Senior Citizen Savings Scheme (SCSS) – Interest Rate and Benefits

Your financial goals as a senior citizen will differ greatly from those you set during your working years. After all, when you don’t have a regular income from a job, you aren’t looking to invest in risky investment options and put your hard-earned money at risk. At the same time, you’re looking to earn returns that can help you manage your regular expenses better. The good news is that the Government offers several senior citizens-focused investment avenues that generate good returns, Senior Citizen’s Savings Scheme being one among them.

If you want to learn more about the SCSS scheme, this blog has got you covered. Read on for details like the interest rates and the benefits the scheme offers.

What is the SCSS scheme?

The SCSS, or the Senior Citizens Savings Scheme, is a government-backed savings instrument for retired individuals. Through the scheme, senior citizens residing in India can invest a sum of money individually or jointly and get regular income and tax benefits.

Since this scheme is a Post Office savings scheme, senior citizens do not need a bank account. They can open a savings account at their post office, deposit funds, and earn returns from the scheme at attractive interest rates.

SCSS scheme details

#1. Eligibility criteria

Most Indian senior citizens can apply for the SCSS. More specifically, civilians between the ages of 55 and 60 years, ex-defence personnel between 50 and 60 years and individuals above 60 years can invest in SCSS. That said, civilians and defence professionals must invest in the scheme within one month of receipt of the retirement benefits.

#2. Investment amount

They can invest a minimum of Rs. 1000 and a maximum amount equivalent to the sum they received as a retirement benefit or Rs. 30 lakhs, whichever is lower. Note individuals can open multiple SCSS accounts with different banking partners too. However, the total amount they invest should be lower than the upper limit specified above.

Note that the SCSS also specifies a method to deposit the funds. Accordingly, individuals can deposit amounts lower than Rs. 1 lakh in cash and amount greater than Rs. 1 lakh as cheques.

#3. Maturity period

Individuals who invest in the SCSS scheme can withdraw their funds after the maturity period of 5 years. Moreover, if they want to increase the interest they earn on their parked funds, they can extend the maturity period by 3 more years after submitting an application. Note that if the individual opts for this option, they must submit the application in the 4th year after submitting it.

#4. Interest rate and payouts

The Government revises the SCSS interest rates quarterly. For instance, the interest rate for this quarter (1 April 2023 to 30 June 2023) is 8.2%. So, if you open an account during this period, you will get the interest at this rate till the end of your tenure.

Plus, the interest payouts happen quarterly. This means the interest will be credited to the individual’s account on 1 April, July, October and January.

Furthermore, if an individual extends the SCSS duration, they earn interest at the prevailing interest rate when requesting the extension upon maturity.

#5. Premature withdrawals

Senior citizens can withdraw funds from the SCSS within one year of starting the scheme completely free of charge. That said, they will not earn interest on the principal amount. If they withdraw the sum before finishing 2 years, they will have to pay 1.5% of the deposit amount as a penalty. They will have to pay 1% of the deposited sum as a penalty if they withdraw it after three years.

Note that individuals who extend their SCSS tenure can close the scheme after completing the first year without incurring any charges.

Benefits of the SCSS scheme

#1. Ease of opening and maintaining the account

Opening an SCSS account is extremely convenient. All one needs to do is visit their bank or post office and submit a duly filled application form, copies of KYC documents, and recent passport-size photographs. Note that some banks even allow you to open an SCSS online through their website.

Once the account is open, maintaining it is simple as well. In fact, individuals can transfer their accounts seamlessly if they move to a different location.

#2. Low-risk investment

SCSS is safer than other post-retirement investment modes for two reasons. Firstly, because the Government backs it. And secondly, because the returns earned aren't tied to market conditions. Combined with the higher interest rates associated with these instruments, one can conclude that the SCSS ROI is high as well.

#3. Higher interest rates

SCSS offers a significantly higher interest rate than traditional savings instruments like senior citizen’s savings accounts. Moreover, the interest rates are at par and sometimes even greater than those offered by comparable savings instruments like recurring deposits or FDs.

#4. Nomination facility

Senior citizens can register a nominee while opening the SCSS account. Moreover, they can also appoint a nominee at a later date. Now, if the account holder passes away before the account matures, the nominee will receive the funds.

Note that the nominee or the legal heir must submit a written application in the requested format along with the account holder's death certificate to initiate the closure of the SCSS account.

#5. Income tax deductions

Senior citizens that opt for SCSS can claim deductions as per Section 80C of the Income Tax Act. Accordingly, they can claim deductions on the principal amount deposited, provided the sum is under Rs. 1.5 lakhs. That said, if the interest amount exceeds Rs. 10,000 yearly, TDS will be deducted.

#6. Regular payouts

Senior citizens can use the SCSS to receive a regular income post-retirement. Account holders can withdraw the interest earned quarterly from the account through the money order system or PDCs at the post office.

Now that you know about the benefits of the Senior Citizens Savings Scheme, the interest rates associated with it, and the features of the account, you can decide if you want to opt for this investment avenue post-retirement.

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