Senior Citizen Savings Scheme (SCSS) offers 8.2% interest rate; All you need to know about tax benefits, investment limit & more

The government-backed Senior Citizen Savings Scheme (SCSS) is available to anyone over the age of 60, or 55 if they retired on superannuation or under a voluntary or special voluntary plan, or 50 if they are former military personnel (excluding civil defence personnel). This implies that employees who desire to retire early cannot take use of the SCSS perk. The account can be opened jointly with a spouse only.

All About Tax-Saving

Here is all you need to know about the SCSS.

Maximum deposit amount

The SCSS now permits a deposit of up to Rs 30 lakh. This was announced in the 2023 Budget. If the account holder dies, the spouse, who is a joint holder or the scheme's only nominee, can continue to use the SCSS account by notifying the accounts office (the post office or a bank branch where an account is created).

Tenure of SCSS

The account shall be opened with a minimum deposit of Rs. 1,000 or any sum in multiples of Rs. 1,000 not exceeding Rs. 30,00,000. The tenure of the deposit is 5 years and can be further extended by 3 years.

SCSS interest rate

The government fixes the interest rate on SCSS every quarter. The government has not hiked the interest rate on SCSS for the January-March 2024 quarter. The account holders can earn interest at the rate of 8.2% on their deposits. The interest is payable every quarter and is fully taxable.

Where can one open SCSS account

An SCSS account can be opened at an authorised bank. It is a good idea to check with your bank whether it offers this facility. An SCSS account can be opened at a post office too.

How to open SCSS account

The applicant needs to fill up the account opening form and attach requisite KYC documents, photographs and a copy of the letter received from the employer with respect to the receipt of retirement funds. You can have more than one SCSS account as long as the total deposit across all SCSS accounts does not exceed Rs 30 lakh.

What is the interest on senior citizen scheme taxability?

"There is SCSS tax exemption under Section 80C of the Income Tax Act, 1961. However, SCSS tax benefit is capped at Rs. 1, 50, 000. In case of interest amounting to more than Rs. 50, 000, for a fiscal year, TDS is applicable," as per the Bank of Baroda website.

Also read: Senior citizen savings scheme: What is the SCSS interest rate for the January-March 2024 quarter?

Premature withdrawal
The government has imposed new restrictions on early departure from the plan. According to the new rules, if the account is closed before the one-year investment period expires, one percent of the deposit would be removed. Previously, if the account was closed before the one-year period expired, the interest paid on the deposit in the account was to be recovered from the deposit and the whole balance was to be remitted to the account holder.

No limit on the extension of SCSS
The government has modified the regulations for the SCSS scheme's expansion. The account holder may continue to extend the account for a n number of blocks of three years each. Furthermore, for each extension, an application must be made. Previously, the extension could only once for a three-year block.

Interest rate on extension
As per the new rules, the government has made changes to the interest rate that a person will be entitled to if the plan is extended after five years. According to the new regulation, if the SCSS account is extended on maturity, the deposit will earn the scheme's interest rate on the day of maturity or the date of extended maturity. Earlier, the deposit in an extended account would have earned interest at the rate applicable to the scheme on the date of maturity.

Account closure on maturity
According to the India Post website, “Account may be closed after 5 year from the date of opening by submitting prescribed application form with a passbook at concerned Post Office. In case of death of account holder, from the date of death, account shall earn interest at the rate of PO Savings Account.

In case spouse is a joint holder or a sole nominee, account can be continued till maturity if spouse is eligible to open SCSS account and not have another SCSS Account.”