What is Senior Citizen Savings Scheme?
The Senior Citizen Savings Scheme (SCSS) is a government backed saving scheme where principal and interest are backed by the government. An account under this scheme can be opened in a post office or in a scheduled commercial bank. An individual who has attained the age of 60 years and above or one who has attained the age of 55 years or more but less than 60 years and who has retired on superannuation or otherwise on the date of opening is eligible to open this account.
One can open the account with a minimum amount of ₹1,000 and a maximum of ₹30 lakh. It can be opened as a single or joint account. The SCSS offers 8.2 per cent per annum interest rate. The rate is revised every quarter, and the final rate is decided considering factors like inflation, market scenario, etc.
What is the normal tenure of the scheme?
The tenure of the scheme is five years. And, it can be extended.
What are the latest changes to the scheme?
In a November 7, 2023, notification, the Finance Ministry brought about a number of changes. Some of the import changes are:
1. A new proviso has been added, which says, “the spouse of the government employee shall be allowed to open an account under this scheme, if the government employee who has attained the age of 50 years and has died in harness, subject to the fulfilment of other specified conditions.” Here, the government employees include all Central and State Government employees and they are eligible for retirement benefit or death compensation.
2. The account can be opened within three months from the date of receipt of the retirement benefits for a living employee and admissible financial assistance to an eligible government employee who died in harness. Earlier, this time limit was one month and that too only for living person.
3. An account holder can extend the account for a further block period of three years by making an application in Form-4 within a period of one year from the date of maturity or from the date of end of each block period of three years. Earlier, this facility was to be used only once.
4. In case of an account extended after maturity, the deposit in such account will earn interest at the rate applicable to the scheme on the date of maturity or on the date of previous extended maturity. Earlier, it was said that interest applicable on the date of maturity was applicable for an extended period.
5. If the account is closed before expiry of one year from the date of extension, an amount equal to one per cent of the deposit will be deducted and the balance will be paid to the account holder.
What changes were brought into the scheme through the Budget?
The maximum deposit limit for Senior Citizen Savings Scheme has been enhanced to ₹30 lakh from ₹15 lakh and it has been made effective from April 1, 2023.
What are the conditions for premature closure?
If the account is closed before one year after the date of opening of account, interest paid on the deposit in the account will be recovered from the deposit and the balance will be paid to the account holder. If the account is closed after the expiry of one year but before the expiry of two years from the date of its opening, an amount equal to 1 ½ per cent of the deposit will be deducted. If the account is closed on or after the expiry of two years from the date of its opening, an amount equal to one per cent of the deposit will be deducted.
What are the tax implications for account holders?
One can claim up to ₹1.5 lakh in a financial year under Section 80C of the Income Tax Act. The interest payments are subject to taxation as per the tax slab rates. Besides, if your interest income exceeds ₹50,000 in a year, then it is subject to Tax Deducted at Source (TDS).