Senior citizen savings scheme, its benefits and drawbacks at a glance.

Being a senior citizen, one has come to a phase of life where income generation is almost cut down to 40 per cent of what he used to earn. 

It’s hard to manage a standard living out of it. When one is retiring, he should think of a way to generate more income so that the future is secured and have a meaningful retired life.

Retirement planning can be done early in the age. With various retirement plans available in the market, one can easily secure his future. SBI has its retirement annuity plan which can be chosen.

Other retirement plan includes long-term investment in the mutual fund or if you do not want to take the risk, you can save additional provident fund every month in your PF account. You may choose NPS which gives pretty good returns and security too.

If not done at the right time, you always have an option. By the time when you get to retire, your terminal benefits can be invested in Senior Citizen Savings Scheme.

In this article, we are going to discuss SCSS and its benefits. So, without any further ado, let’s find it out.

Senior Citizen Savings Scheme 2004

The senior citizen savings scheme was launched in the year 2004. It’s a government-sponsored savings scheme specially for senior people. 

SCSS is one of the best retirement plans with zero risk for investment where a senior person can have a regular source of income quarterly in the form of interest.

Senior citizens can have the SCSS account either in a single name or jointly with their spouses. It’s a long-term saving plan that matures in 5 years with a one-time extension opportunity of 3 years.

The interest portion can be withdrawn quarterly. You can invest a maximum amount of ₹30 lacs and a minimum of ₹1000 in multiples of ₹1000.

The SCSS maximum investment amount was increased from ₹15 lakhs to ₹30 lakhs with the alternatives of withdrawal options which was not available before. Though the premature withdrawal conditions are as follows-

No interest will be paid if premature withdrawal happens within a year, from 1 to 3 years 1.5 per cent of the invested amount will be penalised and if withdrwan between 3 to 5 years, 1 per cent of the invested amount will be penalised.

Investment up to ₹1 lac can be done in cash. If more than that payment will have to be made through cheques only.

SCSS Eligibility Criteria

• A person has to be a citizen of India who is more than 60 years of age.
• Those retirees whose ages are in the range of 55 to 60 years opted for a voluntary retirement scheme (VRS) or superannuation.
• Defence personnel retirees whose age is 50 years and above.

Note that NRIs (Non-resident Indians), PIOs (Persons of Indian origin) and HUF (Hindu undivided family) are not eligible under the scheme.

Where To Open a Senior Citizen Savings Account

Senior citizen savings schemes are delivered through two mediums. One is an authorised bank and the other is the Post Office.

All the PSU banks and private banks are authorised banks where you can get the facility.

Popular Banks in India Where You Can Get SCSS Account

Benefits of the Senior Citizen Savings Scheme

There are several benefits a senior person can get out of it. Below are some of the benefits of SCSS.

• A most secure form of investment with zero risk as it is a government-sponsored scheme.
• It is very simple to understand and easy to open with minimal documents requirement.
• It is transferable from one bank to another if you are reallocated no need to worry.
• The SCSS gives good returns which are guaranteed returns. At present its rate of interest is 8.2 % per annum. Interest rates are reviewed every quarter by the central government.
• The tenor of savings can be extended one time up to 3 years. The maximum investment period will be 8 years including an extended period.
• Premature withdrawal is now available. It can be withdrawn anytime after the opening date, though terms and conditions are being applied.
• Under Section 80C of the Income Tax Act, investors can have the benefit of tax deductions up to ₹1.5 lakhs per annum.

Demerits of the Senior Citizen Savings Scheme

Although SCSS is a great scheme for a senior person there are flaws you need to know about.

These can be summed up follows

• The limited tenor of investment. If you want to invest for more than 8 years then SCSS is not the choice.
• TDS will be deducted from the interest income.
• The maximum amount of only ₹30 lacs. If you have more funds you can not invest here.
• Hefty penalties and charges are applied when closing an account prematurely. 

To know about Public Provident Fund please go to the link.

How to Open a Senior Citizen Savings Scheme Account

This is the best part where documents requirement is minimal. Below is the list of documents that banks usually ask for-

• Account opening form A.
• KYC documents.
• Age proof can be your birth certificate.
• Passport-size photographs.

Just fill out form A and submit it along with other documents mentioned above to the authorised bank or Post Office. Your senior citizen savings scheme 2004 account will be open within a few minutes and you can get the passbook on the spot.

Other than this, there are certain forms you need to be aware of because they will be required sooner or later. These forms are-

• Form B is an application form for SCSS one-time extension.
• Form F is an application form for deceased claim settlement.

Is SCSS Premature Withdrawal possible?

Yes, it can be closed prematurely but there are certain conditions which you need to be aware of if you would consider closing prematurely.

• When you close the Senior Citizen Savings Scheme within a year, the bank will not pay you any interest. If a few months’ interests is already paid to your account, the bank will recover the paid amount from your capital invested amount.
• If the account is closed after 1 year to 3 years, there will a penalty of 1.5% of the deposit amount which is deducted as premature withdrawal charges.
• If closed after 2 to 5 years, a penalty of 1% of the deposit amount is deducted.
• Premature closure of the account due to the sudden demise of the investor is without any charges or penalty. 

Conclusion

Senior Citizen Savings Scheme is one of the best government-backed saving schemes for senior people who have less risk appetite. With the guaranteed returns and the tax benefit that it gives, this scheme has become the first choice among aged people.

You can open Senior Citizen Saving Scheme in banks and post offices with minimal documents. Though there are a few drawbacks to the scheme, the benefits of SCSS far outweigh the drawbacks.