SCSS - Senior Citizen Saving Scheme

Designated for individuals above the age of 60, the Saving Schemes for senior citizens in India are effective, long term saving options and offer unmatched security and features that are usually associated with any government sponsored savings program. These schemes are available through certified banks as well as the network post offices spread across India.

About Senior Citizens Savings Scheme (SCSS)

In every human society, the elders or the senior citizens are given the pride of place. These individuals have spent a lifetime working, creating life and chiseling paths in the roughest terrains for the ease of the generations that are to follow them. And, the collective society hasn’t forgotten these contributions- honoring its elders with many facilities and considerations that are tasked to make the lives of our older generation better. When it comes to saving schemes for senior citizens in India, the government has a wide collection of very attractive programs in store.

The typical Senior Citizens Savings Scheme (SCSS) account extends upto 5 years and upon maturity can be subsequently extended for an additional 3 years. The depositor is allowed to make one deposit into this account, an amount that is a multiple of Rs.1,000 and not extend beyond Rs.15 lakhs. SCSS accounts are robust, safe, highly targeted and a long term savings prospect. After spending a lifetime supporting others and running in the mad rat race of life, the various Senior Citizens Savings Schemes in India offer the aged folk a medium of effective savings for their twilight years.

Latest interest rates for senior citizen saving schemes

Interest rate for the first quarter of Financial year 2017-18 i.e. Apr’17 to Jun’17

Investment Option	Rate of Interest for Quarter 1 : Apr'17 to Jun'17
Senior Citizen Savings Scheme (SCSS)	8.40%

Documents Required to Apply for SCSS

Those wishing to apply for the Senior Citizens Savings Scheme will be required to provide certain documents, which are given as follows:

• A fully and correctly filled application form that can be obtained from a bank or post office
• A correctly filled-up Know Your Customer (KYC) form
• Applicant(s) photos
• Aadhaar details
• Permanent Account Number (PAN); If applicant doesn’t hold a PAN Card when applying for SCSS, they must apply for a PAN card and mention their PAN Card application number in lieu of PAN Card details
• Proof of age
• Proof of residence
• Retired applicants will be required to furnish a employer-issued certificate which states the designation help by the applicant, duration of their employment, retirement benefits they are entitled to, and whether the retirement was on superannuation or otherwise.
• Proof stating the date on which applicant’s retirement benefits were disbursed
• Applicants may also be required to provide the details of existing accounts held by them under this scheme, and also the amounts that have been deposited in each of such accounts.

Proof of Investment

The depositor is given a passbook once the account is opened, which includes the date of opening, the account number, the depositor's name, photograph, address, the amount deposited, dates and amount of the quarterly interest payable, maturity date and amount, nomination details. before March 31, 2018 to avoid the account becoming inoperable.

Tenure of the Scheme

As mentioned earlier, the tenure of investment in the SCSS is 5 years. However,  once the 5-year tenure is over, it can be prolonged for another 3 years.

Withdrawals from the Scheme

One can make premature withdrawals from this scheme, but such withdrawals are permitted only after the scheme has finished the first year of its tenure. Also, certain charges will be levied in case of premature withdrawals. In case withdrawals are made after a year, but before 2 years from the start date of the scheme, the withdrawal charges are 1%. If the SCSS account has been pre-closed following the death of the depositor, no withdrawal charges will be levied.  

Maturity

All SCSS accounts have a tenure of 5 years, after the end of which, the account holder can either close the account or, as mentioned previously, extend it for an additional term of 3 years. To close the account after maturity and receive the accumulated amount, the depositor will be required to submit their account passbook and a completely filled ‘Closure Form'. If the account holder wishes to extend the account’s tenure for another 3 years, they must apply for the same. To do so, the investor is required to submit the extension form after ensuring that it has been filled in correctly. If, after the account has reached maturity, the depositor has not put in a request for extension, or closed the account, then the deposited amount in the account will earn interest at the rate that is applicable to it.

Taxation

Those who have invested in a Senior citizens Savings Scheme will be eligible for tax exemption under Section 80C of the Income Tax Act. the exemption will be subject to the current benefit ceiling of Rs. 1.5 lakh/year, that is applicable to all investments made under this Section of the Act.  

It is important to note, that, there will be no tax liability on the principal amount if the same is withdrawn by the legal heir or nominee following the death of the account holder/depositor. However, the interest that the deceased depositor’s account accrues will be liable for taxation.

