Senior Citizens Savings Scheme

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.

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

• 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.
• 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.
• 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.
• Investors can close the account prematurely, if desired.
• 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.
• 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.

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.

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

To pay the SCSS premium, investors must:

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

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

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

The following are the taxation rules application to the 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.
• 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.

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

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