Senior Citizen Savings Scheme (SCSS): Interest Rates, Benefits, and how to invest?

The Senior Citizen Savings Scheme (SCSS)  is one of India’s mid and long-term investment schemes. This scheme particularly focuses on people who are above the age of 60. This serves as the best pension tool for those aged people. It comes with high-level security. The rate of interest was revised quarterly.

This scheme can be easily accessible by applying it in post offices around the nation. It includes higher returns compared to other pension schemes. Also, it comes with the tax savings feature up to Rs.1.5 lakh p.a. It is one of the attractive savings options with attractive features available for the senior citizens of India. 

1) What is the Senior Citizen Savings Scheme (SCSS)?

Senior Citizen Savings Scheme (SCSS) has been introduced by the Government of India in August 2004. This scheme is primarily for senior citizens. SCSS primarily focuses on the financial security of senior citizens after the post-retirement. It acts as a post-retirement tool. 

There will be financial uncertainty at the time of retirement, senior citizens would not have enough time to analyze the risks in other investment options. They will look for a safe option to invest in. Also, look for the guaranteed returns and a good interest rate. SCSS meets these expectations. 

2) Why Senior Citizen Savings Scheme (SCSS)?

The primary reason to choose Senior Citizen Savings Scheme is it will be useful for senior citizens to carry out their expenses after post-retirement. Other long and mid-term savings-investment schemes like Public Provident Fund, National Savings Certificate, and post office FD don’t provide special concessions for senior citizens. 

While in the other hand SCSS serves only senior citizens. As it is a government-backed scheme, it stands as a risk-free investment option. It offers one of the high-interest rates in its segment. You can easily buy this scheme from the nearby post offices around the world. This feature made this scheme easily accessible to all senior citizens. 

The working of SCSS is similar to PPF and NSC but varies in the point of 

• Interest rate
• Tenure of the scheme 
• Tax deductions 
• Withdrawal period
• Limited only to senior citizen 

The minimum amount needed to deposit in SCSS is Rs.1000. As the minimum amount is small this scheme allows low-income families to open an SCSS investment option. Note that you can open multiple accounts under the Senior citizen’s savings scheme. 

3) What are the eligibility criteria to open Senior Citizen Savings Scheme (SCSS)?

There are certain eligibility criteria that you need to possess to open a Senior Savings Scheme. They are 

• First, you need to be a senior citizen of age above 60
• Also, if you have retired early under the Superannuation or in the Volunteer Retirement Scheme (VRS) rules, then your age should lie between 55 and 60.   
• Then the retired defense personnel can open an SCSS account. For the retired defense personnel age is not a mandatory option but they need to satisfy certain terms and conditions. 

The above three are the eligibility criteria for SCSS. if you don’t come under any of the three then you can’t subscribe to this SCSS investment option. For a second applicant, there are no other eligibility criteria. 

In some cases, you are not allowed to open a Senior citizen savings scheme. If you are a Non-Resident Indians or Hindu Undivided Family, you can’t open an SCSS account. 

4) How to open Senior Citizen Savings Scheme (SCSS)? 

As said earlier senior citizen savings scheme is available in the post offices, nationalized banks, and some other private banks. Also, you can open multiple SCSS account and a joint account. But the join account 

4.1) In post office

To open the SCSS account in the post office follow the below-mentioned steps. 

• Visit the nearby post office 
• Look for the FORM A
• Fill in the details asked and attach the required documents such as address proof, age proof, and identity proof. 
• Submit it to the SCSS account provider. 
• If you wish to invest give cash or cheque to make your investment. 

4.2) In banks

As it is a government-backed scheme the opening procedure of SCSS account is the same for banks as well as the post office. You can download FORM A which is the application form for the SCSS account online. Just log in to the bank’s website where you need to open an SCSS account. Then simply download the application form. 

Note that only the form can be downloaded online. You can’t carry out the whole application process online. When you are opening an SCSS account in banks you are reaped with some additional benefits. They are 

• If you open your SCSS account at the bank, then your accumulated interest earned through SCSS will be directly credited to your savings bank account. 
• The statement of the normal savings bank account will be provided through email or post or printing in your passbook. Likewise, the statement of your SCSS account will be provided to you at regular time intervals through email or post. 
• You are provided with customer care service 24/7  to resolve your problems. 

According to the past survey, nearly 24 public sector banks and 1 private sector bank offer the SCSS account facility. 

4.3) Details in SCSS application form 

As said earlier you can’t open the SCSS account online. The application forms are often downloaded through online. You need to carry out other processes only through offline mode. After submitting the form KYC verification is carried out. 

