How to use the Senior Citizen Savings Scheme(SCSS) to Build Retirement Savings

The Challenges of Post-retirement life can be daunting if you are not prepared. 

But if you are a late-starter and you are worried about post-retirement savings, The Senior Citizen Savings Scheme from the Government of India offers you regular income and tax benefits.

Here’s what you must know before investing in this scheme.

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What is the Senior Citizen Savings Scheme?

The Senior Citizens Savings Scheme (SCSS) is a 2004 Central Government scheme that targets the welfare of India's senior citizens. You can create an SCSS scheme account at the nearby post office. 

Since you can create an SCSS account even at a Post Office, the scheme is also known as the Post Office Senior Citizen Saving Scheme.

A Senior Citizen in India is a resident who was at least 60 years old but not yet 80 years old at any time during the previous year. 

The Government via the Ministry of Social Justice & Empowerment provides an array of welfare services to the senior citizens of India ranging from social security schemes and tax benefits to travelling concessions.

The Senior Citizen Savings Scheme (SCSS) is a government-backed social security program. Senior Citizens in India can invest a lump sum in the scheme, either alone or with others, and get regular income and tax breaks in return.

The Government Savings Promotion Act of 1873 enables the Central Government to frame Savings schemes to promote a saving habit amongst the citizens. The SCSS is one such scheme.

Benefits of SCSS

Here are some details about the Senior Citizen Savings Scheme which will help you understand its benefits.

1. Government-backed Scheme – Since the scheme is backed by the Government there is no question about its safety and reliability.
2. Accessibility–You are not dependent on any particular financial institution for setting up a Senior Citizen Savings Scheme. You can set it up in a Bank or a Post office.
3. Country-wide Portability– You can easily move the account anywhere across India. This means that you don’t have to worry about the account if you are planning to move across the states to settle down with your children.
4. High-Interest Rate–The post office senior citizen scheme promises higher rates of interest than any other Savings Scheme.
5. Tax Benefits – under Section 80C of the Indian Tax Act, 1961.
6. Short-Time Maturity –The account can be kept open for another 3 years after the first 5 years are up.

SCSS Eligibility: Who can Open an SCSS Account?

Here are the eligibility conditions for opening an SCSS account. At the time of opening the account, the account holder must be 60 years old. However, there are a few exceptions. 

You can start an SCSS account between the ages of 55 and 60 if you –

1. Invest within one month of receiving retirement benefits.
2. You have retired through 
   1. Superannuation
   2. VRS or
   3. Special VRS.

How to Open an SCSS Account

If you are eligible, you can Open an SCSS Account in ANY Bank or Post Office.

Some banks even allow you to open an SCSS account via the bank's website or mobile banking app. The Post Office does not offer a way to open an SCSS account online—Hence it is better to open a Senior Citizen Savings account in a bank where you have a savings account.

You can open the account individually or jointly with your spouse. But the deposit amount in the joint account will only be attributed to the first account holder.

Documents Required for Creating an SCSS Account

Here are the documents that you must submit to create an SCSS account. All the documents should be self-attested.

1. Passport size photos
2. Identity Card– Passport or PAN card.
3. Address Proof–Aadhaar card or a phone bill.
4. Proof of Age– For this, you can use PAN, Voter ID, Birth Certificate, Senior Citizen Card, or Passport.

Fill out this form(Form-I Application for opening an SCSS Account) and submit it along with the above-mentioned documents at your nearest post office or bank of your choice, and the procedure for creating an SCSS account will be initiated.

Minimum Amount for Opening an SCSS Account

To open an SCSS account you can make a single deposit, with the amount being a multiple of ₹1000. But the maximum amount must not exceed ₹1 lakh. 

Depositing Money in the Senior Citizen Savings Scheme

You can start an SCSS account with a minimum deposit of ₹1000. 

You must deposit the amount in multiples of ₹1000. The highest that you can deposit is ₹15 Lakh. If you deposit more than that the excess amount will be refunded immediately. Also, the interest rate will get downgraded to a Post Office Savings Scheme Interest Rate (4% per annum)

Investments you make under this scheme qualify for tax benefits as per Section 80C of the Income Tax Act.

Interest Rates for Senior Citizen Savings Scheme

As of October 2022, the SCSS interest rate is 7.6% per annum. 

SCSS Interest will be payable from the date of deposit to 31 March/30 September/31 December in the first instance, and then on 31 March, 30 June, 30 September and 31 December after that.

You can draw interest via auto credit to draw into your savings account at the small post office or through electronic clearance.

If you don’t claim the interest quarterly, the interest will not compound.

The interest will be taxable only if the total interest across all SCSS accounts is more than ₹50,000.

Closing the SCSS Account

Closing the SCSS Account on Maturity

The SCSS account becomes mature in 5 years.

You can close the account on maturity by submitting this form(Form-3:Application for closure of account), along with your passbook at the respective post office or Bank.

In case of the death of the SCSS Account Holder, the interest rate of the account will become equal to the interest rate of the PO savings account from the date of the person’s death.

But if the spouse is the joint account holder, the account can be continued till maturity if–

1. the spouse is eligible to hold an SCSS account and 
2. doesn't have another SCSS account.

Premature Closure of the SCSS Account

To prematurely close your SCSS account, fill up and submit this form(Form-2:Application for premature closure of account).

You can close the SCSS account prematurely. When you do so, keep in mind the following conditions.

1. If you close within a year, no interest will be paid.
2. If you close between 1–2 years, 1.5% of the principal amount will be deducted.
3. If you close between 2–5 years, 1% of the principal shall be deducted.

But if the account is already extended(after 5 years) then you can close it without any deduction.

You can only make a single withdrawal from the account.

SCSS Account Extension

You can extend the account up to 3 years from the date of maturity, without having to suffer any changes in the interest rate. To do this you have to submit this form(Form-4 Application for extension of account) after filling it out at the concerned post office or bank.

If you want to extend the account you have to do this within one year from the maturity of the deposit.

How Can NoBroker Help

The SCSS scheme is an excellent option for people who feel that they started investing and saving late. We recommend that you reach out to the older adults in your family and help them start Senior Citizen Savings Scheme Accounts in banks or post offices near you.

Retirement Planning and Savings can be a tough ordeal for a lot of people. We recommend that you check out our extensive collection of articles on Investments and Savings– that should get you started. 

Prioritise Real Estate Investments if you are aiming for a stable post-retirement life. 

Call NoBroker Now to buy properties in the best cities of India.

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