Everything About Senior Citizen Savings Scheme (SCSS) - Features, Benefits, & Limitations

The Senior Citizen Savings Scheme (SCSS) is created by the government for citizens above 60 years of age. This scheme was launched to help senior citizens earn regular income after retirement.

SCSS Scheme is a government-backed investment scheme that guarantees quarterly returns and is completely risk-free. Senior citizens can apply for the savings scheme through post offices and public-private banks. This scheme is also eligible for tax benefits under Section 80C of the Income Tax Act. This blog shares more details about this scheme and its features and benefits.

Who is Eligible to Apply for the Sr. Citizen Saving Scheme?

The following criteria must be fulfilled to avail the Senior Citizen Savings Scheme:

• The individual must be a citizen of India. Non-resident Indians and Persons of Indian Origin are not eligible to avail the benefits of this scheme. Members of the Hindu Undivided Family also do not qualify for it.
• Since it is a savings scheme for senior citizens, any Indian citizen aged 60 years or above is eligible for it. However, the age limit is relaxed in these cases:
  • If a person has opted for Voluntary Retirement Scheme (VRS) or Superannuation, and is in the age group of 55-60, the retiree can avail the benefits of this scheme if he has applied within one month of the disbursement of retirement allowance.
  • If retired defence personnel fulfil other conditions, they are eligible to avail the benefits of this scheme. In such cases, there is no upper age limit for eligibility.

SCSS: An Overview

An overview of the key details of the SCSS scheme has been provided below:

Features and Benefits of Senior Citizen Savings Scheme (SCSS)

There are two key advantages of opening such a senior citizen scheme account viz. accumulation of sufficient wealth after retirement and saving on income tax. Some other benefits and features include:

1. Adequate Returns

   The SCSS scheme returns are adequate and assured as it is a government-backed scheme. The SCSS interest rate is typically higher than other savings schemes such as fixed deposits, recurring deposits, etc. So, it helps the senior citizens to earn sufficient returns.

2. Acts as a Medium-Term Investment

   Senior Citizen Savings Scheme is popular as a medium-term investment, with an initial maturity period of 5 years. Since the interest rates are not subject to market fluctuations, it is a good option for medium-term savings.

3. Flexible Investment Amount

   The minimum investment to open an account under this scheme is Rs 1,000 and the maximum is Rs 15 lakh. Only a one-time lump sum amount can be deposited in this scheme.
   So, it also turns out to be one of the better lumpsum investment options for senior citizens. If a customer has more than one account, the total deposit amount in all such accounts should not exceed the maximum limit.

4. Change in Interest Rates in Three Months

   The Senior Citizen Savings Scheme interest rate is revised every quarter depending on various factors such as inflation level, prevailing rates in the market. Due to economic conditions, the rates may also remain the same even after revision.

5. Fixed Income

   The SCSS interest rate applicable at the time of investment remains fixed for the entire maturity period. So, your returns do not get affected after the quarterly interest rate revisions.

6. Maturity Period

   The maturity period of the Senior Citizen Scheme is 5 years, and it can be extended by 3 years further.
   If you want to extend it by 3 years, then Form B has to be submitted. Extension of the three-year period is allowed only once and the interest rates applicable for that quarter will be applicable on the extension.

7. Premature Withdrawal & Closure of Account

   Withdrawal of funds is allowed even after one year of opening the account. If you wish to close the account before completion of 2 years, a penalty of 1.5% of the deposit amount is deducted.
   If the extension is done after the completion of the period, then the account can be closed after the first year without any penalty. If you pass away before the account matures, your nominee will be entitled to receive the full balance.

8. Nomination Facility

   The Senior Citizen Savings Scheme also has a nomination facility. If you pass away before the account matures, your nominee will receive the remaining balance in full.

9. Tax Gains

   The principal amount deposited towards this scheme and all investments are exempted from income tax under Section 80C of the Income Tax Act, 1961.
   A benefit of Rs 1.5 lakh can be availed every year. The interest on Senior Citizen Savings Scheme is taxable as per the tax slab applicable to the individual. TDS will be deducted if your total interest earnings in a financial year exceed Rs. 50,000.

Some Limitations of SCSS

You must also note down some limitations or disadvantages of the Senior Citizen Savings Scheme. Investors cannot invest more than Rs 15 lakh under this scheme. Investors get interest on the first day of every financial quarter. This is a stable source of income but it does not give the benefit of compound interest.

Conclusion

Investing in the SCSS scheme offers a secure way to earn regular income and reduce your tax burden. It provides a long-term, safe and effective savings solution. Since it is a government-sponsored scheme, it also comes with additional perks associated with such schemes.

SCSS is an ideal senior citizen tax saving scheme and the right investment option for securing your future. At PNB MetLife, we offer different retirement plans to secure your financial future. Grow your investment wisely by selecting the right financial instruments!

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