Savings scheme

How to open a Seniors Savings Account

The Seniors Savings Plan (SCSS) is a government-backed plan that offers seniors a great way to invest a portion of their retirement corpus and earn quarterly interest. Security of capital and assured periodic returns play a key role in choosing an investment program, especially in the case of the elderly. This scheme, which offers guaranteed quarterly interest payments, was introduced in 2004 with the aim of providing seniors with a stable and secure source of income for their post-retirement period.

This account can be opened at any bank or post office and has a term of five years and can be extended for a further period of three years (the request must be made by completing form B within one year after maturity). Thus, in practice, this plan is limited to five years. Only a single extension up to three years is possible; therefore, one cannot invest in this plan beyond eight years.

A maximum of Rs15 lakh can be invested (individually or jointly in the program). You can only open a joint account with your spouse. In the event of a joint account, the entire amount of the deposit in a joint account is attributable solely to the first account holder. Appointments under this regime can only be made in favor of Resident Indians. An account can be transferred from one post office to another.

The interest rate offered under the SCSS is revised every quarter by the Ministry of Finance and its calculation depends on several factors such as the prevailing market rates, the level of inflation, etc. Sometimes, due to stagnant economic conditions or the absence of significant changes, rates could remain constant after revision. The current interest rate offered on SCSS is 7.4%, which is taxable, and investment under this program qualifies for the benefit of Section 80C of the Income Tax Act 1961. returned. The interest rate in effect when you invest the funds is what you earn. throughout the term and your investment is not affected by changes in interest rates in subsequent quarters. Interest is paid on March 31, June 30, September 30 and December 31.

The investment is blocked for five years, but the account can be closed prematurely at any time after the opening date. If you opt for an early withdrawal, a penalty will be charged.

If the account is closed before one year, no interest will be due and if interest has been paid on the account, it will be recovered from the principal. If the investor leaves the program before the expiration of a period of two years from the date of opening the account, a penalty will be charged up to 1.5% of the amount of the deposit. If the investor exits the system within two years and less than five years from the date of opening the account, 1% of the deposit amount as a penalty is charged. In the event of the death of the depositor, no fees or penalties are levied for the premature closure of the account. The extended account can be closed after the expiration of one year from the date of expansion of the account without any penalty deduction.

Eligibility

The scheme is open to any resident natural person aged 60 and over.

People who have reached 55 but are under 60 are also eligible to apply for the SCSS, provided they have retired under applicable superannuation or VRS rules.

In this case, the SCSS account must be opened within one month of receipt of pension benefits. Proof of the date of payment of these retirement benefits must also be submitted along with a certificate from the employer stating retirement details on superannuation, retirement benefits, employment held and period of retirement. this job with the employer.

Defense service retirees (except civilian defense employees) who have reached the age of 50 may also invest in SCSS (subject to meeting other specified conditions).

Retired civilian employees over 55 and under 60 may invest in this plan (provided the investment is made within one month of receiving pension benefits).

Required documents

Form A must be completed and two passport size photographs must be submitted.

Proof of identity and address (one of the following):

1. Aadhaar card

2. Passport

3. Driver’s license issued by the regional transport board

4. Voter ID card

5. Labor card issued by NREGA signed by state government officer.

Additional documentation if the investor is under 60 years of age:

1. Employer’s certificate showing details of retirement on superannuation or otherwise, retirement benefits, employment held and period of such employment with the employer.

2. Proof of the date of payment of retirement benefits (the date of opening an account under this Plan must be less than one month from the date of receipt of retirement benefits).

In addition to the above documents, the PAN card is mandatory.

Minimum and maximum amount

The minimum deposit allowed in a SCSS account is 1000 Rs and in multiples of 1000 thereafter. The maximum deposit allowed on a SCSS account is Rs15 lakh.

Tax treatment

The principal amount deposited into a SCSS account is eligible for tax deductions under Article 80C of the Income Tax Act 1961, up to the limit of Rs1.5 Lakh. However, this exemption is only applicable under the old tax regime and is not allowed if an individual chooses to file income tax returns under the new system introduced in the 2020 Union budget. Interest received is however subject to taxation according to the applicable scale. the taxpayer concerned.

The withholding tax (TDS) is applicable on the amount of interest received on a quarterly basis for investment in the SCSS. For exemption, Form 15H must be submitted to the respective bank / postal branch each financial year.

There are some limitations to this regime: ceiling on the amount of the investment (Rs15 lakh only), limited tenure (5 years + 3 years of extension), penalty on premature withdrawal and withholding tax. on interest earned, which reduces overall income. But despite these limitations, the government approved program is a good option because it offers good returns and the capital invested in it enjoys superlative safety and security.


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