Nomination Facility

SCSS account holders are allowed the nomination facility wherein the account holder can nominate another person to receive the deposit amount in the event of the former’s untimely demise. Account holder can even nominate minors as nominees, on the condition that they provide the minor’s date of birth, along with the details of the minor’s guardian.

If the account holder has not nominated any person at the time of account opening, they may do so after the scheme has commenced. To do so, they must provide a completely filled nomination form. If the account if jointly held, the nomination form must be duly signed by all account holders.

Account holders are permitted to change the nominee as many times as they may wish. There is no restriction in that regard, and the account holder(s) will not be charged any fee to change nominee details.

Account Transfer Facility

Account holders also have the option to transfer their SCSS account to any other bank or post office. To avail this option, the account holder must submit a transfer form that has been correctly filled, to the deposit office (post office or bank) where they currently hold an account. This facility can be availed on payment of a negligible fee.

Benefits of SCSS

As a savings and investment product for the 60+ year olds, the Senior Citizens Savings Scheme Account is a heaven-sent. Boasting of one of the best interest rates for any government sponsored investment product in India, the senior citizens savings scheme is customized to suit the specific requirements of an investment minded senior citizen. The salient features and benefits of this option are as follows-

1. Easily Available- Fill up a simple application form at your local bank or post office and you are set.
2. Reliability- This is a Government of India sponsored investment product and comes with all the security and assurance associated with that tag.
3. Multiple Accounts- A single applicant can open multiple SCSS accounts, either individually or with a joint investor (must be the spouse of the primary investor).
4. High Returns- At 8.6% per annum, the returns on your SCSS accounts are very impressive.
5. Flexible Tenure- The account has a tenure of 5 years but can be stretched to add another 3 years. Thus, your senior citizens savings scheme serves as either a medium range investment or a long term plan.
6. Save Tax- As per the dictates of Section 80C, Income Tax Act, 1961, the TDS can be saved.
7. Choose Your Investment- Only one investment is allowed per SCSS account. This amount must be a multiple of Rs.1000 and not exceed Rs.15 lakhs. Thus, the SCSS investment is immensely affordable and scalable.
8. Premature Termination- In extreme financial duress, your SCSS account can be closed and the money accessed. While this option only applies after the account has existed for a minimum of one year, it still is a ready source of funds that can be called to help at a moment’s notice. However, after 1 year, a penalty of 1.5% of the funds in the SCSS account will be deducted while the same is 1% after the completion of 2 years.
9. Minimum Documentation- KYC documents that prove your age. The documents that can be submitted to substantiate this are- Passport/ Birth Certificate/ Voter’s ID/ Senior Citizen Card/ PAN, etc.

Eligibility for Senior Citizens Savings Schemes in India

In order to qualify for the saving schemes for senior citizens in India, said applicant must be-

1. Aged 60 years or above.
2. Must be aged 55 years or above, but less than 60 years, provided he/she has retired from his/her employment as per VRS/superannuation and must open said SCSS account within one month of the receipt of retirement benefits. Also, the invested amount must not exceed the amount of the retirement benefits.
3. In case of a joint account, the eligibility is decided per the aforementioned age requirements of the primary depositor. There is no age restrictions/requirements imposed on the second applicant.

SCSS Interest Rates

A lucrative, savings oriented investment option, the Senior Citizens Savings Schemes interest rate is set at 8.6% per annum (FY 2016-2017). Instead of parking their savings in the low yield savings bank accounts or risky propositions like mutual funds, the Senior Citizens Savings Schemes offer the Indian senior population the option to invest in a safe, high yielding and popular savings portfolio.

As of 1.10.2016, the interest rates for senior citizens savings scheme has been revised to 8.5%. payable from the date of deposit of 31st March/30th Sept/31st December in the first instance thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st December.

Applicable interest rate on SCSS deposit=8.5% per annum

Applicable interest rate per quarter= 8.5%/4 = 2.125

ie, interest accumulated for every Rs.100=Rs.2.125

ie, interest accumulated for every Rs.1 = (2.125/100)= 0.02125

A depositor for the senior citizens savings scheme is allowed only one deposit of multiples of Rs.1000 not exceeding Rs.15 lakh

An account be opened by cash if it below Rs.1 lakh, anything above Rs.1 lakh - the account can be opened only by cheque

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.

If the interest amount exceeds Rs.10,000 per annum, TDS is deducted from the interest.

