What is a Senior Citizen Savings Scheme? : How to apply
The SCSS is a government-backed account for senior citizens in India for getting benefits upon retirement and can only be opened by those who are residents of the country. It has a lock-in period of five years, and its interest rate is revised by the central government quarterly. Currently, the scheme is offering an interest rate of 8.2 per cent for the April to June quarter of 2023.
While talking about SCSS, a question that often arises is — who can be called a senior citizen? According to the Income Tax Act (ITA) “An individual resident who is 60 years or above in age but less than 80 years at any time during the previous year is considered as Senior Citizen for Income Tax purposes. A Super Senior Citizen is an individual resident who is 80 years or above, at any time during the previous year.’’
Eligibility criteria for opening an SCSS account
An SCSS account can be opened if the applicant falls under a particular category and applicants have to comply with the set eligibility criteria to open an account. The account can be opened by:
- Individuals above 60 years who are residents of India.
- Retired civilian employees over the age of 55 but under 60, with the condition that the investment be made within one month of receiving retirement benefits.
- Retired defence employees over the age of 50 but under 60, with the same condition as above.
- SCSS accounts can be opened both in an individual capacity or jointly. A joint account can be opened only with a spouse. However, the entire deposit can be redeemed only by the first account holder.
Why should seniors invest in SCSS?
People, who are eligible, should opt for this scheme because it is a secure way to invest as it promises a guaranteed return on investment with the interest rate being higher than that of fixed deposits (FDs) or bank savings accounts. Account holders can start investing in the scheme with a minimum deposit of INR 1,000 which can go up to a maximum deposit of INR 30 lakhs.
Additionally, the account provides quarterly interest which means every April, July, October and January, the interest gets credited to account holders’ SCSS account. This increases the compounding effect which ultimately offers a better return on investment (ROI).
The five-year maturity period of SCSS can be increased by three years if the account holder chooses to stay invested in the scheme. This means that the account holder does not have to transfer funds to any other investment scheme to earn more than the nominal ROI.
The scheme also provides a nomination facility wherein account holders can nominate their children or any other person they wish to give money to in case of the first holder’s death.
SCSS account holders are also eligible for tax benefits, as per which they can claim tax deductions on investments up to INR 1.5 lakh in the scheme under section 80C of ITA, 1961. However, if the interest earned exceeds INR 10,000 per annum, the tax is deducted at the source.
Does an SCSS account allow premature closure?
Yes, an SCSS account allows premature closure anytime after opening the account. However, the following are the few payout conditions which account holders have to agree upon for premature closure.
- If the account is terminated before a year, no interest is payable, and any interest paid in the account is settled from the principal.
- If the account is terminated post one year but before two years from the date of opening, 1.5 per cent of the principal balance is deducted.
- If the account is terminated after two years but before five years from the date of opening, 1 per cent of the principal amount is charged.
Documents required to open an SCSS account
- Self-attested identity proof — Aadhaar Card and PAN Card
- Self-attested address proof, which can be either of these — Aadhaar card, electricity bill, rent agreement or telephone bill
- Two passport-size photos
- Duly-filled Form A with the applicant’s signature
How to open a Senior Citizen Savings Scheme account?
In order to open an SCSS account, an individual has to visit the nearest bank or post office branch followed by filling out the required form and attaching the necessary documents to it. Further, one has to submit the paperwork and deposit the account opening amount. After this, the bank executive reviews the application and opens the SCSS account.
Source: https://www.lifestyleasia.com/ind/money/senior-citizen-savings-scheme-complete-guide/
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