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All you wanted to know about Senior Citizen Savings Scheme (SCSS)
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What is Senior Citizen Savings Scheme (SCSS)?
The “Senior Citizen Savings Scheme” (or SCSS) is a deposit scheme specially meant for elderly citizens. |
Features / Overview of the Senior Citizen Savings Scheme (SCSS)
Age Criteria
The investment can be made only by people of 60 years of age or above.
People who have retired on superannuation or under a voluntary retirement scheme can also invest if they are at least 55 years old.
People retiring from defense services are eligible to invest in the scheme irrespective of the age limit, but there are some additional conditions applicable.
Other Restrictions
The Senior Citizen Savings Scheme account can be opened only by individuals. It can not be opened by Non-Resident Indians (NRI), Persons of Indian Origin (PIO) and Hindu Undivided Families (HUF).
Source of Funds
For people between 55 and 60 years of age, the amount invested in SCSS has to come from their retirement benefits.
For persons over the age of 60 years, there is no restriction on the source of funds invested.
Maturity
The Senior Citizen's Savings Scheme has a maturity of 5 years, which is extendable by 3 years.
Interest Rate
The rate of interest offered on the investment is 9% per annum.
Interest Payment
The interest is computed and paid out every quarter. That is, the interest is paid out every three months.
Income Tax Treatment
There is Section 80C income tax benefit on the investment made in SCSS, but there is no income tax benefit on the interest earned from it.
The investment made in the Senior Citizen Savings Scheme on or after 1st April, 2008 is deductible from your income under section 80C of the Income Tax Act. The interest earned on the deposit is fully taxable.
(To know more about the deductions under section 80C, and the avenues of investment u/s 80C, please read "Saving Income Tax – Understanding Section 80C Deductions")
Tax Deducted At Source (TDS)
The income tax applicable is deducted at source. If your income is not taxable, you can provide form 15H or 15G so that no tax is deducted at source.
The tax is deducted at source only if the total interest in a year is over Rs. 5,000.
Investment Limits
The minimum investment is Rs. 1,000, and the maximum allowed investment is Rs. 15 Lakhs. Any amount between Rs. 1,000 and Rs. 15 Lakhs can be invested in multiples of Rs. 1,000.
Joint Account
The account can be opened as a single account, or can be opened in joint names. The joint account holder can only be the spouse.
There is no age limit applicable for the joint account holder (spouse).
In case of the death of the primary account holder, the spouse can continue the account – this is subject to the condition that his / her total investment in SCSS should not exceed Rs. 15 Lakhs.
Premature / Early Withdrawal
The amount can be withdrawn before the maturity date, provided the deposit is at least 1 year old. But early withdrawal carries a penalty as follows:
- Account age between 1 and 2 years: 1.5% of the deposit amount
- Account age over 2 years: 1% of the deposit amount
Loan / Pledging
You can not obtain a loan against the SCSS account by pledging it.
Nomination
Nomination facility is available for the Senior Citizen Savings Scheme. Names of one or more persons can be specified as nominees.
Nomination can be done even after opening the account. The nomination can also be changed or canceled later.
Nomination can also be done in case of joint accounts. In such cases, the joint holder is entitled to the amount in case of death of the primary account holder. The nominee(s) would have a claim only after the death of both the joint holders.
Should you invest in Senior Citizen Savings Scheme (SCSS)?
Interest Rate
Till very recently, the prevailing interest rates on bank fixed / term deposits were 5% - 6% per year. At that time, the Senior Citizen Savings Scheme was very popular with people, as it provided interest rates that were way above the average market rates.
But now (August 2008), with interest rates on FDs being as high as 10% (with an additional 0.5% for senior citizens), the interest offered on Senior Citizen Savings Scheme looks quite low.
Interest Payment
The interest is paid out every 3 months. This means that SCSS can provide a steady, periodic income.
Safety
The SCSS is backed by the Government of India, and thus, carries a sovereign guarantee for principal and interest payments.
Therefore, it is among the safest investment avenues available in India.
Bottomline
Since the scheme is absolutely safe, and provides periodic payment of interest, retirees and senior citizens can invest a portion of their retirement corpus in the Senior Citizen Savings Scheme.
How to invest in the Senior Citizen Savings Scheme (SCSS)
A Senior Citizen Savings Scheme account can be opened at any designated post office throughout the country.
The scheme can also be opened at the designated branches of the following public sector banks:
- Allahabad Bank
- Bank of Baroda (BoB)
- Bank of India (BoI)
- Bank of Maharashtra (BoM)
- Canara Bank
- Central Bank of India (CBI)
- Corporation Bank
- Dena Bank
- Indian Bank
- Indian Overseas Bank (IOB)
- Punjab National Bank (PNB)
- State Bank of India (SBI)
- State Bank of Hyderabad
- State Bank of Indore
- State Bank of Bikaner and Jaipur (SBBJ)
- State Bank of Patiala
- State Bank of Saurashtra
- State Bank of Mysore
- State Bank of Travancore (SBT)
- Syndicate Bank
- UCO Bank
- Union Bank of India
- United Bank of India
- Vijaya Bank
A Senior Citizen Savings Scheme (SCSS) account can also be opened at ICICI Bank. ICICI Bank is the only private bank where an SCSS account can be opened.
