Senior Citizen Savings Scheme: A Worthwhile Option for Retirees

Rising interest rates have turned out to be a boon for retirees looking to draw a regular cash flow or income to meet expenses, such as paying a few utility bills, grocery bills, etc.

The government-backed saving schemes are currently offering attractive interest rates - in some cases higher than bank fixed deposits.

The Senior Citizen Saving Scheme (SCSS) is currently offering a 7.6% per annum interest rate compounded annually. If inflation mellows from the current levels, as envisaged by the Reserve Bank of India (RBI), senior citizens or retirees would earn better inflation-adjusted returns (known as real returns).

Table: Senior Citizen Saving Scheme

Minimum Investment	Rs 1,000 and in multiples thereof
Maximum Investment	Rs 15 Lakh
Interest Rate	The rate of interest is defined by the Ministry of Finance from time to time.
	The interest rate currently is 7.6% per annum
Interest Payment	Quarterly
Interest Payment dates	Payable from the date of deposit of 31st March/30th Sept/31st December in the first instance & thereafter, interest is payable on 31st March, 30th June, 30th Sept and 31st December.
Tenure	5 years
Extension of Account	Can be extended for another 3 years (the request has to be submitted in the prescribed form within one year from maturity). The extended account shall earn interest at the rate applicable on the date of maturity.
Premature closure of Account	If closed before 1 year, no interest will be payable and if any interest paid in the account shall be recovered from the principal.
	If closed after 1 year but before 2 years from the date of opening, an amount equal to 1.5 % will be deducted from the principal amount.
	If closed after 2 years but before 5 years from the date of opening, an amount equal to 1 % will be deducted from the principal amount.
	The extended account can be closed after the expiry of one year from the date of extension of the account without any deduction.
Mode of Investment	Cheque / Pay order / Demand Draft
Tax Treatment	TDS is deducted at the source for the interest of more than Rs 50,000 per annum. However, if form 15 G/15H is submitted and accrued interest is not above the prescribed limit no TDS will be deducted.
	The investment amount is eligible for tax rebate under Section 80C (limit Rs 1.5 lakh per annum)
Account Holding Pattern	Single account holding or can be jointly held with your spouse only
Nomination Facility	Available
Ineligible to invest	NRIs and HUFs

SCSS is a sensible proposition if you are above 60 years of age, or you have retired between 55 to 60 years of age under a Voluntary Retirement Scheme (VRS).

Similarly retired defence employees above 50 years of age and below 60 years of age can opt for SCSS, subject to the condition that investment is to be made within 1 month of receipt of retirement benefits.

How can one invest in SCSS?

The investment in SCSS could be made in an individual capacity or jointly with your spouse (husband/wife) with select banks and/or India post branches.

In the case of a joint account (with the spouse), the whole amount of the deposit will be attributable to the first holder only.

What is the tenure and maximum permissible investment in SCSS?

The maximum tenure of SCSS is 5 years, while the maximum lump sum deposit permissible is Rs 15 lakh (and the minimum Rs 1,000 and multiples of Rs 1,000).

Now, in case you try to invest any sum over the maximum permissible limit, the excess amount will be refunded immediately and only the savings account interest shall be paid to you from the date of the excess deposit to the date of refund.

How is the interest on SCSS paid?

The interest earned on the SCSS Account is on a quarterly basis (on the first working day of April, July, October, and January), wherein it is credited to your savings account.

This quarterly interest payout provides a cash flow enabling you to take care of retirement needs to an extent.

What are the tax implications of investing in SCSS?

The investment made entitles you to a deduction of up to Rs 1.50 lakh (from Gross Total Income) under Section 80C of the Income Tax Act, 1961.

The interest earned, however, is taxable as per your income tax slab. If the interest income earned in a financial year is greater than Rs 50,000, tax is first deducted at the source as per Section 194A of the Income Tax Act, 1961.

But to avoid tax at source, you can furnish Form 15G or 15H (as the case may be) to the bank/post office if the accrued interest earned is less than the aforesaid prescribed limit.

Are premature withdrawals permitted?

Yes, premature withdrawals are allowed before the 5-year maturity period (for whatever reasons you need the money). However, note the following:

• If closed before 1 year, no interest will be payable, and if paid already, will be recovered
• After 1 year, if you prematurely withdraw, an amount equal to 1.5% of the deposit will be deducted
• And after 2 years, if you prematurely withdraw, 1% of the deposit to be deducted

To sum up...

SCSS is a meaningful option for senior citizens or retirees to draw a regular source of income. But so that you cover your retirement expenses, make it a point to invest a respectable sum of money.

If you invest sensibly by diversifying your investments across asset classes and investment avenues, recognise your risk profile, and needs, plus are optimally insured for health and life, it can help you live a blissful retired life.

• "As in all successful ventures, the foundation of a good retirement is planning." - Earl Nightingale

Happy Investing!