Senior Citizen Savings Scheme

The Government of India has created the Senior Citizen Saving Scheme (SCSS) to help senior citizens earn a regular income from their investment and save taxes using the Section 80C deduction of the Income Tax Act. The senior citizen savings scheme can be availed by elderly citizens over the age of 60 years or who has attained the age of 55, subject to certain conditions. In this article, we look at the procedure for opening a Senior Citizen Savings account and its benefits.

Opening a Senior Citizen Savings Account

To invest money in the Senior Citizen Savings Scheme, a Senior Citizen Savings account must first be opened by the senior citizen with a post office or a bank in India. The following is the eligibility criteria for opening a Senior Citizen Savings Account:

The individual has attained the age of 60 years at the time of opening of the account.
The individual has attained the age of 55 years and has retired on superannuation at the time of opening of an account.
The individual has retired and has reached the age of 55 years at the time of opening of the account.
The individual retired from Defence Services (excluding civilian Defence employees). For persons who retired from Defence Services, there is no age limit for opening a Senior Citizen Savings account.

Account Opening Form

To open a Senior Citizen Savings Account, the following information and documents must be submitted:

Documents as per KYC norms of the Bank or Post Office.
Self-attested copies of any of the following documents should be enclosed as age proof:
- Birth Certificate issued by the Municipal authority/ Gram Panchayat / District Office of the Registrar of Births and Deaths.
- Voter Identity Card issued by the Election Commission of India.
- PAN Card.
- Passport.
- Date of birth certificate from the school last attended by the applicant or any other recognised educational institution.
- Driving License issued by the local licensing authority.

A sample Senior Citizen Savings Scheme account opening form is reproduced below for reference: [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2018/03/Senior-Citizen-Savings-Scheme-Account-Opening-Form.pdf" title="Senior Citizen Savings Scheme – Account Opening Form"]

Features of Senior Citizen Savings Account

The Senior Citizen Savings account opened in a post office or bank has certain features that are unlike a regular savings account.

Cap on Maximum Investment

Unlike a regular savings account, there is a cap on the maximum investment at Rs.15 lakhs that an individual, singly or jointly can make in a Senior Citizen Savings account. Though there is no limit on the number of Senior Citizen Savings account that can be opened, the total amount in all the accounts should not exceed Rs.15 lakhs.

Restriction on Withdrawal

Money invested in a Senior Citizen Savings account will be subject to certain restrictions on withdrawal. The normal tenure of Senior Citizen Savings account is 5 years, which can be extended for another 3 years. In case of premature withdrawal before 5 years, the following charges will be applicable:

Time of Withdrawal	Withdrawal Charges
Within 1 year	Not allowed
Between 1 - 2 years	1.5% of the deposit
After 2 years	1% of the deposit

In case of premature closure due to the depositor's death, no withdrawal charges will be levied.

Interest Rate on Senior Citizen Savings Account

Money invested in a Senior Citizen Savings account will fetch a higher interest rate when compared to a regular savings account. The interest rate payable under the senior citizen savings scheme is fixed by the Ministry of Finance every quarter. Currently, a deposit made in a senior citizen savings account fetches interest @ 8.60% p.a. from the date of deposit payable at the end of each calendar quarter e.g. 31st March / 30th June / 30th September / 31st December. Compounding of interest not permissible. Hence, it is advisable if the amount of interest accrued is withdrawn and used by the depositor as a source of income.

Tax Benefit for Investment in Senior Citizen Savings Account

Interest received from money invested in the Senior Citizen savings account is taxable under Income Tax. However, the principal amount invested in the Senior Citizen Savings scheme qualifies for deduction under Section 80C of the Income Tax Act, subject to the overall ceiling of Rs.1.5 lakhs per annum. The taxpayer can claim deduction under Section 80C in the year in which amount was invested in the account. In case of premature withdrawal, in addition to paying withdrawal charges, the depositor would also lose any benefits claimed under Section 80C previously. Thus, in case of premature withdrawal, the principal amount withdrawn, along with the interest paid in the year of the withdrawal is added to the individual's gross total income in the year of withdrawal.

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