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All you wanted to know about Senior Citizen Savings Scheme (SCSS)

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The Senior Citizen Savings Scheme (SCSS) is often referred to as the best alternative for the elderly to invest their money. Is this justified? Here's a detailed look at all the features of the Senior Citizen Savings Scheme, and an analysis of whether you should invest in it or not.



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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Author: maria de souza
Jan 08, 2009
scss
I have a SCSS account in india and fixed deposits as well. can i take a loan of 1,50,000.00 in cash against one of the FDRs but i can pay back on the same day by prematurely cashing one of the FDRs.
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

Author: raagvamd
Jan 17, 2009
Re: scss
Hi Maria,

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.

Author: RAVINDRA KUMAR MUNJAL
Mar 11, 2009
SCSS
Agood coverage on the subject.

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

Author: raagvamd
Mar 13, 2009
Re: SCSS
Hello Ravindra,

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.

Author: rp
Mar 23, 2009
scss
i am 57 years old and retired from military service on 28 feb 09. can i be treated at par with senior citizens in sbi tax saving scheme 2009 to earn 9% interest for depositing my retirement money similar to provisions exiting in scss.

Author: raagvamd
Mar 24, 2009
Re: scss
Hi rp,

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.

Author: Priya venkat
Mar 26, 2009
enquiry reg. Senior citizen rate of interest
Im prefering to deposit some amount more than Rs.25000 in the name of my father who is a senior citizen, pls guide us for the interest paid by you with time period details and the account opening too. Since im new to this bank.

Author: raagvamd
Mar 27, 2009
Re: enquiry reg. Senior citizen rate of interest
Hi Priya,

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.

Author: Narendra Oza
Apr 05, 2009
SCSS and tax benefit under section 80C
I happen to see yr web-site and found it v. informative and usefull.

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.

Author: raagvamd
Apr 05, 2009
Re: SCSS and tax benefit under section 80C
Hello Narendra,


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


Author: Nirmal
Apr 11, 2009
What is the % of comission given to the agents of post office
I Just Want to know What is the % of comission given to the agents of post office?

As my agent is giving me only 25 paisa against promised 65 paisa

Author: raagvamd
Apr 14, 2009
Re: What is the % of comission given to the agents of post office
Hi Nirmal,

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!).

Author: P K Misra
May 13, 2009
2nd time opening of account in SCSS
I had deposited Rs 15,00,000 in SCSS. I withdrew the amount after 2 years. Can I open again an accont with limit upto 15,00,000.

Author: raagvamd
May 15, 2009
Re: 2nd time opening of account in SCSS
Hello Mr. Misra,

Yes, you can open another SCSS account.

Author: R Ramamurthy
May 17, 2009
80 C BENEFIT on Scss Scheme
Can I deposit Rs 100000 on 1/6/09 , avail 80 C benefit and prematurely withdraw the amount invested after one year on 1/7/2010 paying the penalty of 1.5%.If this is permissible the Lock In period will be less than 3 years prescribed for 80 C for ELSS Schemes.

Author: Sahil
May 24, 2009
Whether investment in SCSS will be viable at this juncture
Hiii!!

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

Author: raagvamd
Jun 05, 2009
Re: 80 C BENEFIT on Scss Scheme
Hello Mr. Ramamurthy,

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.

Author: raagvamd
Jun 05, 2009
Re: Whether investment in SCSS will be viable at this juncture
Hi Sahil,


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.


Author: Gurpreet
Jun 15, 2009
Additional deposit in SCSS
Hi,
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

Author: raagvamd
Jun 22, 2009
Re: Additional deposit in SCSS
Hi 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.

Author: VERENDRA
Jun 25, 2009
SCSS INVESTMENT
I invested Rs 3 lakhs on 2-6-2009 in SCSS this month. When I wanted to invest another Rs 2 Lakh in SCSS, my post office agent told me that I cannot make two SCSS investments in the same month in any Post Office & I will have to wait until 1st July 2009 for the next investment in SCSS. Is it true ? Why ?

Thanks

Author: raagvamd
Jun 29, 2009
Re: SCSS INVESTMENT
Hi Verendra,

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!

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