SCSS ( Senior Citizen Savings Scheme ) – Tax Benefits, Eligibility and Interest Rate

Having a steady income source in one’s retirement days is one of the important financial goals of individuals. Hence, investing is saving schemes that will provide a regular income during retirement is of utmost importance. SCSS (Senior Citizen Savings Scheme) is one such savings scheme that aims to provide individuals above the age of 60 to invest in order to have a secure source of income. This article will help you understand the various aspects that you need to consider when investing in SCSS.

What is SCSS?

SCSS is a retirement savings scheme backed by the government of India. It is a scheme that offers stable returns to its account holders and as the government monitors the scheme the risk of the capital loss is at its minimal. An individual can avail the benefit of SPSS via Indian Post Office or certified Public/Private Banks. The rate of interest on SCSS is compounded quarterly and distributed at every quarter on the first date of April, July, October, and January. Currently, the interest rate for the first quarter of the financial year 2020-21 is 7.4%

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Who is the Eligible to open an SCSS Account?

Residential individuals can invest in Senior Citizen Savings Scheme if they fall under the following eligibility criteria:

  • Senior Citizen who is a residential individual above the age of 60 years
  • A residential individual between the age of 55 and 60 who has opted for the Voluntary Retirement Scheme. It is important to note that these individuals have to invest within one month of receiving the receipt of retirement
  • Retired Defence Service Personnel can also opt for SCSS irrespective of the age
  • NRI’s and HUF’s are not eligible to open an account under SCSS

What are the benefits of investing in SCSS?

Investing in SCSS can have many advantages, some of which are as follows:

Income Tax Benefits

SCSS is one of the best retirements saving schemes as it offers a stagnant source of income, high-interest rate and also Income Tax Benefits. An individual can avail deductions under section 80C up to INR 1.5 lakhs on the principle amount if they opt for old tax regime. It is also important to note that the interest receivable is taxable as per the applicable tax slab. If the interest amount receivable is more than INR 50,000 for a year, TDS is applicable to the interest. This limit for TDS deduction on SCSS investments is applicable from AY 2020-21 onwards.

Minimum and Maximum Deposit Limits

The minimum amount that one can deposit in this scheme is INR 1000 and the maximum is INR 15,00,000. 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. However, if you want to deposit more than INR 1 Lakh than it has to be via cheque or demand draft.

Maturity and Withdrawals

The maturity period of SCSS is 5 years but can be further extended for 3 more years. An account holder can withdraw from their SCSS account prematurely after one year. There is also a penalty of 1.5% on the deposited amount which will be charged if someone wants to close before the completion of 2 years. Furthermore, if the account holder wishes to close the account after 2 years then there is a penalty of 1% on the deposit amount.

How to Open an SCSS Account?

One can open an SCSS account by either going to the post office or private/public bank. Self Attested copy of the following documents will be needed:

  • PAN card or Passport
  • Telephone bill/Electricity bill/ Adhaar Card
  • Birth Certificate/Senior Citizen Card
  • 2 passport-sized photographs
  • Form A needs to 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 are Offering SCSS Account?

Following is the list of banks from where one can open an SCSS account:

  • Allahabad Bank
  • Andhra bank
  • State Bank of India
  • Bank of Maharashtra
  • Bank of India
  • Corporation Bank
  • Bank of Baroda
  • Canara Bank
  • Central Bank of India
  • Syndicate Bank
  • UCO Bank
  • Union Bank of India
  • IDBI Bank
  • Indian Bank
  • Indian Overseas Bank
  • Punjab National Bank
  • United Bank of India

FAQs

Is it possible for an account holder obtain a loan by pledging the deposit/account under the SCSS, 2004?

No, withdrawals for loans is not permissible under this scheme as it defies the very nature of the scheme.

Can I transfer my account from one deposit office to another?

Yes, Form G must be filled, to transfer an account from one deposit office to another.

Am I allowed to cancel or change my nomination?

Yes, the nomination can easily be cancelled or changed by submitting a fresh nomination in Form-C to the bank/post office wherein said SCSS account is being maintained.

I am 57 and my wife is 50 years old, can I appoint her as partner in a joint account under SCSS?

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 eligibility to act as your joint partner in the account. 

Got Questions? Ask Away!

  1. 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.

  2. 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,

    • Medical allowance is exempt up to INR 15,000 on a reimbursement basis.
    • Children education allowance is exempt up to Rs. 200 per child per month up to a maximum of two children.
    • Conveyance allowance is exempt up to a maximum of Rs. 1600 per month.

    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.

  3. 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.

  4. Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.

  5. 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!

  6. 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.

  7. 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!

  8. 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

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