What is the Senior Citizen Savings Scheme?
Senior Citizen Saving Scheme is a scheme introduced and run by the government of India for retired individuals to have a financially secure life after retirement. This scheme comes under the retirement benefits programme of the government where anyone eligible for opening an SCSS account can invest an amount up to Rs. 30 lakhs in the scheme (lump sum) for enjoying regular income benefits from the same and also get tax benefits.
SCSS scheme was introduced as a post-office savings scheme by the government for senior citizens, however, seeing the demand for the scheme, all the government banks along with the post offices are now offering this scheme.
Senior Citizen Saving Scheme is a fixed-income investment instrument, where you need to invest once in a lump sum manner, and then after 5 years, the scss account will mature and during these five years, the account will earn steady interest as well which will help in growing the money you have invested in the scheme.
Salient Features of the Senior Citizen Savings Scheme
To understand Senior Citizen Saving Scheme, we need to dive into the features of the scheme. The most vital features of SCSS are as follows –
Risk-free investment
When a person nears retirement, they do not want to take unnecessary risks to earn higher returns. They look for investment options which can keep their capital intact while offering decent income regularly. SCSS offers the same as it is a government-backed investment vehicle, it is entirely risk-free and earns regular interest and keeps the deposit safe and secure.
Interest
As this scheme is a fixed-income investment option, it earns regular interest. The interest is earned on the amount deposited in the account and the amount gets credited to the account holder’s bank account quarterly as of 1st of April, July, October, and January. The senior citizen saving scheme interest rate 2023-24 is 8.2% (Q1 FY 2023-24).
Deposits
As per the updated rules of the SCSS scheme in the Union Budget, 2023, the ceiling on the deposit in this scheme has been raised to Rs. 30 lakhs, which was earlier Rs. 15 lakhs. Anyone who is opening this account can invest any amount between Rs. 1000 and Rs. 30 lakhs in one go. If the amount of deposit is less than Rs. 1 lakh, then you can use cash as the mode of the transactions, while an amount above Rs. 1 lakh has to be deposited using a cheque. The deposit has to be made within a month of receiving the retirement benefits from your employer. So, for instance, if you receive retirement benefits from your employer as of the 1st of June, 2023, then you need to open an SCSS account and deposit the amount by the 30th of June, 2023.
Number of accounts and account holders
Senior Citizens’ Savings Scheme account can be more than one for an individual. You can open the accounts on your own same, or jointly with your spouse.
Nomination
Nominees need to be added to the SCSS account while opening the amount or later.
Maturity
The scheme matures after five years from the date of opening the account. However, you can extend the maturity by 3 years by submitting an application for the same in the 4th year of the scheme.
Premature Withdrawal
Under this scheme, there is no fine or penalty for pre-mature withdrawal after one year of opening the account. However, if you want to close the account between the end of 1st year of opening the account and the end of 2nd, year, then you have to bear a penalty charge of Rs. 1.5% of the principal amount and 1% in case the account is closed after 2nd year and fifth year. While if you close the account within a year, then any interest received in that year for any quarter will be deducted from the final amount.
Taxation
While you can get a one-time tax benefit of Rs. 1.5 lakhs under section 80C for investing in SCSS scheme 2023-24, however, the interest you will earn will be taxable if the interest amount in a year surpasses Rs. 50000. Tax deducted at source or TDS will be applicable on the interest amount over Rs. 50000. However, you can get exemption up to Rs. 50000 of the entire interest amount under section 80TTB.
How Senior Citizen Saving Scheme (SCSS) works?
Now that you know the features of the SCSS scheme, let’s see how it works. First and foremost, this scheme is for those who are going to retire soon or are already retired and waiting for their retirement benefits. As soon as they receive the benefit, they can invest in this scheme within a month.
Here retirement benefits refer to the superannuation gratuity amount, provident fund dues, retirement gratuity, leave encashment amount, commuted value of pension plan, and any such payment which is made on account of superannuation or retirement.
Now once you deposit the amount into your SCSS account, you will start earning interest on the same. However, the interest amount will be credited every quarter as of 1st of April, July, October, and January. The interest will directly get credited to your bank account linked to the SCSS account if you opt for the auto credit option, or you can also withdraw the same in person from the post office or bank where you have your account for the scheme.
Coming to maturity, as you can see in the above features as well, you can close the amount anytime you want to after a year of opening the same. You can also extend the maturity of the account by three years.
