Senior Citizen Scheme: Eligibility, Interest Rate and its features

 Senior Citizen Scheme: Eligibility, Interest Rate and its features

The SCSS scheme is the most reliable and risk-free investment for the senior citizen. The retiree who retires from the job get their hard-earned aggregate money at a time but due to tax system implications, they could not understand where to invest? Though there are plenty schemes are available in the market but each scheme has its limitation and risk associated with it and these people are more worried about their future due to stopping of the source of income so they more rely on the hard-earned money in their life so the government has introduced the senior citizen saving scheme in 2004. This scheme is not a saving scheme like others but it gives high-interest rates than the other saving scheme. Since it is government-sponsored the risk factor is negligible.

Let us understand what is a senior citizen saving scheme? Who are eligible for the scheme? And other features of the scheme.

Who can invest in SCSS?

The person who has retired from the company as per company rule or retired under the voluntary retirement scheme at the age not less than 55 years can invest this scheme but the maximum limit of investment is 15 lakhs.

The person retired from (Not civilian defense employee) is also eligible for this scheme provided he has completed 50 years of age and should satisfy other conditions stated in SCSS. The maximum limit is the same for them all.

The person who has completed the age of 60 years can also invest his money immaterialise the source of his income.

All these conditions are applicable to the citizen of India and not applicable for NRI (Non-resident of India)

Where you can get this scheme?

You can invest money under this scheme in the post office, public and private bank also. The current interest rate under this scheme is 7.4%. The maximum interest offered under this scheme was 9.3% in the financial year 2012-13.

The features of the scheme.

·         The interest is revised in every quarter of the financial year. Since it is decided by the government and government decided on the factors like inflation rate, economic condition, and market rates.

Quarter-wise history of the interest rate under this scheme.

Timeline	Rate of interest
1st Quarter of The financial year 2020 – 21	7.40%
4th Quarter of Financial Year 2019 – 20	8.60%
3rd Quarter of Financial Year 2019 – 20	8.60%
2nd Quarter of Financial Year 2019 – 20	8.60%
1st Quarter of Financial Year 2019 – 20	8.70%
4th Quarter of Financial Year 2018 – 19	8.70%
3rd Quarter of Financial Year 2018 – 19	8.70%
2nd Quarter of Financial Year 2018 – 19	8.30%
1st Quarter of Financial Year 2018 – 19	8.30%
4th Quarter of Financial Year 2017 – 18	8.30%
3rd Quarter of Financial Year 2017 – 18	8.30%
2nd Quarter of Financial Year 2017 – 18	8.30%
1st Quarter of Financial Year 2017 – 18	8.40%
Financial Year 2016 – 17	8.50%
Financial Year 2015 – 16	9.30%
Financial Year 2014 – 15	9.20%
Financial Year 2013 – 14	9.20%
Financial Year 2012 – 13	9.30%
till 2012	9.00%

 

Tenure period of the scheme: The tenure of the scheme is 5 years. However one can extend further for three years only once. But Upon extension, however, interest rates applicable at that quarter would apply

Constant fix Income

Once you invest in this scheme the interest rate remains constant throughout the tenure period even though the rates are revised. The new applicable rates are for the individual who is investing in a particular quarter.

For example, Mr. X has invested Rs. 10 Lakh in SCSS on 11th January 2019. The interest rate offered under the scheme for the 4th quarter of Financial Year 2018 – 19 was declared at 8.7%. Hence, his deposit would continue accruing interest at the rate of 8.7% throughout the maturity period even though it was revised and altered to 8.6% in the 3rd quarter of FY 2019 – 20. But those individual who wants to invest now i.e. In Aug 2020 they will be offered an interest rate of 7.4% only.

Type of Account and nominee;

The eligible individual can open his account in individual or jointly but the joint holder should be the only spouse. He can also nominate his survivor in their joint account.  And after the death of first joint holder, other account holders can continue to operate the account. But on account of his death, the amount will be given to the joint holder. The nominee will get the amount only when both the account holders are diseased.

Also A senior citizens can invest up to Rs 15 lakh in an SCSS account. This account can be held jointly with one's spouse. I.e. suppose Mr. A and his wife Mrs. A can jointly invest a maximum of 15 lakh in the SCSS scheme with the first deposit holder Mr. A

And Also Mrs. A can invest in SCSS scheme maximum 15 lakh rupees jointly having first name holder of her i.e. Mrs. A.  And joint holder Mr. A. So, a total of Rs 30 lakh can be invested by you, and your wife in two jointly-held accounts provided the SCSS eligibility conditions are satisfied.

Premature withdrawals and account closure

The premature withdrawal facility is also available in this scheme like a savings scheme like a fixed deposit in the bank. Like bank is charging a 1-2% penalty for premature deposit same clause is applicable for this scheme also. Under this scheme, if the amount is to be withdrawn for any reason after one year opening of the account then a 1.5 % penalty will be charged and if the amount to be invested after 2 years then a 1% charge will be applied. But for extended account i.e. extension after 5 years, there will be not any penalty charged.

For example, if Mr. X deposits Rs. 10 Lakh in Senior Citizen Savings Scheme on 1st March 2018 and closes it on 6th February 2020, he will have to bear a penalty of Rs. 15000.

However, if the investor is deceased before the maturity of their account, no penalty will be charged.

Quarterly disbursal of interest

The SCSS account holder will get interest amount payment on 1^st working day of every quarter only i.e. April, July, October and January.

For example, if Mr.X deposits Rs. 10 Lakh in SCSS in the 4th quarter of FY 2019 – 20, he will earn:

Rs. [(1000000 * 8.6% /4] or Rs. 21500

Hence, Mr. X is eligible to earn approximately Rs. 21500 as interest for 20 quarters on the dates mentioned above.

Mode of deposit

An individual can deposit money in cash if the amount is less than 1 lakh but if it is greater than 1 lakh then he has to pay it by cheque.

Loan Facility:

No loan facility is available under this scheme.

Account transfer:

If account holder wishes to transfer his account from one branch to another then he has to pay a nominal fee of Rs 5 (Five) per lakh.

Security of capital

SCSS is initiated by the government hence it is highly secure and risk-free with a guarantee.

Tax Implications of Senior Citizen Savings Scheme

Tax deduction under section 80C is applicable to this scheme. But as per the present income tax rule if your interest earned is more than 50000/- (fifty thousand) then you will have to pay the TDS as per the guideline.

The interest received is, however, subject to taxation as per the applicable slab of the concerned taxpayer.

For example, if Ms. X earns Rs.60,000 annually as interest from SCSS and her total income in a year amounts to Rs. 4 Lakh, then the interest will be taxed at a 5% rate; his tax outgo on account of SCSS interest income, thereby, would be Rs. (60000 * 4%) or Rs. 2400.

Documents Required to Apply under SCSS?

An individual needs to produce the following documents to open an account under SCSS –

·         Aadhaar Card

·         PAN card

·         Electricity bill

·         Birth Date proof/senior citizen card

2 passport-sized photographs

These documents need to be self-attested