Senior Citizen Savings Scheme (SCSS) is one such sturdy and stable means of investment available to senior citizens of India. Designed to foster financial security post retirement, the SCSS is a government-supported investment opportunity that has the potential to earn attractive rates of interest, besides offering tax benefits and low risk. With this comprehensive guide, we throw light on SCSS and its details like who is eligible to avail it, interest rates offered, taxation for SCSS and downsides, if any, that senior citizens should be aware of before investing.
What is the Senior Citizen Savings Scheme (SCSS)?
The SCSS was launched in 2004 and is a government-supported savings instrument that aims to provide senior citizens with an assured income and comfort post retirement. You can avail of SCSS from designated post offices and banks; it is a safe investment with guaranteed returns.
Senior Citizen Savings Scheme (SCSS) Features
- Interest Rate: As of 2nd January – March 2019 quarter, the senior citizen saving scheme interest rate is 8.7% per annum compounded quarterly. This rate is revised at a quarterly interval and would be based on Government guidelines.
- Tenure: The tenure of the scheme is 5 years and extendable by another 3 years on demand.
- Investment Thresholds: The minimum amount you can invest is ₹1,000, with a maximum cap of ₹30 lakh for individuals (₹60 lakh for joint accounts).
- Interest Payments: Interest paid on April 1, July 1, October 1 and January 1.
- Tax benefits: Investments are eligible for tax exemptions under Section 80C of the Income Tax Act for an amount up to ₹1.5 lakh per annum.
Eligibility for Senior Citizen Savings Scheme
The following are the conditions for opening an SCSS account:
- Age: 60 years and above are applicable.
- Retired Personnel: Retired persons of not more than 55 to 60 years of age who have retired under superannuation or VRS can also open an account, subject to the same terms and conditions applicable to a retired person at the time of opening an account within one month from the date of receipt of retirement benefits.
- Partner Account: The account may also be operated as a joint holder account with a spouse (if eligible).
Senior Citizen Saving Scheme Interest Rate: Comparison With Other Schemes
In today’s financial market scenario, SCSS gives an attractive interest rate of 8.2% per annum. This rate is also in excess of several fixed deposits offered by the top banks, thus making SCSS an interesting choice for senior citizens who want a guaranteed return.
Tax Implications
- Interest Income: Interest income from SCSS is totally taxable. If Annual Interest – More than ₹50,000, TDS is deducted at 10% But senior citizens can submit Form 15H to prevent any TDS deduction in cases where their total income is below the level of taxable income.
- Tax Deduction at Source (TDS): TDS is applicable if the total interest earned from all deposits held with a bank premises exceeds ₹50,000 in a financial year.
How to Calculate Senior Citizen Savings Scheme Return
Interest on SCSS is compounded quarterly and payable every three months. To estimate your returns:
- Principal: Calculate the total of the sum invested.
- Rate of Interest: Charge the present prevailing rate of interest @ 8.2% per annum.
- Frequency of Compounding: As the interest is compounded quarterly, we will divide the annual rate by 4.
Interest Calculation: Use the formula for compound interest:
A=P(1+rn)ntA = P \left(1 + \frac{r}{n}\right)^{nt}A=P(1+nr)nt
Where:
- AAA is the money you have before interest.
- PPP is the principal amount.
- rrr = annual interest rate (decimal).
- nnn = the number of times that interest is compounded per year.
- ttt is the time horizon, in years.
For ₹1,00,000 invested at 8.2% annual interest compounded quarterly over 5 years –
- Principal (P) = ₹1,00,000
- Rate of Interest/Year (r) = 8.2% or 0.082
- Suit is good, and the number of times the interest is compounded per time period (n) = 4.
- Time t for which the money is invested = 5 years
Plugging into the formula:
- A=100,000(1+0.0824)4×5A = 100,000 \left(1 + \frac{0.082}{4}\right)^{4 \times 5}A=100,000(1+40.082)4×5
- A=100,000(1+0.0205)20A = 100,000 \left(1 + 0.0205\right)^{20}A=100,000(1+0.0205)20
- A=100,000×(1.0205)20A = 100,000 \times (1.0205)^{20}A=100,000×(1.0205)20
- A≈100,000×1.4859A ≈ 100,000 \times 1.4859A≈100,000×1.4859
- A≈₹1,48,590A ≈ ₹1,48,590A≈₹1,48,590
Therefore, the total amount after 5 years would be approximately ₹1,48,590, yielding an interest of ₹48,590.
Disadvantages of SCSS
Besides the advantages you get from SCSS, it is important to remember its drawbacks:
- Taxable interest: The interest in the account is taxable in full and therefore lessens the actual yield for those subject to high tax rates.
- Low Investment Ceiling: The permissible investment cap of ₹30 lakh for individuals may be inadequate for those with higher investible funds.
- Premature Withdrawal Charges: The charge on premature withdrawal of deposits is 1% after one year, but up to 2 years, and thereafter for every 6 months.
