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Once you start nearing retirement, you start to worry about your pension arrangements. Pensioners and senior citizens are on the constant lookout for savings plans that can get them the best returns in the market. The government and the private sector also has a number of schemes and plans that cater to the retired population.
The Senior Citizen Savings Scheme (SCSS) is one such savings scheme that is backed by the government of India. it offers assured returns for senior citizens’ savings. It is a fixed deposit scheme with a tenure of 5 years that gives a higher rate of interest compared to normal FDs.
This FD scheme can be availed in all leading public and private sector banks. It is available at India Post Offices too. The scheme can be availed by senior citizens over the age of 60. The investment can also be considered for tax rebate under Section 80C of the Income Tax.
About Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Savings Scheme account can be opened at your nearest public or private sector bank, or at the nearest post office. It is very simple to open this account.
A person can invest a maximum amount of Rs.15 lakhs, either independently or jointly in a SCSS account. The investments should be made in multiples of Rs. 1,000. The sum spent in the plan cannot exceed the amount of money earned at the time of retirement. As a result, a person may either spend Rs.15 lakh or the sum earned as a retirement bonus, whichever is lower. The account can be opened by cash for less than Rs.1 lakh deposits and by cheque for more than Rs.1 lakh.
Here are the historical interest rates offered on the Senior Citizens’ Savings Scheme:
Up to 2012
A person can withdraw early from his or her account under Senior Citizen Savings Scheme one year after the creation of the account.
If a person closes his or her account by the end of 2 years, 1.5% of the deposited balance will be deducted as a penalty. When the closing of the account takes place at the expiration of 2 years, 1% of the balance deposited shall be levied as a penalty. In the case of extended accounts, a person can close his or her account after the first year without incurring any penalty. However, if the creditor has died before the maturity of his account, no penalty will be applied.
Interest is compounded quarterly and paid out on a quarterly basis on the first dates of April, July, October and January. The primary components used for its calculation are –
The duration of maturity is constant, while the other two elements are unpredictable. The interest rate at which the individual invested is to be considered for interest calculation.
Deposits made under the Senior Citizens' Savings Scheme shall mature after five years from the date of opening of the account. However, the account holder has the possibility of continuing the plan for a further 3 years after it has matured. This extension option is currently valid only once and the proposal for an extension must be submitted within 1 year of the maturity of the SCSS account.
Investments made in the Senior Citizen Savings Scheme account are liable for income tax deduction benefits of up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act, 1961.
The interest earned through SCSS is completely taxable. In the event that the amount of interest received is greater than Rs. 50,000 for a tax purposes, TDS shall be deducted on the interest earned. This cap for the TDS deduction for SCSS assets shall extend from AY 2020-21 onwards.
1. Can I open more than one account under the Senior Citizens Savings Scheme?
Yes, an individual can open a single account as well as a joint account with his/her spouse. However, the total deposits under all the accounts should not exceed Rs.15 lakhs.
2. Is there any penalty for premature withdrawals?
Premature withdrawals are permitted, but only after one year of opening the account. If the account is closed after one year but before the expiration of two years, 1.5% of the deposit shall be withheld in the form of pre-maturity withdrawal charges. In case of closure after 2 years, an amount equal to 1% of the deposit shall be charged as penalty. In the case of the death of the depositor, no payments or fines shall be levied for the early closing of the account.
3. What is the minimum and maximum deposit allowed under the Senior Citizens Savings Scheme?
A person can invest a maximum amount of Rs.15 lakhs, either independently or jointly in a SCSS account. The investments should be made in multiples of Rs. 1,000. The sum spent in the plan cannot exceed the amount of money earned at the time of retirement. As a result, a person may either spend Rs.15 lakh or the sum earned as a retirement bonus, whichever is lower.
4. What is the age eligibility to invest in this scheme?
A person who has reached the age of 60 years and over can deposit in this scheme. An individual who has crossed the age of 55 years or more but less than 60 years and who has aged on a superannuation basis or otherwise on the day of the opening of an account. Retired Defence Forces employees after attaining the age of fifty years.
5. What is the mode of deposit accepted under the scheme?
The account can be opened by cash for less than Rs.1 lakh deposits and by cheque for more than Rs.1 lakh.
6. What are the tax implications of Senior Citizen Savings Scheme?
Investments made in the Senior Citizen Savings Scheme account are liable for income tax deduction benefits of up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act, 1961. The interest earned through SCSS is completely taxable. In the event that the amount of interest received is greater than Rs. 50,000 for a tax purposes, TDS shall be deducted on the interest earned. This cap for the TDS deduction for SCSS assets shall extend from AY 2020-21 onwards.
7. How often is the interest credited under this scheme?
The interest on the scheme is reviewed every quarter. This interest is compounded yearly and credited to your account every quarter. The latest interest rate on this scheme is currently at 7.4%. This is one of the highest interest rates offered on deposits right now across all banks in India.
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