Senior Citizen Savings Scheme

In this unit, we will be discussing a deposit scheme that is specially launched by the government of India for all the old age citizens of our country, i.e., 'Senior Citizens Savings Scheme' (SCSS)

The Senior Citizens Savings Scheme (SCSS), launched in 2004, is primarily for senior citizens of India that offers regular income and is a risk-free tax saving investment. Senior Citizens above the age of 60 can invest in this scheme. It has a five year lock-in period. Minimum investment should be of ₹1000 and maximum investment can be ₹15 lakh. Premature closure of this account would attract a penalty.

How to Open a Senior Citizen Savings Scheme Account?

The following documents are required to open a Senior Citizens Savings Scheme account:

• Form A has to be filled for opening an SCSS Account.
• Identity proof like PAN card, Passport.
• Address proof such as Telephone bill, Aadhaar card.
• Age Proof Document like Passport, Senior Citizen Card, Birth certificate issued by Corporation or registrar of births and death, Voter ID card, PAN card etc.
• 2 Passport size photographs.

This account can be opened in both, post offices, as well as select nationalised banks. It is beneficial to have a savings account in the same financial institution where the Senior Citizen Savings Scheme account has been opened to get the credit of interest every quarter.

Interest Rate Mechanism

For SCSS Accounts, the interest rate is 8.7% p.a compounded quarterly. There is a quarterly payout of interest. The interest rate is linked to G-Sec rates with a spread of 1%. The Government reviews the interest rates quarterly but, once a Scheme is booked, the interest rate prevailing at the time of booking would hold till maturity.

For example, if Mr. Jay, aged 61 years deposits ₹ 100000 for 5 years, the amount receivable at maturity would be ₹ 153777.

Tax Implication

Only the principal amount up to ₹150000 invested under this scheme is exempted under Section 80C. Although the maximum amount investible is ₹15 lakhs (₹30 lakhs jointly with spouse).

Risk associated with Senior Citizens Savings account 

There is no risk involved as these deposits are backed by the Government of India. Principal and Interest are guaranteed. If inflation turns out to be higher than the nominal interest rate of the scheme, there would be no real returns available. Hence, it is not inflation protected.