The Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings instrument designed for senior citizens aged 60 years and above.
The scheme was introduced by the Government of India and aims to provide financial security to senior citizens by offering a regular income stream for their post-retirement phase.
Eligibility: The scheme is open to Indian residents aged 60 years and above. Additionally, individuals aged 55 to 60 who have retired on superannuation or under a voluntary or special voluntary retirement scheme are also eligible, provided the investment is made within one month of receiving their retirement benefits.
Interest Rate: The interest rate on the Senior Citizen Savings Scheme is determined by the government and is subject to quarterly revisions. The derivation of the interest rate depends on several factors such as the prevalent rates in the market, inflation level, etc.
Investment Limit: An individual can invest a maximum amount of Rs. 30 lakh in the Senior Citizen Savings Scheme. The investment can be made in multiples of Rs. 1,000.
Mode of deposit: An individual can choose to deposit their money in cash if the amount is below Rs. 1 Lakh but has to pay in cheque if it exceeds Rs. 1 Lakh.
Maturity Period: The Senior Citizen Savings Scheme has a fixed maturity period of 5 years, which can be extended for an additional 3 years after maturity. The extension must be exercised within one year of maturity and can be done many times.
Interest Payment: Interest is paid out quarterly, on the first working day of April, July, October, and January.
Premature Withdrawal: Premature withdrawal is allowed after one year of investment, subject to certain conditions. However, a penalty is levied for premature withdrawals. The penalty is a percentage of the amount withdrawn, and the percentage decreases with the length of time the deposit has been held.
Tax Implications: Investments in the Senior Citizen Savings Scheme qualify for a deduction under Section 80C of the Income Tax Act, up to Rs 1,50,000 pa. However, the interest earned is taxable.
Nomination Facility: The scheme provides a nomination facility, allowing the account holder to nominate a person who will receive the proceeds in the event of the account holder's death.
The government has recently, eased the rules for investment in SCSS for spouse government employees who died while on duty allowing them to invest the financial assistance amount in the scheme. This will be allowed if the government employee has passed away, attaining the age of 50 years, and while being on the job.
It is one of the most lucrative savings schemes in India and offers comparatively substantial returns to its subscribers. Furthermore, it is a government-backed scheme, and hence, the risk of capital loss is negligible.
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