Senior Citizen Savings Scheme (SCSS): Know the Features, Eligibility Criteria & Interest Rates

Senior Citizen Savings Scheme (SCSS) is a scheme introduced by the Government of India for senior citizens and retired persons.

The Senior Citizen Savings Scheme is ideal for senior citizens who want a safe haven for investment and save tax at the same time.

If you are a senior citizen over the age of 60, you will want two basic things from your investment – safety and regular income. The Senior Citizen Savings Scheme (SCSS) meets these two requirements, and you get a deduction from taxable income on it too. The scheme is run by the Government of India.

Features of SCSS:

Who can invest: Any Indian citizen over the age of 60 is eligible to invest in SCSS. It is also open to those who have taken early retirement or VRS over the age of 55. It is not open to non-resident Indians (NRIs) and Hindu Undivided Families (HUFs). The account can be held singly or jointly.

Interest rates: The most attractive aspect of SCSS is the high-interest rate it offers. At the time of writing, it was 8.6 per cent, which is excellent for a scheme that is risk-free. Schemes like Public Provident Fund (PPF) and National Savings Certificates (NSC) on the other hand offer 7.9 per cent. Of course, equity and debt funds could offer returns higher than these but involve much higher risk.

Tax benefit: Like PPF and NSC, you can deduct investments in SCSS from your taxable income up to a maximum limit of Rs. 1.5 lakh under Section 80C of the Income Tax Act. However, you must note that all your investments under Section 80C cannot exceed this amount.

Tenure: The tenure of SCSS is five years, comparable to NSC and five-year bank fixed deposits. It can be extended by another three years.

Minimum and maximum investment: You can invest a minimum of Rs. 1,000 and in multiples thereof. The maximum amount that can be invested is Rs. 15 lakh.

Interest payout: Interest is calculated on a quarterly basis, and credited to your account every quarter, on 1 April, 1 July, 1 October, and 1 January.

Premature withdrawal: You can withdraw the amount prematurely after a period of one year, on which you will have to pay a charge of 1.5 per cent of the deposit. If the withdrawal is done after two years, you will have to pay 1 per cent. Please note that you will forfeit your tax benefit if you close the account prematurely. The amount withdrawn will be added to your taxable income, and you will pay tax according to your income slab.

Tax on interest income: Interest income is subject to income tax. There will be TDS if it exceeds Rs. 10,000 a year. However, you can claim a deduction from taxable income for interest income of up to Rs. 50,000 in a year under Section 80TTB of the Income Tax Act.

Where can you open SCSS deposit: You can open an SCSS deposit at any post office or selected banks.

Certainly, SCSS is an excellent scheme for senior citizens. Even without the tax benefit under Section 80C, it is worth investing in because of the high-interest rate and safety. If you already have a PPF account, it may be worthwhile continuing with it since the interest income is not taxed under PPF. But because of the long lock-in period of 15 years, opening a PPF account after retirement is not recommended. This is where SCSS would be the best choice.

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