Senior Citizens Savings Scheme: When you reach that stage of life where you have to live comfortably after retirement, then financial security becomes the biggest question. In such a situation, the government has started Senior Citizens Savings Scheme i.e. SCSS especially for the elderly. This is a government scheme that ensures regular and reliable income after retirement. Investing in SCSS is also beneficial because it guarantees interest, provides tax exemption, and the method of investment is also very easy. This scheme is available in post offices and recognized banks across the country, which gives ease and convenience to the elderly in investing.
SCSS duration and facility of increase
The most special thing about this scheme is its basic time i.e. tenure of 5 years. When 5 years are completed, you can extend it for 3 years if you want. The option of increase is available when you apply to the bank or post office in the last year of your scheme. With this, the elderly can earn more interest on their savings by keeping them deposited for a few more years, which becomes a good source of income for them.
Interest rate and payment method
The interest rate in the SCSS scheme is decided by the government and it has reached 8.2% annually from April 2024. Whatever interest is received, it is deposited directly into your account every three months i.e. quarterly. This gives the elderly a stable income every month or quarter, which proves helpful in meeting their daily needs and expenses.
Minimum and maximum investment
Investment in this scheme starts from ₹ 1,000 and the maximum you can deposit is up to ₹ 30 lakh. However, investment should be made in multiples of ₹ 1,000. Meaning if you want to deposit ₹ 10,000 or ₹ 50,000 then that is also possible, just keep in mind that this amount should be a multiple of ₹ 1,000. This much investment creates the right balance for the elderly according to their savings.
Account opening and nomination process
Opening an account in SCSS is very easy. You can open it alone or open a joint account with your spouse. Nomination facility is also available, which means that you can nominate a member of your family so that in future the benefits from the account go directly to that person. You can make nomination at the time of opening the account or even later.
How to deposit and withdraw
You can deposit an amount up to ₹1 lakh in cash, but the amount above this has to be deposited by bank cheque. This means that for big investments you will have to follow the banking process. If you need money before the maturity of your scheme, then you can close the scheme prematurely, but some rules and penalties apply for this.
If you withdraw your money before 1 year, then the amount of interest received till that time is deducted from your original investment. At the same time, if you close between 1 to 2 years, then a penalty of 1.5% will be levied on your total deposit amount. And if you withdraw after 2 years, then only 1% penalty is deducted. Note that you can make premature withdrawal only once in this scheme, repeated withdrawal of money is not allowed.
Who is eligible for this scheme
SCSS is only for the elderly, who are 60 years of age or above. Apart from this, people who have retired between 55 to 60 years, such as government employees who have retired under Superannuation, Voluntary Retirement Scheme (VRS) or Special VRS, can also invest in this scheme. It is necessary for them to open an account within 1 month of their retirement. At the same time, people who have retired from defense services, who are between 50 to 60 years, can also take advantage of this scheme, provided they fulfill the rest of the rules. However, Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) cannot invest in this scheme.
Benefits and security of SCSS
Since this scheme is backed by the government, the investment in it is completely safe. The interest received in this is also mostly fixed and is more than the common fixed deposit. The interest amount received on a quarterly basis becomes a regular and reliable source of income for the elderly. Apart from this, special tax exemption is also available in this scheme. You can get tax exemption under Section 80C of the Income Tax Act on deposits up to ₹ 1.5 lakh every year, which reduces your total taxable income.
Talking about taxation and TDS
The interest received in SCSS is fully taxable, but if the annual interest is less than ₹ 50,000, then TDS i.e. tax deduction at source is not deducted. This is a relief especially for the elderly as they do not have to worry about unnecessary taxes on their interest. Therefore, most investors also take advantage of this scheme from a tax point of view.