- No loan facility: SCSS does not provide loans against deposited amount and there are limited liquidity options.
- Fixed Interest Rates: Interest rates are locked at the time of investment and do not grow with future rate increases.
SCSS vs Senior Citizen Fixed Deposits (FDs)
| Feature | SCSS | Senior Citizen FD |
| Interest Rate | 8.2% p.a. | Up to 8.25% p.a. |
| Tax Benefits | Section 80C up to ₹1.5 lakh | Section 80C up to ₹1.5 lakh |
| Liquidity | Limited (5 years + 3 years) | Varies by bank |
| Loan Facility | Not available | Available in some banks |
| Safety | Government-backed | DICGC insured up to ₹5 lakh |
Though SCSS comes with a fixed interest rate and government guarantee, senior citizen FDs may give higher returns and more liquidity depending on a specific bank’s conditions.
How to Open an SCS Account
To open an SCS account, the following steps need to be completed:
How to invest in an SCSS account. Visit an Authorized Bank or Post Office that has permission to open and manage accounts for Senior Citizen Saving Schemes.
- Submit Documents: Attach Age and Address proof (Aadhaar card, passport, etc.)
- Application Form: Fill the SCSS application form with correct information.
- Deposit the Investment Amount: Deposit the amount of investment as directed by the scheme.
- Get Account Information: After processing, the account will be opened and you will get details of the SCSS savings account with a passbook.
SCSS Online Application & e-Services
Senior citizens in today’s digital era don’t have to depend just on making visits to post offices or bank branches if they want to open a Senior Citizen Saving Scheme (SCSS) account. Online application services are also offered by a number of banks and post offices, so it becomes quicker, safer and simpler.
How to Apply for Senior Citizen Savings Scheme Online
1) Choose an Authorized Bank or Post Office
- Maximum government banks such as SBI, Union Bank of India and Punjab National Bank offer SCSS online services.
- In addition, some private banks may offer limited online support.
2) Visit the Official Website:
- For instance, SBI account holders can visit SBI SCSS Online.
- Union Bank account holders can also avail of the Union Bank SCSS.
3) Fill Out the Application Form:
- Fill in your personal, age and retirement information.
- Submit images of your age proof, address proof and retirement documents (as applicable).
4) Make the Initial Deposit Online:
- Deposit the minimum amount (₹1,000 for individuals) using net banking, UPI or debit card.
5) Receive Confirmation and e-Passbook:
- The bank or post office will issue an acknowledgment after verifying the same.
- Certain banks also offer an e-passbook to check deposits, interest payouts and maturity details.
Benefits of SCSS e-Services
- Ease: Apply online from the comfort of your living room, without waiting in line.
- Quicker process: online applications are processed faster than offline ones.
- Interest Tracking: People can track the Senior Citizen Saving Scheme interest rate and check returns with a senior citizen saving scheme calculator.
- Account Management: Partial Withdrawals, Transfer and Account Extension requests can be made online through digital mode of /ports.
Senior Citizen Saving Scheme Calculator
Senior Citizen Saving Scheme calculator – Banks have a calculator that would help you calculate how much interest you would get on maturity based on principal, tenure and the current rate of interest. The calculator provides seniors with a retirement income planning strategy.
Conclusion
The Senior Citizen Savings Scheme continues to be one of the rock-solid investment solutions for India’s senior citizens. Designed to ensure financial stability for one’s retirement years, SCSS is a government-backed scheme with attractive interest rates, tax benefits and low risk. Seniors who know the features, qualifications and disadvantages of reverse mortgages will be able to make informed decisions when it comes time for their retirement.
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FAQs about Senior Citizen Saving Scheme
Q-1) What is SCSS?
A- A government-supported savings scheme for senior citizens offering a steady stream of income and fixed interest.
Q-2) Who can open an SCSS account?
A- Persons over 60 years of age and retired persons between 55-60 years under VRS/superannuation.
Q-3) What is the SCSS interest rate now?
A- 8.2% per year, compounded quarterly.
Q-4) What is the minimum and maximum investment in SCSS?
A- Minimum of ₹1,000; Maximum of ₹30 lakh for individuals, ₹60 lakh for joint accounts.
Q-5) Am I able to access SCSS before the end of the term?
A- Yes, but if withdrawn early after nomination, then a 1%-1.5% penalty, depending on the lock-in period.
Q-6) Are SCSS interest earnings taxable?
A- Yes, entirely taxable; TDS is applicable in case of interest exceeding ₹50,000 per annum.
Q-7) Can SCSS be opened online?
A- Online applications are now acceptable at some banks; usually, you have to visit the post office.
Q-8) How to calculate SCSS returns?
A- Calculate SCSS with principal, years & interest for quarterly compounding.
Q-9) Is SCSS safe?
A- Yes, it’s a government-supported investment with low risk.
Q-10) Disadvantages of SCSS?
A- Taxable interest, surrender charges, fixed maximums and liquidity.
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