• Post last modified:October 1, 2020
  • Reading time:7 min(s) read

Senior Citizens Savings Scheme (SCSS) is an ideal scheme for getting a steady income. It is perfect scheme for senior citizens looking to earn a risk-free regular income with a high return on Investment. The Scheme also provides tax benefits under section 80C of the income tax act.

What is the Senior Citizens Savings Scheme (SCSS)?

Senior Citizen Saving Scheme is a Small Savings Scheme of the Government of India meant for Senior Citizens of India. The Scheme was launched in the year 2004 to provide regular income to senior citizens. The latest guidelines of the scheme were notified vide GOI notification G.S.R. 916(E). dated 12th December 2019. The account under the scheme can be opened in any of the bank branches or Post offices.

Am I eligible to open an account under the Scheme?

  • The account under the Senior Citizen Saving Scheme can be opened by persons over the age of 60 years.
  • The persons aged 55 years or more but less than 60 years are eligible subject to the condition that the person has retired on superannuation or under Voluntary Retirement Scheme (VRS) and that the account is opened within one month of receipt of retirement dues.
  • Defense personnel over the age of 50 years are also eligible to open the account subject compliance of other guidelines of the scheme.
  • The account can be opened in an individual capacity or joint name with a spouse.

How much money can I deposit?

The account under the Senior Citizen Saving Saving Scheme can be opened with a minimum deposit of Rs. 1000.00 (Rupees One Thousand) and in the multiples of Rs. 1000 thereof subject to the condition that the maximum deposit does not exceed Rs 15.00 lacs (Rupees Fifteen Lacs) or retirement benefits whichever is lower.

A depositor may open more than one account subject to the condition that the deposit in all the accounts shall not exceed the maximum limit allowed under the scheme. The excess amount (if any) is refunded to the depositor.

How much interest shall I earn?

The Senior Citizen Saving Scheme interest rate is one of the highest offered by the government under Small Saving Schemes and is even higher than the interest rate offered by most Banks/post office on fixed deposits, recurring deposits, etc.

The interest on deposits under the scheme is notified by the Government every quarter. The latest Senior Citizen Saving Scheme interest rate for the period from 01/07/2020 to 30/09/2020 is 7.40%. The interest under the scheme is compounded & paid every quarter. The interest is paid on the first working day of April, July, October & January to the credit of the depositor’s saving account.

In case the deposit exceeds the maximum allowed limit under the scheme, the interest applicable on the post office savings account is paid on the excess amount from the date of deposit till the date of refund.

Historic Senior Citizen Saving Scheme Interest rate for the last 5 years

Sr NoPeriodRate of Interest (%)
1FY 2015-169.30
2FY 2016-178.50
3Q1, FY 2017-188.40
4Q2, FY 2017-188.30
5Q3, FY 2017-188.30
6Q4, FY 2017-188.30
7Q1, FY 2018-198.30
8Q2, FY 2018-198.30
9Q3, FY 2018-198.70
10Q4, FY 2018-198.70
11Q1, FY 2019-208.70
12Q2, FY 2019-208.60
13Q3, FY 2019-208.60
14Q4, FY 2019-208.60
15Q1, FY 2020-217.40
16Q2, FY 2020-217.40

When does the deposit mature?

The Senior Citizen Saving Scheme account matures after 5 years from the opening of the account. The account may be extended for a further period of 3 years. The application for extension, however, is to be made within 1 year from the date of maturity (i.e. with one year after the initial period of five years).

In case of the death of the depositor before maturity or extended period, the deposit along with interest is paid to the nominee or the legal heirs. In this case, the applicable rate of interest under SCSS shall be paid till the date of death of the depositor and after that, the interest rate applicable on the post office saving account is paid till the closure of the account.

Can I close my account prematurely?

