Post retirement people are looking for investment options to park their retirement funds in. They are hesitant to put their money in market-linked investment options or any other long term investment options that don’t offer any income till maturity. They involve the risk of capital-loss and also don’t provide a steady or regular source of income. Retirees look for investment options that are less risky and can also minimise their tax outlay. This is where the senior citizens’ savings scheme(SCSS) comes in. SCSS is a government backed savings scheme offered to indian residents aged over 60 years. The deposit matures after five years from the date of account opening but can be extended to additional three years once only. This scheme is available through all the public or private sector banks and indian post offices.
FEATURES OF SENIOR CITIZENS SAVINGS SCHEME(SCSS):
- INTEREST RATE:
The interest rate offered under this scheme is revised every quarter and it’s induction depends on various factors such as general rates in the market, inflation level, etc.
- FIXED INCOME SOURCE:
The interest rate declared during the time of investment remains the same throughout the maturity tenure and remains unaffected by alterations in the later quarters.
- DEPOSIT LIMIT:
Individuals are required to make a minimum deposit of Rs 1,000 to open an account under this scheme. And, the maximum deposit amount is Rs. 15 lakhs or the amount received as a retirement benefit, whichever is lower. This clause is applicable irrespective of whether the account is held individually or jointly.
- MATURITY TENURE:
The maturity tenure of the senior citizens savings scheme is five years. But it can be extended to additional three years. If an individual is willing to extend the tenure, he/she will have to submit a Form B after duly filling it. The extension is allowed only once.
- PREMATURE WITHDRAWAL:
An individual can withdraw the funds prematurely from their account under this scheme after one year of opening of the account. But, if he/she withdraws the fund before completion of two years, an amount equal to 1.5 percent of the deposit will be deducted as penalty. Upon closure of the account after two years, an amount equal to 1 percent of the deposit will be deducted as penalty. However, if an individual dies before the maturity period of their account then no penalty will be charged.
- QUARTERLY PAYMENT:
Individuals who open their account under this scheme are eligible to receive quarterly payments against their deposited amount. Interest payments will be made to an individual’s account every quarter.
- MODE OF DEPOSIT :
An individual can choose to deposit their money through cash or cheque. However, if the amount is more than Rs. 1lakh, they have to pay in cheque.
- NOMINATION FACILITY :
Individuals can register a nominee when they are opening their accounts under this scheme or at a later date. In the event of death of an account holder before the maturity period, the nominee will be eligible to receive the due amount.
- SECURITY AND SUBSTANTIAL RETURNS:
As this scheme is fully backed by the government, the capital invested in it is secured and guaranteed. This scheme is known to offer interest at rates that are at par with what is offered by the saving schemes such as FD, RD, PPF etc.
- TAX BENEFITS:
The principal amount invested under this scheme is eligible for tax deductions under the section 80C of the Income Tax Act, up to the limit of Rs. 1.5lakhs. However, if an individual’s interest income in a financial year is more than Rs. 50,000 then it is subject to Tax Deduction at Source(TDS).
The category of people who are eligible to open an account under the Senior Citizens Savings Scheme are:
- Individuals of and above the age of 60 years.
- Individuals who are 55 years of age but have retired under a Voluntary Retirement Scheme(VRS) rules.
- Retired defense persons provided they have satisfied other terms and conditions.
Non resident Indians, Person of Indian Origin, and any member of a Hindu Undivided Family do not qualify for opening an account under this scheme. An SCSS account can be opened with a post office or any of the private or public banks in India. A person who wishes to open an account under this scheme has to visit a nearest bank branch or post office branch, duly fill the Form A and submit the age proof and photocopies of other necessary documents. The process to open an SCSS account is simple. Also, it is transferable across India.
While opening an account under the Senior Citizens Savings Scheme, one must furnish all the required information. It is a very good scheme for senior citizens who want to invest risk free plans and wish to have a regular income source post retirement.