Senior Citizens Savings Scheme Rules

A structured approach is crucial for success and peace of mind. When looking to enrol with the senior citizens savings scheme, ensure that you are well aware of the following conditions-

1. You must be 60 years or above to enroll In certain conditions, individuals in the age group of 55 years and above can also apply successfully.
2. Only one deposit is permitted per SCSS account. The deposit must be in multiples of Rs.1,000 with a maximum permissible investment of Rs.15 lakhs.
3. Interest on the money accumulated in the SCSS account is payable on 31st March/30th September/31st December in the first instance and thereafter interest is payable as of 31st March, 30th June, 30th September and 31st December of each year.
4. Maximum tenure of this saving scheme is 5 years. However, after maturity, the tenure can be extended for a further 3 years, pending the application for the same in the designated format.
5. An applicant can operate multiple accounts simultaneously, individually or with a joint account holder who is the spouse. However, the account holder must ensure that all requirements pertaining to the validity and operation of these accounts must be met, including maintaining the minimum balance.
6. It must be noted that cash is an acceptable medium of investment if the initial amount is less that Rs.1 lakh. If this amount is larger than Rs.1 lakh then a cheque must be used.
7. Account can be easily and quickly transferred from one bank/post office onto another.
8. SCSS provides nomination facility that can be availed at the time of opening the account or after said account has been in operation for a set duration of time.
9. If the depositor chooses to terminate the account prematurely then the following penalty applies- 1.5% of deposit amount after one year and 1% of the deposit amount after two years. Kindly note that premature closure of the senior citizens savings scheme account is only possible after the account has been in operation for a minimum of one year.
10. In case of joint accounts, the primary account holder is deemed the investor while the second stakeholder must be the primary account holder’s spouse.
11. Tax is deducted at source if the accumulated interest on the invested amount exceeds Rs.10,000 per annum.
12. Accumulated interest is deposited onto a designated savings account, maintained at the bank/post office, wherein the senior citizens savings scheme is maintained. These deposits are actioned through the auto credit facility via money orders or PDCs.
13. Investments in the SCSS account saves tax as per the provisions laid out in Section 80C of the Income Tax Act, 1961.

In summary, the standard SCSS is a feature rich offering that helps you save for the medium to long haul while avoiding the common concerns arising from similarly placed products that are actively promoted by non-governmental organizations. It’s your life and future- safety and reliability are definitely top priority.

SCSS Calculator

Often, the dimensions of your senior citizens savings scheme- the tenure, invested amount and the necessary paperwork & upkeep- will show you the larger picture while putting the bottom line (ie, the accumulated interest amount) in the background. Enter the senior citizens savings scheme calculator, a handy tool that helps you briskly calculate and be completely privy to what your SCSS account is doing for you.

Remember, the government of India updates the interest rate on its senior citizens savings scheme on an annual basis but the same is calculated and paid out every quarter. As mentioned before, interest is payable as of 31st March, 30th June, 30th September and 31st December of each year. Thus, the task of the senior citizens savings scheme interest calculator includes the calculation of the applicable quarterly interest rate. Let us further illustrate this aspect-

Applicable interest rate on SCSS deposit= 8.6% per annum

Applicable interest rate per quarter= 8.6%/4 quarters = 2.175%

ie, interest accumulated for every Rs.100 = Rs .2.175

ie, interest accumulated for every Rs.1 = (2.175/100)= 0.02175

Hence, for every Rs.1 invested as part of the senior citizens savings scheme in India, Rs. 0.02175 will be paid out as applicable interest after every 3 months. By simply multiplying this rate with the invested amount, the applicable interest rate for that quarter can be ascertained.

A simpler iteration of the above formulae is as follows- Pr/400 wherein, P= principal amount, r= interest rate per annum.

Tax benefits of Senior Citizens Savings Schemes

Most of us save monies in strategic investment portfolio or other simpler instruments while adhering to two set targets- a) Savings for the rainy days in the future, and b) To save on income tax that must be paid annually and attracts an almost legendary vile reaction from anybody who is gainfully employed and is obligated to pay his/her taxes. However, the following are the ground realities when it comes to Senior Citizens Savings Schemes in India and the associated tax implications-

1. If the investment churns out an interest amount in excess of Rs.10,000 per year, then Tax Deducted at Source (TDS) applies. However, interest that amounts to less than this number is free from tax.
2. All investments made per the SCSS account saves tax in accordance with the provisions laid out in Section 80C of the Income Tax Act, 1961.

Hence, aside from being a secure, scalable option with high returns, the senior citizens savings scheme is also a potent tax saver. All the elements are in alignment when it comes to your SCSS account and the prospect of tax savings.