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Note: Please treat the opinion expressed here as a broad suggestion. Please consult your financial planner / investment advisor before making any investment decision.
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Jan 08, 2009
I'm sorry, but I didn't quite understand your query.
However, to clarify:
- You can not take a loan from your SCSS
- You can withdraw early, provided your SCSS account is at least 1 year old. However, there is a small penalty as mentioned in the article.
- A fixed deposit (FD) can be cashed prematurely. Again, you would have to pay a small penalty, which varies from bank to bank.
Mar 11, 2009
My query is how to treat premature payment of penelty charged/ which is actualy loss of interst income to individual. Such penelty amount is recovered under the scheme is deducted from premature payment of principle amount by bank/ Post office. as interest is paid on quaterly basis a different date, and such a penelty is not appropriated to interest payable.
Secondaly bank also dont pay interest for fraction of month.
Hope to find your reply for fixing my income
Thanks!
I am not sure if I understand your query properly... Are you saying that the penalty should be deducted from the interest earned instead of deducting from the withdrawn amount?
I believe it makes more operational sense to deduct it from the amount withdrawn.
Mar 23, 2009
Unfortunately, I am not aware of any concession in the age limit of senior citizens for retired military personnel for the SBI tax saving scheme.
Mar 26, 2009
I only advise readers about various investment options.
The SCSS account can be opened at a post office or a bank as described in this article.
Apr 05, 2009
A week back, I noted about Sr Citizens Savings Scheme being included for Tax savings from Apr 2009from that, but can't find any conformatory fact .Not even from my CA !Nor from income-tax deppt. web-site nor that of Postal deptt.'s !!On the contrary they state opposite.
Now today -when I decide to act on investment on SCSS, am unable to find that article on yr web-site. Will U pl send that and advise if my investments upto Rs 50,000 done now in SCSS will earn me income-tax rebate of Rs 7500 ( as I come in 15 % tax rebate) ? Another 50,000 I plan to save in my existing PPF a/c for another tax rebate of Rs 7500 for A.Y. 2010-2011.
It will be nice of U to give any ref. of authority other than news-ppr reports.
Thanks a lot .
Yrs. Faith.ly,
Narendra Oza.
Yes, investment in SCSS is eligible for deduction under section 80C.
But you are mistaken about tax rebates - now there is no income tax slab of 15%.
Thus, if you fall under the 20% bracket, you would save tax of Rs. 10,000 on an investment of Rs. 50,000.
(To understand section 80C better, please read "Saving Income Tax – Understanding Section 80C Deductions").
As a proof of this, you can check out the press release on the Income Tax department's website: http://www.incometaxindia.gov.in/archive/PressRelease_02012008.pdf
Apr 11, 2009
As my agent is giving me only 25 paisa against promised 65 paisa
I do not know the exact percentage of commission given to the agents.
However, please note that the entire practice of passing some of the commission to the investor (a cut, so to say) is illegal (thats why this "cut" is always given out in cash!).
May 13, 2009
Yes, you can open another SCSS account.
May 17, 2009
May 24, 2009
My father has retired in the month of February 09 from SAIL and has invested a part of the retirement funds at SBI FD for 1000 days (intrest to be paid quaterly) which at the time of investment in May was 8.75% for senior citizens as per my current understanding and has now been revised to either 8.5% or 8.25% (i am not sure). I have made enquiries at the local SBI and they have suggested due to the nature of SCSS and the tax being levied on the interest amount SBI FD will be better but reviewing the current market condition will it be viable to withdraw the FD in which the investment has been made in April and apply for SCSS at the local Post Office. If my father does how much penalty he wil have to pay as the interest at SCSS is still 9% better than the FDs...
Your advice will be highly appreciated..
Many Thanks,
Sahil
Well, yes, theoretically this is possible. However, I strongly encourage all my readers not to use loopholes to circumvent the spirit of the law.
SCSS is meant to provide a steady, guaranteed income to senior citizens, and should be utilized for this only.
I strongly believe that SCSS is the one of the best options for parking retirement money.
And its not just for the interest rates - they can keep changing (for FDs). For all the reasons, please read "Retirement money: How to invest, where to invest".
Also, if the interest from SCSS is taxed, so is the interest from SBI FD!
The penalty to be paid for breaking the FD would depend on the terms of the bank - you would need to check this with the bank.
Jun 15, 2009
I have two queries:
1. Is it possible to deposit money under SCSS for your dependant parents and avail tax benifits.
2. Is there an option of topover, addition of amount in the existing SCSS deposit
Regards
Gurpreet
1. The tax benefit (under section 80C) of investment in SCSS is available only to senior citizens investing in it.
2. Yes, a topover should be possible subject to the upper limit of Rs. 15 Lakhs.
Jun 25, 2009
Thanks
This is true - you can not make more than 1 deposit in SCSS in a month. I am not sure about the logic behind this rule, but well, this is the rule!
It appears from your SCSS article that i cannot take a loan and that the FDR cannot be prematurely cashed - that is after four months.
Thank you. I hope I made myself clear.
Maria