The department stated that “the Indian government has amended Section 194A of the Income Tax Act 1961 and, accordingly, the total interest income accrued in a fiscal year payable in the case of all SCSS account holders who have not reached the age of 60 has been revised and configured in Finacle from Rs. 10,000 / – to Rs. 40,000 / – for the purposes of the TDS deduction ” .
The Indian government has amended Section 194A of the Income Tax Act 1961 and hence the total interest income payable in a fiscal year for all SCSS account holders under 60 years has been revised from Rs. 10,000 to Rs. 40,000 for the purposes of the TDS deduction.
“It is the responsibility of the relevant CBS post office to update the 15G / 15H form (if submitted) during each fiscal year and update the correct PAN number. Citing an invalid PAN / incorrect PAN number may result in a penalty under 272B of the Income Tax Act 1961, ”the notification states.
Here is an overview of the TDS rules for savings plans for seniors (SCSS).
What is SCSS?
A savings plan for seniors (SCSS) is a small savings plan or post that offers benefits to people over the age of 60. According to the Post Office, “retired civilian employees over the age of 55 and under the age of 60, subject to the investment being made within one month of receipt of pension benefits. Retired Defense employees over the age of 50 and under the age of 60, provided that the investment is made within one month of receipt of pension benefits.
Individually or jointly, seniors residing in India can invest a lump sum in the scheme and receive regular income as well as tax benefits. Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not permitted to invest in SCSS.
The SCSS account has a limit of Rs15 lakh which you can invest and should be invested in multiples of Rs 1000.
How is interest paid?
For the quarter ending December 31, 2021, the plan’s interest rate was set at 7.4% per annum. Interest is calculated for each quarter until the last day of each quarter which is March 31, June 30, September 30 and December 31. Interest payable is credited to the holder’s account on April 1, July 1, October 1 and January 1.
How are investments in SCSS taxed?
Before you read on, be aware that these tax benefits are only available to those who opted for the old income tax regime; those who have opted for the new preferential tax regime cannot benefit from these deductions.
Section 80C of the Income Tax Act, 1961 allows a deduction for contributions to the SCSS. This tax benefit, however, is limited to the current annual limit of Rs 1.5 lakh for all investments made under Section 80C.
Interest received under the scheme is taxable in the hands of depositors. However, the elderly can claim a deduction under section 80TTB for a maximum of Rs 50,000 in a single fiscal year. There is a withholding tax (TDS) on the payment of interest if the amount is more than Rs 10,000 per year according to applicable tax laws.
For people over 60, interest is taxable if the total interest paid on all SCSS accounts during a fiscal year exceeds Rs 50,000 (for those under 60 it is Rs 40,000) , and TDS at the nominal rate is deducted from the total interest paid. If the 15G / 15H form is presented and the accrued interest does not exceed the prescribed maximum, no TDS will be deducted.
As per the Post Department notification, the TDS will be deducted from SCSS account holders under the age of 60 by non-CBS post offices in accordance with the amended limit.
If you are a SCSS account holder, be sure to check if the TDS has been deducted even after submitting the 15G / H form. Additionally, make sure you have completed and submitted the 15G / 15H form to ensure that TDS is not cut off from your SCSS investments.
Read also: Everything about the Seniors Savings Plan