Senior Citizens Savings Scheme

Senior Citizens Savings Scheme (SCSS) is a government-backed savings instrument offered to Indian residents aged over 60 years. The deposit matures after 5 years from the date of account opening but can be extended once by an additional 3 years. The SCSS interest rate for April to June 2020 has been set at 7.4%. This is the highest interest rate among the various small savings schemes in India.  SCSS is available through Public / Private sector banks and India Post Offices. Being a government-backed savings instrument, the terms and conditions applicable to the SCSS are the same, regardless of the bank/ post office, you invest through. One of the main benefits of the scheme are:

  • Tax benefits are provided
  • Safe to invest in the scheme
  • Interest rate has been reduced from 8.6% to 7.4%
  • Premature withdrawal is allowed

The scheme comes with various security features and provides individuals with a savings option for the long run. The SCSS is available at post offices and certified banks across the country.

SCSS Eligibility

The Eligibility Criteria for the SCSS are mentioned below:

  • An individual who has attained the age of 60 years or above at the time of opening an SCSS account.
  • Individuals who have attained the age of 55 years old, but are below the age of 60 years old and have retired on superannuation are eligible to open an SCSS account.
  • Individuals who have attained the age of 55 years old and have retired before the implementation of the SCSS rules are eligible under the scheme.
  • Under the SCSS, retired Defence Services personnel are eligible irrespective of their age. However, certain other specific conditions must be met by these individuals.
  • Non-Resident Indians (NRIs) are not eligible to open an SCSS account.
  • Hindu Undivided Families (HUFs) are not eligible to open an SCSS account as well.

How to Open a SCSS Account at Post Office

You can open a Senior Citizens Savings Scheme account at all India Post Offices. The interest earned from an SCSS account is automatically credited to the investor’s linked savings account at the same post office. The wide reach of India Post ensures that the option of SCSS account is available to Indians across the country- even those located in the most remote parts.

SCSS Account Registration at Banks

Apart from the post offices, the SCSS account is also offered at select Public/ Private sector banks. The following are key benefits of opening a Senior Citizen’s Savings Scheme account at authorized banks:

  • The accrued interest can be directly credited into the depositor’s savings bank account held with the bank branch.
  • Standard account statements are forwarded to depositors through post or email.
  • 24×7 customer service through phone banking services.

In case you are a senior citizen and plan to complete your SCSS registration at a bank, you will have to follow the applicable account opening procedure.

Documents Required to Open an SCSS Account

An SCSS account can be opened in any of the authorized banks or post office branch across India with following documents:

1. Form A  has to be filled for opening an SCSS Account.

2. Identity proof like PAN card, Passport to be presented.

3. Address proof such as Telephone bill, Aadhar card is mandatory.

4. Document for proof of age is required. This could be in the form of a Passport, Senior Citizen Card, a Birth certificate issued by the Corporation or Registrar of Births and Deaths, Voter ID card, PAN card etc.

5. 2 Passport size photographs.

All the above documents must be self-attested.

SCSS Interest Rate

Currently, the SCSS interest rate has been reduced from 8.6% to 7.4%. The returns of the SCSS is high when compared to savings and Fixed Deposit (FD) accounts. On the first instance, the interest is payable on the deposit date of March 31, September 30, and December 31, thereafter, interest is payable on March 31, June 30, September 30, and December 31. Quarterly interests are paid on the initial working day of April, July, October, and January. However, quarterly interest payments are available only at Core Banking enabled post offices.

Minimum and Maximum SCSS Deposit Limits

Depositors are allowed to make a lump sum deposit with a minimum deposit of Rs.1000. Deposits greater than Rs.1000 have to be made in multiples of Rs.1000. The maximum SCSS limit deposit is Rs.15 lakh.  

While deposits in the SCSS accounts can be made in cash, this is allowed only for amounts less than Rs. 1 lakh. If the deposit amount for Senior Citizens Savings Scheme exceeds Rs. 1 lakh, using a cheque/demand draft for making the deposit is mandatory.

Tenure of the Fund and Withdrawal

The tenure of this scheme is 5 years with the option to extend it for 3 more years. In order to extend the scheme for another 3 years after the completion of the 5-year tenure, the investor is required to submit the duly filled Form B for the extension of the scheme. Only one extension is allowed, and such extended accounts can be closed after one year of extension without any penalty.

Taxability on Senior Citizens Savings Scheme

  • Investments made in a Senior Citizen Savings Scheme account qualify for income tax deduction benefit up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act, 1961.
  • Interest on SCSS is fully taxable. In case the interest amount earned is more than Rs. 50,000 for a fiscal, Tax Deducted at Source (TDS) is applicable to the interest earned. This limit for TDS deduction on SCSS investments is applicable from AY 2020-21 onwards.

SCSS Application Form Download Online

Senior Citizen’s Application Form is available via the offline route at India Post Offices as well as via the online route. If you are planning to open your SCSS account at an India Post Office, you can download the SCSS application form from the official India Post website.

A number of participating public and private sector banks also have the option of SCSS Application form download from their official websites. Alternatively, you may choose to obtain the paper form at designated branches of participating banks in India.

How to Fill Senior Citizen’s Savings Scheme Application Form

Currently, a SCSS account cannot be opened via the online route, thus after downloading the SCSS application form, you have to print, fill it out and submit the completed SCSS Application form (at the post office/bank) along with applicable supporting documents.  The SCSS application form requires you to provide some key information at the time of opening a Senior Citizen’s Savings Scheme account such as:

  • Applicant name and PAN
  • Name of the primary applicant’s father/mother/husband/wife
  • In the case of joint SCSS account with spouse, you have to mention the name, age, and address of your spouse.
  • Cheque/demand draft amount and number (if applicable)
  • Nominee name, age, and address (If you wish to have more than one nominee, mention detail of individual share of each nominee)

Premature Withdrawal of SCSS Account Deposit

Premature withdrawal of Senior Citizen’s Savings Scheme is allowed but penalties are applicable in such cases based on the time elapsed between account opening and withdrawal. The penalties on premature exit from SCSS are as follows:

  • 1.5% of deposit amount deducted as a penalty if an exit from the scheme occurs before completion of 2 years from the date of account opening.
  • 1% of SCSS deposit deducted as a penalty if an exit from the scheme occurs between 2 years to less than 5 years from the date of account opening

Closure of SCSS Account Before Maturity

In the event of death of the primary account holder before actual maturity of the account, the account will be closed and all the maturity proceeds will be transferred to the legal heir/nominee. For deceased claims, the nominee or the legal heir will have to fill out a written application in prescribed format along with a Death Certificate to facilitate the closure of the account.

Benefits of Investing in Senior Citizen Savings Scheme

  • Being a government-backed scheme, SCSS comes with all the protection and assertion associated with all government schemes i.e. sovereign debt.
  • Superior Returns- the scheme has a high-interest rate of 7.4% per annum. This is higher than most tax savings instruments in Sector 80C.
  • Medium-Term Investment – The account comes with an initial maturity term of 5 years however this can be further extended to another 3 years. This encourages senior citizens to have this saving scheme as a medium or a long term investment product in their financial kitty.
  • The investment done under this scheme is tax-deductible under Section 80C, of the Income Tax Act, 1961 up to Rs. 1.5 lakh per annum.
  • Flexibility in Investment amount – One can invest any amount in multiples of Rs. 1,000 up to the maximum cap of Rs. 15 lakhs. However, only one-time lump sum investments are allowed.
  • The option of premature withdrawal in case of financial emergencies (with applicable penalties).
  • Easy availability – the scheme may be availed through India Post Offices or designated bank branches located across the country.

Frequently Asked Questions on Senior Citizens Savings Scheme

Q.What will be the share of the joint account holder in the deposit in an account?

A.The whole amount is attributed to the first depositor or applicant. The addition of a spouse as a joint account does not matter in this case.

Q.Can both the spouses open separate accounts?

