With growing age, managing finances & savings also becomes important. If we talk about senior citizens, they prefer stable & secure investment options which offer trustworthy returns. When it comes to the Best Savings Schemes being provided to senior citizens, the Senior Citizen Savings Scheme is considered to be the most reliable option.
The Senior Citizen Savings Scheme is backed by the government, offering a regular income flow & safety & taxation benefits. This scheme allows investors to invest funds in a lump sum, i.e. one single instalment for a period of 5 years at an interest rate of 8.2% with quarterly payouts. Senior citizens can get their accounts opened either by visiting a bank or post office.
Let us know how a SCSS account works:
- An SCSS account can be opened with a minimum deposit amount of INR 1000, which can range up to a maximum of INR 30 lakhs.
- An investor has to restrict the deposit amount to the retirement benefits received.
- Senior citizens between 55 & 60 years of age should invest the funds in the SCSS account within one month of the date of receipt of retirement benefits from his/ her employer.
- Retirement benefits are payment amounts to be received at the time of retirement, which include retirement or superannuation gratuity, provident fund, leave encashment, commuted value of pension, retirement cum withdrawal benefit under Employee Family Pension Scheme, savings component under Group savings linked insurance scheme, & ex-gratia payments under VRS.
- The interest on the deposit amount is paid once each quarter.
- If the amount of the deposit is in excess of the ceiling amount, the amount over & above shall be returned to the account holder immediately.
- The interest to be credited can be drawn through the auto-credit option directly into your savings bank account through ECS.
- This account can be closed prematurely at any time after opening the account.
- This account can be extended for a period of 3 years from the date of its maturity within 1 year from the date of maturity.
Eligibility Criteria
Provide are the eligibility parameters to be met to invest funds in the Senior Citizen Savings Scheme:
- This scheme is valid for individuals above 60 years of age.
- It includes retired civilian employees over 55 years of age & less than 60 years of age. The investment has to be made within 1 month of the receipt of retirement benefits.
- It includes retired defence employees over 50 years of age & less than 60 years of age. The investment has to be made within 1 month of the receipt of retirement benefits.
- Non-resident individuals, i.e. NRIs & Hindu Undivided Families, cannot open senior citizen savings accounts.
- Any senior citizen can open an SCSS account in an individual or joint capacity.
Documents Required
Provided is the list of documents required to open the SCSS account:
- Identity Proof – Voter ID, PAN Card, passport, Aadhar Card.
- Age Proof – Voter ID, PAN Card, Senior Citizen Card, or Birth Certificate
- Address Proof – Utility Bills, Aadhar Card
- Two Passport sized photographs
Benefits of SCSS
Provided are the benefits of SCSS:
- SCSS is a scheme backed by the Government of India; it is a secure & trustworthy scheme.
- A Savings Calculator can be used to maximise its benefits by getting accurate financial planning, estimating earnings & ensuring a stable post-retirement income.
- SCSS account can be transferred anywhere all across India.
- It is simple to understand & easy to open by visiting any post office or bank in India.
- Get high interest rates on SCSS deposits.
- The tenure of 5 years can further be extended for 3 years.
- It offers a tax deduction maximum of up to INR 1.5 lakhs u/s 80C of the Income Tax Act, 1961.
Fixed Deposits Vs SCSS for Senior Citizens
Let us know which scheme can be considered to be a better choice for senior citizens:
- The interest rates of fixed deposits fluctuate far more than those of the SCSS scheme. Interest rates are directly linked to economic growth, & as FDs are vulnerable to economic growth, hence we can say SCSS provides more stability.
- Fixed deposits can be availed for a period of 6 months to 5 years. On the other hand, SCSS can be availed for a period of 5 years, which can further be extended by 3 years.
- There is no maximum amount limit under fixed deposits, whereas, under SCSS, the maximum amount of deposits cannot exceed INR 30 lakhs.
- Under fixed deposits, special interest rates are offered to senior citizens once they attain 60 years of age. On the contrary, retired senior citizens can opt for SCSS only after 55 years of age & 50 years in the case of defence personnel.
- The mini period required to claim deduction under section 80 C remains the same, i.e. 5 years for both schemes.
- Under SCSS, in case of premature withdrawal, a penalty is charged at some pre-determined rates. On the other hand, in the case of Fixed deposits, no penalty is charged; rather, lower interest rates are offered.
How to exit the SCSS scheme
- A senior citizen can get his SCSS account closed prematurely after bearing a penalty charge.
- This scheme does not allow the facility of pledging deposits to obtain loans.
- A premature exit of the SCSS account is allowed only after completion of 1st year from the date of its opening. It will attract a penalty of around 1-1.5% based on the tenure completed.
- In case the account is closed after the 1st year but before the end of 2nd year, an amount equal to 1.5% of the deposit will be deducted as a penalty.
- In case the account is closed on or after the 2nd year, an amount equal to 1% of the deposit will be deducted as a penalty.
- In case the account is closed anytime after the end of 1st year from the extension date, an amount equal to 1% will be deducted, & the remaining amount will be refunded to the account holder.
Conclusion
A Senior Citizen Savings Scheme is a secured financial investment option which offers guaranteed returns, competitive interest rates, hassle-free registration, & tax benefits. Also, this scheme is backed by the government, hence offering safety & security along with no risk of capital loss.
