Senior Citizen Saving Scheme

Definition: The Senior Citizen Saving Scheme or SCSS is a short-term government saving scheme meant for the Indian citizens of the age of more than 60 years. The purpose of SCSS is to fulfill the needs of senior investors, who seeks for guaranteed returns, regular payouts, and safety of capital.

The Senior Citizen Saving Scheme is backed by the government of India on which regular interest is paid and allows premature withdrawals with minimum penalty. The investment in SCSS qualifies for the deductions under Section 80 C of the Income Tax Act. The following are the main features of Senior Citizen Saving Scheme:

1. An individual of the age of 60 or more, being the citizen of India can open the SCSS account.
2. Also, the individual of the age of 55 years but less than 60 years, who has retired on superannuation or VRS can also invest in the scheme provided the account is opened within one month of retirement benefits and the amount not exceeding the retirement benefit amount.
3. The SCSS account can be opened with the cash for below Rs 1 Lac and for Rs 1 Lac or more the payment should be made by cheque. If payment is made by cheque, then the date of realization in the government account should be same as that of when the account was commenced.
4. The maximum amount that an investor can deposit, either singly or jointly with another holder is Rs 15,00,000. The deposit should be in the multiples of Rs 1,000.
5. The government of India sets the rate of interest for the SCSS account. Currently, the rate of interest is 6% per annum (w.e.f. 1 April 2016). The interest on the deposit is paid out on Quarterly Basis. The subscriber gets the interest amount on every first working day of April, July, October and January.
6. The investment under this scheme qualifies for the tax deductions under Section 80 C of the Income Tax Act. But, however, the interest earned is fully taxable as income. Also, the interest is subject to TDS, if the interest amount is more than Rs 10,000 p.a.
7. The senior citizen saving scheme comes with a maturity of 5 years, and can be further extended for three years on a request of the subscriber.
8. Also, the premature closure of the account is allowed for a deduction of 1.5% of deposit, if the account is closed before two years and 1% in case the account is closed after two years.

Note: There is no penalty if the investor seeks for the account closure during the extended period, after the mandatory 5 years.