Senior Citizen Savings Scheme (SCSS) is a reliable investment instrument undertaken by the Government of India. Only senior citizens of India are allowed to opt for this scheme. SCSS offers an attractive interest rate with five years of tenure that can be a better option than bank FDs. The current interest rate of SCSS, as of October 2020, is 7.4% per annum.
The Senior Citizen Savings Scheme account holder can get a Tax deduction of up to Rs. 1.5 lakh under Section 80C. NRIs (non-resident of India) are not eligible for opening this scheme. An SCSS is allowed to open from both Post-office and RBI recognized Banks.
To open an SCSS account, the following criteria are needs to be fulfilled:
Persons under the below situations are not eligible for SCSS:
The following documents need to be submitted while opening an SCSS account:
The SCSS is a one-time deposit scheme. An applicant can invest a minimum of Rs. 1000, and the maximum is 15 lakh individually or jointly. Investment over Rs. 1000 must be multiple of 1000. The depositor has the option to pay by both cash or cheque. To deposit above Rs. 1 lakh the applicant must pay by cheque.
Senior Citizen Savings Scheme matures after five years from the opening date of the account. The deposited amount will be locked-in for five years. The Account holder can extend the tenure for a further three years by giving an extension application to the respective authority before maturity.
SCSS allows premature closure of account but only after one year.
On closing the SCSS account before completion of the 2nd year, a penalty of 1.5% will be charged on the deposited amount. And closing the SCSS account 2nd year onwards, only a 1% penalty will be applicable. However, in the case of the account holder's death, there will be no penalty.
Income over Senior Citizen Saving Scheme is taxable. If interest fetches more than Rs. 50,000, then TDS will be applicable. However, tax-deduction benefits up to Rs. 1.5 lakh (U.S. 80c. Income Tax Act.) is allowed to avail during the first year of investment.
As of Q1 FY 20-21, the rate of interest of the Senior Citizen Savings Scheme is 7.4%. The interest rate revises quarterly. However, the initial rate of interest during investment will remain the same until its maturity. As an example, if Rajat invests Rs. 15,00,000 lakh with an ROI of 7.4%, he will fetch the same rate of interest until maturity.
The interest will be paid into a provided savings account on completion of each year. Here are some examples of sample returns below:
|Invest||Annual Income||Total Return (5 Years)||Total Return (8 Years)|
|Rs 15,00,000.00||Rs 1,11,000.00||Rs 20,55,000.00||Rs 23,88,000.00|
|Rs 10,00,000.00||Rs 74,000.00||Rs 13,70,000||Rs 15,92,000|
|Rs 8,00,000.00||Rs 59,200.00||Rs 10,96,000||Rs 12,73,600|
|Rs 5,00,000.00||Rs 37,000.00||Rs 6,85,000||Rs 7,96,000|
The above calculation is based on an annual interest rate of 7.4%.
The depositors of the SCSS account are normally given a passbook or a certificate just similar to a bank fixed deposit.
Senior Citizen Saving Scheme is only for senior citizens. However, the primary account holder can add one or more nominees under this policy. The account holder can also change or add a nominee after opening the account.
Despite a compact scheme, the Senior Citizen Savings Scheme has some drawbacks. These are described following: