Senior citizens are an important part of Indian society, and it is important to make sure that they have a steady source of income during their retirement phase. Hence, the Senior Citizens Savings Scheme (SCSS) was launched by the government in 2004 to meet the specific financial needs of elderly individuals, offering them a secure investment avenue with attractive interest rates and tax benefits.
What is the Senior Citizens Savings Scheme?
SCSS (Senior Citizens Savings Scheme) is a retirement savings scheme specifically focused on well well-being of senior citizens after their retirement. This scheme offers stable returns to its account holders, and as the government monitors the scheme, the risk of capital loss is minimal. The resident Indian can avail of the benefit of SCSS via the Indian Post Office or certified public or private banks.
Eligibility for SCSS
Residential individuals can invest in the Senior Citizen Savings Scheme individually or jointly with a spouse if such a person fulfills the below-mentioned criteria:
- Indian residents aged 60 years or above can avail the benefit of this scheme.
- A resident individual between the ages of 55 and 60 who has opted for the Voluntary Retirement Scheme will also be eligible under this scheme.
- Retired personnel of Defence Services (excluding Civilian Defence Employees) may open an account upon attaining the age of 50 years subject to the fulfillment of other specified conditions.
Note: NRIs and HUFs are not eligible to open an account under the SCSS scheme.
Features of SCSS
Minimum and Maximum Deposit Limits
The minimum amount that one can deposit in this scheme is INR 1,000, and the maximum is INR 30,00,000. Moreover, it is important to note that deposits in SCSS can be made only in multiples of INR 1000.
One can deposit an amount in cash, but it cannot exceed INR 1 lakh. Hence, if you want to deposit more than INR 1 lakh, it has to be via cheque or demand draft.
Maturity and Withdrawals
The maturity period of the senior citizen savings scheme is 5 years but can be further extended for 3 more years by applying the required format within 1 year of the maturity of the SCSS account.
An account holder can withdraw from their SCSS account prematurely after one year of opening the account. Moreover, there is no charge for premature account closure within one year.
However, if the depositor wants to close the account after 1 year but before the completion of 2 years, a penalty of 1.5% will levy on the deposit amount. Furthermore, if the account holder wishes to close the account after 2 years but within 5 years then there is a penalty of 1% on the deposit amount.
Note: An SCSS account can be transferred from a bank to a post office and vice-versa.
Number of SCSS accounts
A depositor is permitted to open multiple accounts owned by themselves or jointly with their spouse provided that the aggregated sum from all accounts does not exceed the maximum limit.
Note: Joint account can be opened only with the spouse and the initial depositor should be the investor of the account.
Nomination Facility
The depositor may designate a nominee while opening their SCSS accounts or at a later date. The nominee will be qualified to receive the due amount in case of the death of the account holder.
Interest rates for SCSS
SCSS interest rate is compounded quarterly and distributed every quarter on the first day of April, July, October, and January. Currently, the SCSS interest rate is 8.2%, and this interest rate applies from 1st Jan 2024 to 31st March 2024.
Understanding of calculation for Maturity value
The main factors that determine the calculation are:
- Principle Amount i.e., deposit amount
- Interest rate
- Maturity period
Principle amount * Lock in period * interest rate
The maturity period of 5 years is fixed. However, interest rate and principal amount are variable.
Let us take an example to understand the calculation:
Ajay is 62 years old and has deposits INR 10 lakhs on 1st January 2024. The prevailing interest rate was 8.2%.
10 lakh * 8.2% * 5 years = INR 4,10,000
Hence, the Maturity Amount will be INR 14,10,000 where the total interest is INR 4,10,000.
What are the benefits of investing in SCSS?
As discussed previously, the senior citizen savings scheme is one of the best retirement savings schemes as it offers a stagnant source of income, high-interest rates, and income tax benefits.
- Income Tax Benefits- An individual can avail of deductions under section 80C up to INR 1.5 lakhs on the principal amount if they opt for the old tax regime.
However, it is also important to note that the interest receivable is taxable as per the applicable tax slab. Further, if the interest amount receivable is more than INR 50,000 for a year, TDS applies to the interest. This limit for TDS deduction on SCSS investments is applicable from AY 2020–21 onwards. - High interest rates are offered. Currently, the interest rate is 8.2% p.a.
- Pre-mature withdrawal is allowed.
- The account can be transferred to any post office or bank across the country.
How to Open an SCSS Account?
One can open an SCSS account either by going to the post office or a private/public bank. You will need a self-attested copy of the following documents:
- Identity proof such as a PAN card or Passport
- Address proof such as Telephone bill /Electricity bill/ Adhaar Card
- A document confirming the age of the individual. Birth Certificate / Senior Citizen Card / Voter ID, etc
- Two passport-size photographs
- Form-A needs to be filled (One can get Form A from the Department of Posts)
After these documents are ready, one can go to the post office or private/public bank to open the account.
Which Banks Offer SCSS Account?
Following is the list of banks from which one can open an SCSS account:
- Andhra Bank
- Allahabad Bank
- Bank of Baroda
- Bank of India
- Bank of Maharashtra
- Canara Bank
- Central Bank of India
- Corporation Bank
- Dena Bank
- Indian Bank
- Indian Overseas Bank
- Oriental Bank of Commerce
- Punjab National Bank
- State Bank of Bikaner & Jaipur
- State Bank of Hyderabad
- State Bank of India
- State Bank of Mysore
- State Bank of Patiala
- State Bank of Travancore
- Syndicate Bank
- UCO Bank
- Union Bank of India
- United Bank of India
- Vijaya Bank
- IDBI Bank Ltd.
- ICICI Bank Ltd.
FAQs
No, withdrawals for loans are not permissible under this scheme, as it defies the very nature of the scheme.
Yes, Form G must be filled to transfer an account from one deposit office to another.
Yes, the nomination can easily be canceled or changed by submitting a fresh nomination in Form-C to the bank/post office wherein said SCSS account is maintained.
As you are the primary account holder SCSS account, it is your age that is the qualifying factor. You can appoint your spouse as the joint account holder. Her age does not affect her eligibility to act as your joint partner in the account.
Currently, the SCSS interest rate is 8.2% per annum which is substantially high when compared to Savings and fixed deposit accounts.
Hey @sushil_verma
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
For eg,
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
Hey @shindeonkar95
In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.
However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.
Hope, it helps!
Hello,
Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?
There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?
I couldn’t find anything on this. Any help is appreciated.
Hello @Veejayy,
Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.
Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.
These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!
Also, interest earned on these bonds will be taxable.
Hope this helps!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.