Basically, this scheme is for earning regular income on your retirement benefits. Once the scheme matures you can get the accumulated sum which you can further invest in other instruments or keep in your bank or for any other purpose as per your requirements and preferences.
Senior Citizen Savings Scheme eligibility & age limit
Senior Citizens’ Savings Scheme as the name suggest is a scheme for senior citizens and thus for being eligible to invest in this scheme, you need to be above 60 years of age. In the case of retired civilian employees, the age considered for the scheme is above 55 years and below 60 years while for retired defence personnel, the age has to be above 50 years and below 60 years. In any of these cases, the investment needs to be made within a month of receiving retirement benefits.
** NRIs and HUFs cannot avail of the benefit of this scheme as per current rules and regulations of the government.
How to open an SCSS account?
Earlier, the SCSS account opening process was offline only however, now, you can open this account online as well. For the benefit of the users, we will discuss both methods of opening an SCSS account here.
Online Method
If you are opening the amount online, you need to check whether the bank or the post office offers an online SCSS account opening facility or not like in BhartiAxa. For opening an account, you need to fill in the form with all the correct details like your name, occupation, savings account number, and other details. Then click on submit and upload the required documents for KYC such as PAN, AADHAAR, Salary slip, bank statement and photographs. Then after the verification is over, you will have to make the deposit and once the deposit is made, you will get acknowledgement for the same and you can check the amount in your SCSS account. You need to link your bank account of your with the SCSS account for transactions.
Offline Method
Under the offline method, you need to visit the post office or other banks where the SCSS scheme is offered. Then you need to take and fill out the SCSS application form and enter the required details as mentioned above. You need to attach your passport-size photograph. You have to choose whether you are applying as an individual or jointly with your spouse. Tick the documents which you want to submit for KYC. Then attach a copy of those documents along with the form and submit it after signing the documents where asked for. Also, you need to mention the amount of the deposit and payable via cash or cheque.
In case of nomination, you can fill the nominee section of the form while applying or later you can add the nominee to your SCSS account. This can be done both online and offline.
Why invest in Senior Citizens’ Savings Scheme?
If you are thinking that there are so many other investment options then why you should choose the senior citizens' savings scheme here are some factors which set this scheme apart from others –
- SCSS scheme is a scheme which is directly backed by the government and available only at Post offices or nationalised banks. This ensures the risk-free nature of the scheme. After retirement, hardly anyone would want to risk their life savings, isn’t it thus, investing in SCSS can not only ensure the safety of your capital as well as offer regular interest income.
- Talking about the interest income, usually the SCSS interest rate is higher than regular bank deposits or even fixed deposits interest rate. For the April-June, 2023 quarter, the interest rate is 8.2% which is quite higher than what your bank savings account can offer. So, if you are getting your retirement benefits now, it will be beneficial for you to invest in this scheme rather than keeping the amount sitting in your bank account.
- Now you may say, that while the interest rate is high, the scheme must have some lock-in period, but in reality, there is no such lock-in period for this scheme. You can withdraw your money as and when you want. However, there is a maturity tenure of five years, and if you close the account before this tenure, you have to pay a very nominal fee for the same
- While pre-mature account closer is chargeable though negligibly, pre-mature withdrawal is not chargeable at all. So, you can withdraw from your account after the first year into the scheme.
- You can open an SCSS account with any post office or nationalised bank across the country and also transfer the account if you are shifting from one city to another.
- The cherry on top is that you can get a deduction under section 80C for investing in this scheme which is up to the limit of the section of the IT Act which is 1.5 lakhs in a financial year. So, the year you are investing, you can reap extra tax benefits for investing in this scheme.
- If you want to keep the amount in this scheme, you can extend the maturity after five years as well and enjoy earning a higher interest rate.
Why Invest with Bharti AXA?
BhartiAxa offers hassle-free online SCSS account opening which is one of the primary reasons for choosing BhartiAxa when you are thinking about investing in the SCSS scheme. Apart from that, you can easily withdraw your money, without standing in long queues like in the post office or in nationalised banks where there is a rush all the time. Moreover, you can check the SCSS account anytime using our online services.
Conclusion
To conclude, it is pretty understandable now that senior citizens' savings scheme is one of the most beneficial investment options for veterans in India. From earning a higher interest rate to having a safety net around life savings, for both one can entrust the SCSS scheme.