Premature closure of the SCSS account is allowed with the following penalties:

  • If the account is closed within 1 year from the date of opening, the interest paid in the account is recovered and the balance is paid to the depositor.
  • If the account is closed after 1 year but before 2 years, a penalty of 1.50% is imposed on the deposit made under the scheme i.e. an amount equal to 1.50% of deposit is deducted and the balance is paid to the depositor.
  • If the account is closed after 2 years, a penalty of 1.00% is imposed on the deposit made under the scheme i.e. an amount equal to 1.00% of deposit is deducted and the balance is paid to the depositor.

No penalty is levied for an extended period of 3 years if the account is closed after one year from the date of extension.

What are the Benefits of the Scheme?

A steady flow of Income with High rate of interest: The Senior Citizen Saving Scheme interest rate is one of the highest offered by the Government under Small Saving Schemes and is even higher than the interest rate offered by most of Banks/post office on fixed deposits, recurring deposits, etc. The interest under the scheme is paid every quarter and hence it ensures a steady flow of income for account holders.

Government-Backed Scheme: The Senior Citizen Saving Scheme is offered under “Small Saving Schemes” of the Government of India. Hence the deposits under the scheme are fully secured.

Tax Benefits: The deposit under the scheme are eligible for tax deduction under section 80C of the IT act up to the extent of Rs. 1.50 lacs under the old tax regime. However, the interest received is taxable as per the normal tax slab of the depositor.

A low requirement of minimum Deposit: The Senior Citizen Saving Scheme account can be opened with a minimum deposit of only Rs. 1000.00 (One thousand rupees). Further, the benefits under the scheme can be availed on the deposits up to Rs. 15.00 lacs (Rupees Fifteen Lacs).

Easy Accessibility: The account can be opened in any of the bank branches or Post offices which are located in all parts of the country and hence are easily accessible.

Premature Withdrawal: The premature withdrawal is allowed subject to penalties as discussed above, hence the depositor can withdraw the amount in case of exigencies.

Conclusion

Given the regular flow of income, Government backing, high rate of interest, tax benefits & low deposit requirements we strongly recommend the scheme for Senior Citizens. The eligible depositors may consider parking part of their savings into the scheme.

Postscript

While the account under the scheme can be opened in any of the bank branches or Post offices, we have given below the link of SCSS scheme from the websites of some of the institutions with large networks, you may find information in respect of formalities, nearest branch, etc from the websites:

Senior Citizen Saving Scheme in SBI (State Bank of India)

https://sbi.co.in/web/personal-banking/investments-deposits/govt-schemes/senior-citizens-savings-scheme

Senior Citizen Saving Scheme in the Post Office

https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx

Senior Citizen Saving Scheme in PNB (Punjab National Bank)

https://www.pnbindia.in/senior-citizen-saving-scheme.html#:~:text=The%20Senior%20Citizen%20Savings%20Scheme,for%20senior%20citizens%20in%20retirement.

Senior Citizen Saving Scheme in HDFC Bank

https://www.hdfcbank.com/personal/resources/learning-centre/save/five-senior-citizen-tax-saving-schemes

In this article, we have discussed the features of the Senior Citizens Deposit Scheme. If you are not eligible under the scheme due to any reasons or have already availed the benefit of the scheme you may refer detailed analysis of deposits of various banks at

fixed deposit rates

Fixed Deposit Rates – Insights to Maximize Your Profits and Minimize Your Risks

Sources

https://www.incometaxindia.gov.in/pages/rules/senior-citizens-savings-scheme-rules.aspx

https://www.indiapost.gov.in/VAS/Pages/PMODashboard/SeniorCitizenSavingsScheme.aspx

https://sbi.co.in/web/personal-banking/investments-deposits/govt-schemes/senior-citizens-savings-scheme

https://www.pnbindia.in/senior-citizen-saving-scheme.html#:~:text=The%20Senior%20Citizen%20Savings%20Scheme,for%20senior%20citizens%20in%20retirement.

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S S BANSAL
S S BANSAL
2 months ago

Very nice information

Reetu
Reetu
2 months ago

Beneficial article