior Citizens Savings Scheme

The Senior Citizens Savings Scheme (SCSS) is a government-backed scheme offered to senior citizens in India, that is, individuals who are over 60 years of age and are Indian citizens. It falls under the purview of the National Savings Institute (NSI), which is responsible for all National Savings Schemes launched by the Government of India.

Senior Citizens Savings Scheme Definition

Launched in 2004, the SCSS is a government-sponsored savings instrument that gives guaranteed2 quarterly returns after maturity. It aims to help senior citizens enjoy regular income after retirement. As this is a government sponsored scheme, it is considered to be a low-risk instrument. Note that it has a minimum investment amount of ₹1000 to open the account, along with a maximum investment amount of ₹15 Lakhs.

To understand what the SCSS is, consider the example given below.

Mrs Aggarwal has invested ₹10 lakhs in the SCSS. With an interest rate of 7.4%1, she stands to gain an interest of ₹3,70,000 (which is, 10,00,000*7.4%*5) at the time of maturity. It is important to note that the interest rate determined at the time of investment will remain the same until maturity, irrespective of any changes in later quarters.

How does an SCSS plan work?

To understand whether an SCSS investment is the right avenue for you, you must first understand how it works.

  • SCSS The investor starts by opening an SCSS account, either by adding a minimum investment amount of ₹1000 or a maximum of ₹15 Lakhs in one go. The maximum investment amount is determined by any retirement benefits attained by the investor. Thus, if the retirement benefit is ₹10 lakhs, that would be the maximum investment amount. However, even if the retirement benefit exceeds ₹15 lakhs, only a maximum amount of ₹15 lakhs can be deposited in the SCSS.
  • SCSS The term retirement benefit in this situation refers to any annuity or payment received upon retirement via provident fund fees, leave encashment, any Group Linked Savings Insurance Scheme that is payable by one’s employer, ex-gratia payments under voluntary retirement schemes, commuted value of pensions, superannuation gratuity, retirement-cum-withdrawal benefit under the Employees’ Family Pension Scheme, and so on.
  • SCSS Interest earned on the total deposit is paid to the investor every quarter by automatically processing the payment to the linked bank account. As an SCSS plan can be purchased via authorised banks or the Post Office, the amount can either be linked with the corresponding bank account or Post Office account.
  • SCSS Investors can close the account prematurely, if desired.
  • SCSS Though the maturity period is 5 years, it can be extended by 3 years. However, the request for extension must be made within a year upon maturity.
  • SCSS Once the maturity period is reached, the interest on the amount is paid to the investor in the form of quarterly payments. The applicable amount is transferred to the investor’s account on the 1st of every April, July, October and January.
Features of the Senior Citizens Saving Scheme
The salient features of the SCSS are as follows:
SCSS
Number of accounts
An investor can have more than one SCSS account, or open a joint account with a spouse. However, the total investment amount across all the accounts cannot exceed a total of ₹15 lakhs.
SCSS
Maturity period
The SCSS has a maturity period of 5 years which can be extended to 3 years.
SCSS
Transferability of the account
Investors can transfer the SCSS account from the Post Office to the bank, or the other way around, if needed.
SCSS
Premature withdrawals
The scheme permits investors to withdraw their finances prematurely (that is, before the maturity period is over). However, the withdrawal can happen only 1 year after the SCSS account has been opened. Additionally, if the withdrawal is made after 1 year, there is a charge of 1.5% levied. Similarly, if the withdrawal is made after 2 years, a charge of 1% is levied.
SCSS
Nominees
Investors can add a nominee when they open the SCSS account. If there is no nomineed, and the investor passes away, the funds will be transferred to the legal heir.
SCSS
Minimum and maximum amount
A minimum investment of ₹1,000 can be made, along with a maximum investment of ₹15 lakhs.

Eligibility for SCSS

The following is the eligibility criteria for the SCSS:
Note that NRIs and individuals under the Hindu Undivided Family Act (HUF) do not qualify for the SCSS.

