Senior Citizen Savings Scheme (SCSS) - Rules & Features

scss main features

Senior Citizen Savings Scheme (SCSS) is a government sponsored scheme meant for the senior citizens to secure additional retirement benefits while availing day to day cash requirements. SCSS offers regular income, highest safety and tax saving, making it a popular product for those over 60 years of age. 

Post retirement, people are looking for less risky investment avenues to park their retirement corpus in. SCSS offers capital protection, along with quarterly interest payment as a source of income. The scheme is backed by the government and, therefore, offers a sovereign guarantee. 

These schemes are available through certified banks and post offices across India. The SCSS accounts usually have tenure of 5 years and can be further renewed for another 3 years at a time. The depositors are allowed to make deposits in a lump sum and it should be in multiple of 1,000 with maximum annual limit of Rs. 15 lakhs.

Main Features of SCSS

Eligibility : Senior citizen of India aged 60 years or above, Retired Defense personnel and Early retirees who have opted for VRS with certain age conditions.
Liquidity : Premature withdrawals are allowed only after one year and with premature withdrawal charges. 
Rate of Interest : Interest rate is subject to revision every quarter/ year. The interest payable on an investment is locked on the date of the investment. 
Investment Limit : Minimum investment limit is Rs 1000 & Maximum limit is Rs 15 lakhs.
Tax Treatment : Interest earned is taxable as per the investor's tax bracket. 
Lock In Period : 5 Years

Tax Benefits provided to SCSS

Section80C Benefits - Deposits made in SCSS are eligible for deduction under Section 80C subject to a maximum of Rs 1.5 lakhs in a financial year. There will be no additional benefit under Section 80C for the extension of an existing account after five years. 
Tax at Maturity - Interest received under the scheme is taxable in the hands of the depositor. Tax deducted at source (TDS) applicable on interest payment above RS 10000 per annum.

scss tax benefits 

Rules for SCSS

Who can open?
- Senior citizen of India aged 60 years or above.
- Early retirees between 55 and 60 years, who either opted for the voluntary retirement scheme (VRS) or superannuation, can also invest in the scheme. Here the investment has to be done within a month of receiving the retirement benefits.
- Retired defense personnel with a minimum age of 50 years. 
- 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.
- HUFs and NRIs are not allowed to invest in this scheme.

Number of accounts
There is no limit on the number of accounts that can be opened, but the total amount in all the accounts must not breach the maximum investment limit. 
Where to open?
The SCSS account can be opened in any of the authorized banks or post office branch across India. 

Documents required to open
- Duly filled application form, available at the post office or bank 
- Identity proof like PAN card, Passport, Aadhaar
- 2 Passport size Photographs of the applicant/s 
- Age proof 
- In the case of early retirees, Proof of date of disbursal of the retirement benefits.
- If the information furnished by him is false then the account will be closed immediately and the deposited amount will be refunded after the deduction of interest already paid.

Contributions Limit
- The minimum investment possible in SCSS is Rs. 1000.
- The amount invested in the scheme also cannot exceed the money one receives on retirement. Therefore maximum limit one can invest, either Rs 15 lakh or the amount received as a retirement benefit, whichever is lower.
- Cash Limit is upto Rs 1 lakhs
- Above Rs 1 Lakhs cheque or DD will be required to open an account. The investment date in the scheme is taken as the date on which the cheque is realised in the government's account.   

Interest on SCSS
- Interest rate on new deposits is subject to revision every quarter / year.
- Interest rate remains fixed during the entire tenure of instrument.
- The accrued interest can be directly credited into the depositor's savings bank account held with the bank branch or to the linked Post Office Savings account.
- If an SCSS account is extended post maturity the interest rate that the extended account will earn will be as per the rate prevailing for that scheme on the date of extension.

Premature Withdrawls
In the event of any financial compulsion, the account holder can prematurely close the account after a minimum term of one year.

Conditions and Penalty on Premature Withdrawl

  • Within 1 year - No withdrawl allowed
  • After 1 year and Before 2 years from the start date - Premature penalty of 1.5% of the maturity value 
  • After 2 years till the 5th year - Premature penalty of 1% of the maturity value
  • In case of renewal post completion of the initial term of 5 years, no premature penalty is levied for any withdrawal of funds.
  • No charges are levied in case of premature closure of account due to the depositor's death.

Maturity and Tenure
- Tenure of the scheme is five years, which can be further extended for three more years. 
- Depositor has to submit Closure form to close the account after the completion of five years and receive the maturity amount. 
- Within one year after maturity a depositor can extend their SCSS for a period of three years.
- In case the depositor has not extended the scheme on maturity or closed the account after maturity then post maturity, the deposit will earn the post office savings account interest rate, applicable at that time.

Transfer SCSS 
Account can be transferred from one deposit office to another by submitting a form. A nominal fee is charged to avail this facility.

Cancel or change of nominee
- A nominee can be added at the time of opening SCSS.
- A depositor can also appoint a minor as his nominee. He just needs to provide the guardian's details, along with the minor's date of birth. 
- Nomination can easily be cancelled or edited by submitting a fresh nomination form.