A.Yes, individual accounts can be opened as well, provided the deposit limit is a maximum of Rs.15 lakh. Of course, it has to adhere to the rules of the scheme.

Q.Any income tax rebate / exemption is admissible?

A.No, not with this scheme.

Q.Is TDS applicable to the scheme?

A.Yes if the interest exceeds Rs.10,000 per annum, TDS is applicable. In this scheme, interest payments are no exemption to deduction of tax at source.

Q.Any minimum limit has been prescribed for deduction of tax at source?

A.As per government regulations, tax has to be deducted at source as per the minimum balance.

Q.Can a person holding a Power of Attorney sign for the nominee in the nomination form?

A.No a person holding a Power of Attorney cannot sign in place for the nominee in the nomination form.

Q.In case of a joint account, if the first holder / depositor expires before maturity, can the account be continued?

A.Yes, the nominee can hold the account of the expired depositor in case of a death, provided it pertains to the SCSS Rules.

Q.Is there any fee prescribed for nomination and / or change / cancellation of nomination?

A.No fee is charged.

Q.Can an account holder obtain a loan by pledging the deposit/account under the SCSS, 2004?

A.Periodic withdrawals for loans is not possible in this scheme as it defies the very nature of the scheme.

Q.Is premature withdrawal of the deposits from the accounts under the SCSS, 2004 permitted?

A.Yes, premature withdrawals are allowed, although a premature closure of the savings account is permitted only after a year, whereby the account holder will be charged 1.5% of the savings and 1% after two years.

Q.Are Non-resident Indians, Persons of Indian Origin and Hindu Undivided Family eligible to invest in the SCSS, 2004?

A.No, it is not possible, though an Indian moving abroad and having a SCSS can continue to maintain it.

Q.Can an account be transferred from one deposit office to another?

A.Using Form G, an account can be transferred from one deposit office to another.

Q.Can an SCSS account be extended?

A.Yes, within one year after maturity a depositor can extend their SCSS for a period of three years.

Q.What happens if an account is opened in contravention of the SCSS Rules?

A.The account will be closed, interest deducted and the deposit money returned to the depositor.

Q.Whether commission is payable to the agents under the Scheme?

A.Payments of commission under this scheme has been discontinued.

Q.Why must I choose to open my SCSS account in a bank rather than a post office? Which is better?

A.The senior citizens savings scheme is an Indian government sponsored program that is administered to the general public through two mediums- a list of certified banks and the offices belonging to the Indian Postal Department. The latter are just the medium and do not possess any control over the terms, rules and regulation of the actual SCSS product. Thus, it will be wrong to put one medium over the next.

However, owing to the rapid advancement of online and digital technology in the banking sector, a number of features are now available that make banking simple and the management of investments, a child’s play. These features will help you manage your SCSS account better, though the difference as compared to the post office hosted SCSS account may not be much. The following features are the highlights-

  • Facility of direct credit of accumulated interest into the depositor’s savings bank account. In the case of the post office, such a savings account must first be created.
  • Regular account statements are forwarded to the depositor via post and/or email.
  • Higher grade of customer service through phone banking facility.

Q.What will happen to my account if I were to pass away?

A.If you have opened an individual account (without any joint investor) and unfortunately, you were to pass away unexpectedly, the SCSS account will be primed up for closure. To affect such a termination, the account holder’s nominee must forward an application in Form ‘F’. The Annexures II & III of such a form must be attested by a public notary or the Oath Commissioner.

Q.Can I cancel or change my nomination?

A.When applying for the SCSS account, you are free to propose a nominee. This activity can also be completed after your account has been in existence for a specified duration of time. Alternatively, the nomination made by you can easily be canceled or edited by submitting a fresh nomination in Form-C to the bank/post office wherein said SCSS account is being maintained.

Q.What to keep in mind before opening a SCSS Account

A.Before you open a Senior Citizens Savings Scheme account, ensure that you provide all the necessary information that has been requested. If it is found that the information provided by you is incorrect or false, the account shall be closed with immediate effect. The deposited amount will be refunded to the depositor after the deduction of interest that has already been paid into the account.

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