  • SCSS Any individual over the age of 65
  • SCSS An individual who is between 55-60 years of age, and has retired early due to a Voluntary Retirement Scheme or superannuation
  • SCSS Any retired defense person

Premium Payment Options

To pay the SCSS premium, investors must:

  • iconbullet Pay amounts under ₹1 lakh by cash
  • iconbullet Pay amounts over ₹1 lakh by cheque or demand draft

Who should invest in SCSS?

The SCSS is a suitable investment avenue for senior citizens who want to:

  • iconbullet Maintain financial independence after retirement
  • iconbullet Continue to grow their wealth even after their stop earning
  • iconbullet Invest in a low-risk financial instrument that has guaranteed² returns

Benefits of SCSS

The SCSS offers a myriad of benefits such as:

SCSS
High-interest rate:
The SCSS offers a high interest rate of 7.4%1 and is therefore one of the most beneficial schemes for seniors to invest in.
SCSS
Guaranteed² returns:
As the SCSS is backed by the Government of India, it is a reliable and safe scheme to invest in.
SCSS
Tax benefits³:
Under Section 80C of the Income Tax Act , the SCSS is applicable for tax deductions upto ₹1.5 lakhs.
SCSS
Fixed Income:
Investors can enjoy a fixed income post retirement when they invest in the SCSS. The interest on the deposit is paid on the 1st of every April, July, October and January.

Taxability of SCSS

The following are the taxation rules application to the SCSS:

  • SCSS Investors can enjoy tax benefits³ when they invest in SCSS. As per Section 80C of the Income Tax Act, investors can enjoy tax deductions upto ₹1.5 lakhs.
  • SCSS Based on the investor’s tax slab, interest earned on the deposit is taxable. Interest exceeding ₹50,000 in a financial year is applicable for TDS.

Documents required to open an SCSS account

The following documents are required to open an SCSS account, these documents must be self-attested:

  • SCSS Age proof: This can be in the form of a PAN Card, Birth Certificate, Voter ID Card, Passport or Senior Citizen Card
  • SCSS Identity proof: This can be in the form of an Aadhaar Card or Passport
  • SCSS PAN Card
  • SCSS 2 passport-sized photographs
  • SCSS Form A (filled in correctly)

List of Authorised Banks in India that offer SCSS

The following banks in India are authorised to offer the SCSS:

  • ICICI Bank
  • UCO Bank
  • Union Bank of India
  • Punjab National Bank
  • Indian Bank
  • IDBI Bank
  • State Bank of India
  • Indian Overseas Bank
  • Central Bank of India
  • Dena Bank
  • Corporation Bank
  • Canara Bank
  • Bank of Maharashtra
  • Bank of Baroda
  • Bank of India
  • Vijaya Bank
  • Syndicate Bank
  • Andhra Bank
  • Allahabad Bank
  • Indian Overseas Bank
  • UCO Bank

FAQs

Yes, spouses can open individual SCSS accounts. It is not compulsory to open a joint account.
Currently, there is no way to open an SCSS account online. To open an SCSS account, investors must visit the nearest authorised bank branch or the nearest post office.
No, a joint SCSS account can only be opened with your spouse. However, it is important to note that only one spouse must meet the age criteria of the SCSS account (that is, above 65 years of age, or between 55-60 years of age with a Voluntary Retirement Scheme). The second spouse can be younger.
No, NRIs cannot open an SCSS account.
In case of a premature death, the funds are transferred to the legal heir or nominee of the account holder. Do note that an individual with a Power of Attorney cannot sign for the funds instead of the nominee.
People of Indian origin who move abroad after opening their SCSS are allowed to maintain the account. However, NRIs cannot open an SCSS account.
Yes, it can be done. Investors need to fill out Form G to do so.
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  • Disclaimer

    1 https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=181
    2 Provided all due premiums are paid.
    3 Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
    ADV/7/22-23/751