Government of India has always given a special attention to protect and secure the most respected class of our society which is Senior citizens of our country. Indian government to ensure their safety has launched various security apps. They also enjoy a special treatment by having a higher tax maximum exemption limit, while travelling they have special quota for them and many other things are their which government has done to safeguard their interest. It has been always observed that after fulfilling their responsibilities when they receive their retirement benefits or we can say the fruit of their hard work, then they become very conscious as to where to park such huge amount. To ensure their financial stability and to fulfil such needs the government has also taken one step in that direction by introducing Senior citizen Saving Scheme.
Senior Citizen Saving Scheme (SCSS) was launched in year 2004 to safeguard the financial interest of the senior citizens. When an individual retires from his or her job then the most important thing which he or she looks for is the regular stream of income. This income is necessary for their self-consumption, self-respect and dignity. Keeping this need in mind Government of India introduced this scheme so that a guaranteed regular income will be provided to them to carry out their regular expenses and financial need as well as making their principal money secured. Now, let’s focus on the main features of the account and the process to acquire it.
Any individual who is a resident of India and is of 60 or more years of age is eligible to open this account.
Although the minimum entry age in this scheme is 60 years, but a person of 55 years of age or less than 60 years can also open this account only if he/she satisfies following condition
- A person must have taken a voluntary retirement.
- He/she should deposit the retirement benefit within a month from the date at which such benefits have been received.
This account can be opened on single as well as on joint basis. The joint holder must be the spouse of the primary holder. In case of joint account opening, the age limit is applicable for the primary account holder only.
Once this eligibility criteria is fulfilled, an individual can open his/her account in the nearest post office or the authorised commercial bank. The documents which can serve the purpose of opening of this account are, Passport, Aadhaar Card, Voter ID Card, Driving License, PAN Card etc.
Under this scheme only one time investment is allowed For example, if Mr A got retired and received Rs 10 Lacs as the retirement benefit. Then, in this case he can open his account with this amount and after that he cannot invest any further amount in this account. However he can open multiple account in the same post office or bank and if required, can easily transfer the account from one bank/post office to another.
Minimum amount that can be invested in this account is Rs 1000 and maximum is Rs 15 lacs (in multiple of Rs 100). If your investment amount is up to Rs 1 Lac then you can pay through cash but if amount exceeds Rs 1 Lac, then, the payment should be made through cheque. While making payment through cheque, the opening date of your account will be the date at which the amount has been credited in the post office or bank.
In case of multiple account, the maximum limit for this account i.e. Rs 15 Lacs is on collective basis and includes the holding of each account.
Let’s say that Mr A has 3 accounts in his name and each account has a deposit of Rs 300000, Rs 500000 and Rs 500000. Then, the maximum limit that will be decided in his case will be Rs 1300000 i.e. inclusive of holding of each account. Now if he opens a third account then he is permitted to deposit only 200000. So the maximum ceiling is of Rs 1500000.
This scheme offers 5 years maturity period by default and if a person desires then the account can be extended for additional 3 years. The rate of interest which a person is entitled to receive is 8.5% p.a. compounded quarterly and payable to the individual at the 1st working day after the end of each quarter. From the date of opening of your account, for the first period, the interest rate will be calculated at 31st March, 30th September, 31stDecember and will be payable on 1st working day of April, October and January. After first period completes the interest will be credited on 1st working day of April, July, October and January.
For an instance, if you open your account on 30th December 2015 with an amount Rs 1500000. Then for the first period the interest amount will be calculated on 31st March, 30th September and 31st December. So the first interest payable to you will be on 1st April 2016 which will be Rs 31875 and respectively on 1st October and 1st January. After that you will receive the interest for each quarter i.e. 31st March, 30th June, 30th September and 31st December.
Interest rates can vary as per the guidelines of the government, so the quarterly payment can vary accordingly. You can also link your savings account with this account and the quarterly interest will get directly credited in your account and nominate the person as per your desire for the same.
From 1st April, 2007, the investment made under this scheme qualifies for the tax deduction under section 80C of Income Tax Act 1961(i.e. up to Rs 150000). The interest income if exceeds Rs 10000 then the TDS will be deducted on the same before crediting to the account. Since this account provides a good and strong financial assistance to the senior citizen, therefore, it is recommended to hold this account for the actual maturity period. But due to any unforeseen circumstances, an individual is allowed to withdraw the amount from this account after 1 year with all the accumulated interest and principal subject to following condition;
- If withdrawn after 1 year then, penalty of 1.5% of the deposit shall be borne by the individual.
- If withdrawn after 2 years then, penalty is 1% of the deposit.
However if you have extended your account for additional 3 years and after one year of extension you want to withdraw the amount, then, no penalty shall be charged.
Senior citizen Saving Scheme is a very attractive investment option available to the senior citizens as at this age the appetite of risk usually is absent in the individual and a secured gateway of investment is needed for their post retirement period. Government schemes are the most secured alternative to park your retirement benefits, with inflation beating and safe returns.
