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Aditya Birla Sun Life Insurance Company Limited

Senior Citizens Savings Scheme

Give ₹1 lakh/ month for 5 years and Get₹ 4.58 lakhsevery year till your life¹.

Senior Citizens Savings Scheme Definition

Launched in 2004, the SCSS is a government-sponsored savings instrument that gives guaranteed2 quarterly returns after maturity. It aims to help senior citizens enjoy regular income after retirement. As this is a government sponsored scheme, it is considered to be a low-risk instrument. Note that it has a minimum investment amount of ₹1000 to open the account, along with a maximum investment amount of ₹15 Lakhs.

To understand what the SCSS is, consider the example given below.

Mrs Aggarwal has invested ₹10 lakhs in the SCSS. With an interest rate of 7.4%1, she stands to gain an interest of ₹3,70,000 (which is, 10,00,000*7.4%*5) at the time of maturity. It is important to note that the interest rate determined at the time of investment will remain the same until maturity, irrespective of any changes in later quarters.

How does an SCSS plan work?

To understand whether an SCSS investment is the right avenue for you, you must first understand how it works.

The investor starts by opening an SCSS account, either by adding a minimum investment amount of ₹1000 or a maximum of ₹15 Lakhs in one go. The maximum investment amount is determined by any retirement benefits attained by the investor. Thus, if the retirement benefit is ₹10 lakhs, that would be the maximum investment amount. However, even if the retirement benefit exceeds ₹15 lakhs, only a maximum amount of ₹15 lakhs can be deposited in the SCSS.

The term retirement benefit in this situation refers to any annuity or payment received upon retirement via provident fund fees, leave encashment, any Group Linked Savings Insurance Scheme that is payable by one’s employer, ex-gratia payments under voluntary retirement schemes, commuted value of pensions, superannuation gratuity, retirement-cum-withdrawal benefit under the Employees’ Family Pension Scheme, and so on.

Interest earned on the total deposit is paid to the investor every quarter by automatically processing the payment to the linked bank account. As an SCSS plan can be purchased via authorised banks or the Post Office, the amount can either be linked with the corresponding bank account or Post Office account.

Investors can close the account prematurely, if desired.

Though the maturity period is 5 years, it can be extended by 3 years. However, the request for extension must be made within a year upon maturity.

Once the maturity period is reached, the interest on the amount is paid to the investor in the form of quarterly payments. The applicable amount is transferred to the investor’s account on the 1st of every April, July, October and January.

Features of the Senior Citizens Saving Scheme

The salient features of the SCSS are as follows:

Number of accounts

An investor can have more than one SCSS account, or open a joint account with a spouse. However, the total investment amount across all the accounts cannot exceed a total of ₹15 lakhs.

Maturity period

The SCSS has a maturity period of 5 years which can be extended to 3 years.

Transferability of the account

Investors can transfer the SCSS account from the Post Office to the bank, or the other way around, if needed.

Premature withdrawals

The scheme permits investors to withdraw their finances prematurely (that is, before the maturity period is over). However, the withdrawal can happen only 1 year after the SCSS account has been opened. Additionally, if the withdrawal is made after 1 year, there is a charge of 1.5% levied. Similarly, if the withdrawal is made after 2 years, a charge of 1% is levied.

Nominees

Investors can add a nominee when they open the SCSS account. If there is no nomineed, and the investor passes away, the funds will be transferred to the legal heir.

Minimum and maximum amount

A minimum investment of ₹1,000 can be made, along with a maximum investment of ₹15 lakhs.

Eligibility for SCSS

The following is the eligibility criteria for the SCSS: Note that NRIs and individuals under the Hindu Undivided Family Act (HUF) do not qualify for the SCSS.

Any individual over the age of 65

An individual who is between 55-60 years of age, and has retired early due to a Voluntary Retirement Scheme or superannuation

Any retired defense person

Premium Payment Options

To pay the SCSS premium, investors must:

Pay amounts under ₹1 lakh by cash

Pay amounts over ₹1 lakh by cheque or demand draft

Who should invest in SCSS?

The SCSS is a suitable investment avenue for senior citizens who want to:

Maintain financial independence after retirement

Continue to grow their wealth even after their stop earning

Invest in a low-risk financial instrument that has guaranteed² returns

Benefits of SCSS

The SCSS offers a myriad of benefits such as:

High-interest rate:

The SCSS offers a high interest rate of 7.4%1 and is therefore one of the most beneficial schemes for seniors to invest in.

Guaranteed² returns:

As the SCSS is backed by the Government of India, it is a reliable and safe scheme to invest in.

Tax benefits³:

Under Section 80C of the Income Tax Act , the SCSS is applicable for tax deductions upto ₹1.5 lakhs.

Fixed Income:

Investors can enjoy a fixed income post retirement when they invest in the SCSS. The interest on the deposit is paid on the 1st of every April, July, October and January.

Taxability of SCSS

The following are the taxation rules application to the SCSS:

Investors can enjoy tax benefits³ when they invest in SCSS. As per Section 80C of the Income Tax Act, investors can enjoy tax deductions upto ₹1.5 lakhs.

Based on the investor’s tax slab, interest earned on the deposit is taxable. Interest exceeding ₹50,000 in a financial year is applicable for TDS.

Documents required to open an SCSS account

The following documents are required to open an SCSS account, these documents must be self-attested:

Age proof: This can be in the form of a PAN Card, Birth Certificate, Voter ID Card, Passport or Senior Citizen Card

Identity proof: This can be in the form of an Aadhaar Card or Passport

PAN Card

2 passport-sized photographs

Form A (filled in correctly)

FAQs

Yes, spouses can open individual SCSS accounts. It is not compulsory to open a joint account.

Currently, there is no way to open an SCSS account online. To open an SCSS account, investors must visit the nearest authorised bank branch or the nearest post office.

No, a joint SCSS account can only be opened with your spouse. However, it is important to note that only one spouse must meet the age criteria of the SCSS account (that is, above 65 years of age, or between 55-60 years of age with a Voluntary Retirement Scheme). The second spouse can be younger.

No, NRIs cannot open an SCSS account.

In case of a premature death, the funds are transferred to the legal heir or nominee of the account holder. Do note that an individual with a Power of Attorney cannot sign for the funds instead of the nominee.

¹ https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=181
² Provided all due premiums are paid.
³ Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
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