02 Feb, 2023 08:28 PM

What is Senior Citizen Savings Scheme which brought cheers to Sr. Citizens?

What is Senior Citizen Savings Scheme which brought cheers to Sr. Citizens?

Finance Minister Nirmala Sitharaman has raised deposit limits under Senior Citizens Savings Scheme and Post Office Monthly Income Scheme (POMIS).

The maximum deposit limit for Senior Citizen Savings Scheme will be enhanced from Rs 15 lakh to Rs 30 lakh. POMIS limit has been doubled from Rs 4.5 lakh to Rs 9 lakh. Increase in the SCSS deposit limit will help senior citizens in providing decent returns and ensure the safety of their deposit and their retirement corpus. Increase in the limits for Senior Citizens is a defenitly a great move to help protect retirement corpus and income for senior citizens. The central government employees can look into this as a good option for investing thier pensionary benefits.

What is Senior Citizen Savings Scheme?

The Senior Citizen Savings Scheme or SCSS is a worry-free investment opportunity to senior citizens and decent returns. Because the government is supporting the programme, the security of the money deposited is assured. SCSS's current interest rate is 8%. Although the Finance Ministry adjusts the SCSS interest rate on a quarterly basis, traditionally the rates have stayed high and have outperformed several fixed deposit programmes provided by banks and the post office. 

Only a maximum of 5 years tenure is allowed for the SCSS scheme's deposits to receive interest. After the 5-year maturity period has passed, there is the option to keep the account open for an additional 3 years by submitting an application in the required format within one year of maturity of the account. However, the account can be closed without any charges after the expiry of the account. Premature withdrawals are allowed, although a premature closure of the savings account is permitted only after a year, whereby the account holder will be charged 1.5% of the savings and 1% after two years.

Individuals are allowed to operate more than one account by themselves or open a joint account with their spouse. However, joint accounts can be opened only with the spouse and the initial depositor is the investor of the joint account. 

Only a single deposit is allowed to be made in the account. It can be in the multiples of Rs.1,000 and the maximum amount that can be deposited is Rs.15 lakh. Deposit amounts less than Rs.1 lakh can be paid by cash, while amounts more than Rs.1 lakh must be paid by cheque. In case of cheque payments, the date the cheque realises will be the opening date of the account.

The SCSS investments are are eligible for tax deductions Under Section 80C of the Income Tax Act, 1961, on investments up to Rs.1.5 lakh. In case the interest generated is more than Rs.10,000 p.a., the tax will be deducted at source.

Senior citizens now receive bigger quarterly incomes because the deposit ceiling has been increased to Rs 30 lakh per account. The illustration below shows how much interest older adults can earn annually and over the course of five years by depositing money between Rs 5 lakh and Rs 30 lakh. The current interest rate of 8% is considered in the example.

Amount Rs Monthly Interest (Rs)* Quarterly Interest (Rs)* Annual Interest (Rs) 5-Year Interest (Rs)
100000 665 2000 8000 40000
300000 2000 6000 24000 120000
500000 3333 10000 40000 200000
1000000 6667 20000 80000 400000
1500000 10000 30000 120000 600000
2000000 13333 40000 160000 800000
2500000 16667 50000 200000 1000000
3000000 20000 60000 240000 1200000

The calculation shows that the quarterly interest income from SCSS account by depositing Rs 30 lakh will be Rs 60,000 if the interest rate remains at 8%. This means, the monthly income by depositing Rs 30 lakh will be Rs 20,000.

To summarise, the main benefits of the scheme are:

  • Tax benefits provided.
  • Safe to invest in the scheme.
  • Premature withdrawal allowed.
  • The account can be transferred across the country
  • High interest rates

How to open an SCSS account?

The SCSS account can be opened at the Post Offices or at select Banks.

The procedure to fill the SCSS application form in case you wish to open an account at the post office is mentioned below:

  • Enter the branch name.
  • In case you have a savings account at the post office, the account number must be entered.
  • Enter the post office address.
  • The name of the account holder must be entered.
  • The next section must be filled if you want to open a savings account.
  • Choose the type of account holder.
  • Choose the type of account.
  • In the section, details of the amount that is being deposited must be entered.
  • Enter the account holder/holders' details.
  • Choose the documents that you will be submitting.
  • Enter nominee details in the next section.

Given below is the list of banks that of the scheme:

  • ICICI Bank
  • Union Bank of India
  • UCO Bank
  • Indian Bank
  • Punjab National Bank
  • IDBI Bank
  • Indian Overseas Bank
  • State Bank of India
  • Dena Bank
  • Central Bank of India
  • Canara Bank
  • Corporation Bank
  • Bank of India
  • Bank of Baroda
  • Bank of Maharashtra

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