Senior Citizens Savings Schemes in Post Office

The Indian postal system is an icon when it comes to staying connected with the grass root levels of the Indian society. No wonder, in this age of email and digital communication, the humble post box is still a strong contender in the Indian context, especially in the rural confines of this immense country. This is also the reason why the government of India actively employs the services of the Indian Postal system to propagate a plethora of its savings and investment themed programs. The senior citizens savings scheme (SCSS) is also offered at your local post office and just as in the case of the friendly National Savings Certificate (NSC) and National Savings Scheme (NSS), the SCSS has also managed to garner in a sizable fan following. Note that the interest amount generated by the SCSS account can be credited (using PDCs or money order) onto a savings account that is created in the same post office. Post offices are also a much preferred option especially amongst the non-urban folk as, they are deemed to be easily approachable, involves less influx of initial investments (service charges, account opening, etc.) and are more friendly in terms of the returns as a very limited number of people and systems are operational between this government scheme and its intended beneficiary.

Senior Citizens Savings Schemes offered by different banks

Alongside post offices, the Senior Citizens Savings Scheme is also offered by select banking organizations across the country. In recent times, banking in India has seen a renaissance of sorts wherein the usage of the latest banking technology, modernization of pioneering public sector banks and the emergence of a number of super competitive private sector banking firms has spiced up the Indian banking scene. Thus, quite naturally, a vast number of people, mainly the urban and semi-urban population, have a 24x7 relationship with their respective banks that include a number of portfolios other than the basic savings account. Into this scene walks the senior citizens savings scheme that offers a wide range of senior citizen friendly savings/investment options. Its quite easy for said citizens to open a SCSS account with their favorite bank rather than the nearest post office. A mere extension as compared to a whole new relationship.

As of 2004, 24 public sector and one private sector bank are authorized to offer the SCSS option. The following is the comprehensive list of said banks-

Public Sector Banks,

1. Allahabad Bank
2. Andhra bank
3. State Bank of India
4. State Bank of Mysore
5. State Bank of Bikaner and Jaipur
6. State Bank of Patiala
7. State Bank of Travancore
8. State Bank of Hyderabad
9. Bank of Maharashtra
10. Bank of Baroda
11. Bank of India
12. Corporation Bank
13. Canara Bank
14. Central Bank of India
15. Dena Bank
16. Syndicate Bank
17. UCO Bank
18. Union Bank of India
19. Vijaya Bank
20. IDBI Bank
21. Indian Bank
22. Indian Overseas Bank
23. Punjab National Bank
24. United Bank of India

Private Sector Bank - SCSS ICICI Bank Ltd.

FAQs about Senior Citizens Savings Schemes

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

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.

2. Can both the spouses open separate accounts?

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.

3. Any income tax rebate / exemption is admissible?

No, not with this scheme.

4. Is TDS applicable to the scheme?

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.

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

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

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

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

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

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

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

No fee is charged.

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

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

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

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.

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

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

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

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

13. Can an SCSS account be extended?

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

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

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

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

Payments of commission under this scheme has been discontinued.

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

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.

17. What documents must be submitted when opening up a senior citizens savings scheme account?

Essentially, the documents that help the bank ascertain your age are required when opening up the SCSS account. These include, Passport/ Birth Certificate/ Voter’s ID/ Senior Citizen Card/ PAN, etc.

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

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.

19. I keep hearing the term ‘retirement benefits’, what does this mean exactly?

When speaking of the eligibility for the senior citizens savings scheme, people belonging to the age group of 55 years- 60 years can apply, provided that they must open this account within one month of receipt of ‘retirement benefits’. Also, the invested amount must not exceed the net value of the ‘retirement benefits’.

What then is ‘retirement benefits’? In the context of the rules governing the SCSS accounts, retirement benefits are defined as any payment that is credited to the depositor post his/her retirement (on superannuation or otherwise) and includes such monetary components as PF dues, gratuity, encashment of unused leaves, earnings from Group Savings linked Insurance scheme, payments per the voluntary retirement scheme, etc. When applying for a SCSS account, the applicant must disclose such benefits in line with the regulations that govern the operation of such SCSS accounts.

20. Can I cancel or change my nomination?

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.

21. My wife is just 45 years old, can I appoint her as partner in a joint account?

Since you already have an SCSS account, you are free to appoint your spouse as the joint account holder. Its your age that is the qualifying factor here and not your wife’s. Thus, her age doesn’t affect her eligibility to act as your joint partner in the account. However, the converse of this isn’t possible as your wife is just 45 years old and the minimum age to be eligible to own a SCSS account is 60 years.

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

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.