While filling the SCSS application form you need to provide the details of the below-mentioned fields. They are 

• First, Name of the applicant who needs to open an SCSS account
• Then you need to enter your PAN card details such as PAN card number
• The details of family members which includes father/mother/spouse
• If you wish to open a joint account then the details such as the name, age, relationship, and address of the second applicant must be entered. 
• Then the cash, cheque, or the demand draft to make the initial investment. In case of making a late investment, you may skip this field. 
• If you wish to add any nominee just enter their name. 

4.4) Documents required for SCSS account opening

While opening the SCSS account you need to provide the below-mentioned documents. 

• First, you need to provide identity proof. Identity proof can be of Aadhar card, PAN card, or passport.
• Then you need to provide address proof. Address proof can be of telephone bill, Aadhar card, or PAN card. 
• Also, you need to provide age proof. Age proof includes passport, senior citizen card, voter id, Pan card, or birth certificate. 
• Your recent passport size photographs. 
• If you are a retiree then you should submit your employment certificate 
• You need to attach the proof of disbursal of retirement benefits. 

After submitting your application form along with these documents to the SCSS service provider then your account will be opened shortly. 

5) What are the benefits of the Senior Citizens Savings Scheme (SCSS)?

This savings schemes option remains one of the best for post-retirement cash. This is due to their number of benefits. Benefits of senior citizens savings scheme are 

5.1) Revision of interest rates

The interest rate of SCSS is revised every quarter of the year. The interest directly depends upon the prevalent rate in markets, economic crisis, and the inflation level. Almost all the time the interest rate will not be changed after the revision. This is because of maintaining stagnant economic conditions in our nation. 

5.2) Fixed income 

Though the interest rate is being revised every quarter of the year, it would not affect our current interest rate. This means that the interest charged at the time of opening the SCSS account will remain the same throughout the tenure. Your income is generated based on that initially charged interest rate.  

For example, let us assume that the interest of the SCSS account will be 7.8% during the opening of the SCSS account in January 2020. Now the government has revied the interest as 8% in the first quarter of 2020. But your account will continue only on the interest rate of 7.8% throughout the 5 years of maturity period. 

5.3) Higher interest rates

This scheme offers higher interest rates for senior citizens. This will be higher than the post office FD’s. The current interest rate (April to June FY 2021-2022) on the SCSS account is 7.4% p.a. The interest rate on the fourth quarter (Jan-March) of FY 2019-2020 is 8.6%. 

5.4) Flexibility in deposits

Senior Citizens Savings Scheme offers flexibility in deposits. The minimum amount to be invested in the SCSS account is Rs.1000 and the maximum amount is Rs.15 lakh. If you have multiple accounts then the sum of the amount in all the accounts should not exceed the maximum amount. 

5.5) Tenure period

The tenure period or the maturity period of the SCSS account is of 5 years. It can be extended up to 3 years. ie) the tenure can be of 8 years. After this, you can’t able to extend the tenure of the SCSS account. 

5.6) Premature withdrawal 

Premature withdrawal of SCSS account can be done after one year from the date of opening. If you wish to withdraw your amount and need to close your account before the completion of 2 years, then 1.5% of your total amount will be deducted as a penalty. 

In another case, if you wish to withdraw and close your account after the completion of two years, then 1% of your total amount will be deducted as a penalty. Similarly in the extended period after five years, you can close your account whenever you want. No penalty will be charged. 

5.7) Quarterly disbursal 

The most important feature which SCSS as a better option for the post-retirement tool is quarterly disbursal. If you subscribe to this feature then the interest earned will be credited to the individual’s account on the first day of every quarter of the year. ie). On the first day of every April, July, October, and January. 

5.8) Deposit modes

For the SCSS account, you are provided with two modes of deposit. If you are going to deposit an amount that doesn’t exceed Rs.1 lakh can be deposited by means of cash. If the deposition amount exceeds Rs.1 lakh then you should make the payment only through the cheque or through demand draft. 

5.9) Nominee facility

With the SCSS account, you can add your spouse and open it as a joint account. Also, you can add someone as your account nominee. After the demise of the account holder, the nominee can able to receive the due amount. 

5.10) Tax benefits 

As per government rules, the principal amount that doesn’t exceed Rs.1.5 lakh won’t be taxable under Section 80C of Income-tax Act 1961. However, the interest earned through this scheme is subjected to taxation. If the interest generated exceeds Rs.50,000 then Tax Deducted at Source (TDS) will be applicable. 

Hereby summing up that the Senior Citizens Savings Scheme will be the better option to carry out your expenses after your post-retirement. At the same time earning through the SCSS account is quite higher than FD’s.

By comparing it to the PPF the maturity period of SCSS is only 5 years. Also, partial withdrawal can be made in case of an emergency. If you are above 60 and thinking of making an investment just go for the Senior Citizen Savings Scheme. 

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