(Article Posted in Blog:http://svsaibaba.blogspot.in/2016/04/senior-citizen-savings-scheme.html
With the reduction of Interest rates on Fixed Deposit Schemes, concerns of senior citizens are where to invest and how they get regular income with safety. The answer to this is Post Office Senior Citizen Scheme or SCSS. Let us discuss about this scheme in detail.
Senior Citizen Savings Scheme
Post Office Senior Citizen Scheme or SCSS is 5 years one-time deposit scheme.
Who can invest in Post Office Senior Citizen Scheme or SCSS?
- An individual who attained the age of 60 years of age or above on the date of account opening.
- An individual who attained the age of 55 years or more but less than 60 years of age and has retired on superannuation or under a voluntary or special voluntary scheme. But they can open this account only on a condition that the account is opened within one month of receipt retirement benefits and amount should not exceed the amount of retirement benefit.
- Retired personnel of Defence Services (excluding civilian Defence employees) without any age restrictions. But they have to fulfil other limits specified in the rules.
- NRIs and HUF are not eligible to open this account.
Where to open Senior Citizen Savings Scheme or SCSS?
You can open Senior Citizen Savings Scheme either in post office or with recognised 24 PSU banks and one private bank.
The list of 24 nationalised banks are :
State Bank of India, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala, State Bank of Mysore, State Bank of Travancore, Allahabad Bank, Andhra bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Corporation Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India, United Bank of India, Vijaya Bank and IDBIBank.
One private bank allowed to open this scheme is ICICI Bank.
How to open Senior Citizen Savings Scheme or SCSS?
- Fill the Form A of account opening.
- Deposit Amount-If deposit amount is less than one lakh, then it is accepted in cash. If it is more than Rs.1 lakh then either in cheque or DD.
- Two passport size photographs.
- Age Proof like Passport, Senior Citizen Card, Birth certificate issued by MC/Gram Panchayat/District office of registrar of births and death, Voter ID card, PAN card, Ration card, Date of birth certificate from the school or Driving license.
- Address and Identity Proof like passport or PAN card.
- You must carry original documents for KYC verification purpose.
How much one can invest in Senior Citizen Saving Scheme 0r SCSS?
- Minimum of Rs.1,000 and in multiples of Rs.1,000.
- Maximum of Rs.15 lakh.
One can open multiple accounts either in an individual capacity or jointly with spouse. But the maximum limit including all his accounts must not cross the maximum limit of Rs.15 lakh.
What is the rate of interest of Post Office Senior Citizen Scheme or SCSS?
Earlier, the interest rate on SCSS used to be declared once in a year. But not it is declared on a quarterly basis like April-June, July-September, October-December, and January-March. Refer my earlier post for the recent changes done in interest rates at “Post Office Savings Schemes -Changes effective from 1st, April 2016“.
So as per this, the interest rate for April-June quarter of 2016 is 8.6%. But in many posts, articles or even RBI mentioned that SCSS compounding frequency is on quarterly. However, when the depositor getting the whole interest earned on quarterly base then where comes the quarterly compounding effect.
How they pay the interest for Post Office Senior Citizen Scheme or SCSS?
Interest will be payable on the quarterly basis on 1st working day of April, July, October and January. If you fail to claim such quarterly interest, then this interest amount will not earn any further interest. It will be kept idle. For the first time it is paid from the date of deposit to 31st March/30th June/30thSeptember/31st December and then every quarter.
Interest is rounded off to a rupee. Like if the interest is less than 50 paisa is ignored and more than 50 paisa is rounded off to a rupee. There will not be any compounding. So for example, if you deposited Rs.1,00,000 and interest rate at 8.6%, then for a year it fetches Rs.8,600. This they divide into 4 (because they pay it in 4 quarters) and pay you Rs.2,150.
Duration or maturity of Post Office Senior Citizen Scheme or SCSS
It is 5 years fixed deposit kind of product. After the completion of 5 years, you have to submit the written application along with passbook and Form E.
In case you not close the account after maturity and also does not extend the account, the account will be treated as matured and you will be entitled to close the account at any time. However, post-maturity interest at the rate as applicable to the deposits under the Post-office Savings Accounts from time to time will be payable on such matured deposits up to the end of the month preceding the month of the closure of the account.
What happens in case of death of depositor?
In case of death of the depositor before maturity, the account will be closed and deposit refunded along with interest to nominees or legal heirs if the nomination was not made or in case of death of nominee.
If the total amount including interest payable is up to Rs.1 lakh, it may be paid to the legal heirs on production below documents.
- Letter of indemnity
- An affidavit
- A letter of disclaimer on an affidavit
- A certificate of death of the depositor on stamped paper in the form as in Annexure to Form F.
Whether Pre-mature withdrawal allowed?
Yes, but with certain conditions. You are not allowed to withdraw within one year of account opening. You have to fill the Form E for this early withdrawal.
- In case the account is closed after the expiry of 1 year but before the expiry of 2 years from the date of opening of the account, an amount 1.5% of the deposit shall be deducted and the balance paid to the depositor.
- In case the account is closed on or after the expiry of 2 years from the date of opening of the account, an amount equal to 1% of the deposit shall be deducted and balance paid to the depositor.
Whether one can extend the Senior Citizen Saving Scheme or SCSS?
- Account will not be extended automatically.
- You can extend for a period of 3 years after 5 years maturity period. However, you have to submit Form B within one year from the date of maturity.
- Also, such extended accounts can be closed after one year of extension without any penalty. Means after completion of 6th year, one can withdraw the amount without any penalty.
- Interest rate during such extension period will be as per prevailing rate of interest after 5 years maturity.
- Only one extension is allowed to the old account. Means after 5 years completion of SCSS, you can extend only for once. After that, the account will be matured.
- However, you are free to open one more account during the old account tenure or after maturity of old account subject to the maximum ceiling of Rs.15 lakh.
Whether one can nominate?
Yes, you can nominate one or more than one persons. Also you can nominate, change, or cancel before the maturity as and when you wish. You have to submit Form C and present the passbook for registering, changing or cancelling the nomination. This service is totally free and there is no fee to it.
In case of joint account deposit. The nominee will come into picture only after the death of both joint account holders.
Whether loan facility is available?
No, you are not allowed to avail the loan by pledging it. Because this scheme is meant for regular income from your investment.
Whether transfer facility is available?
Yes, one can transfer Post Office Senior Citizen Scheme deposit from one office to another office. You have to fill Form G and enclose the passbook. If the deposit amount is Rs.1 lakh or above, a transfer fee of Rs.5 per Rs.1 lakh of deposit for the first transfer and Rs.10 per Rs.1 lakh of deposit for the second and subsequent transfers will be payable.
However, SCSS deposit can’t be transferred to others or it can’t be traded.
What if you break the Senior Citizen Saving Scheme or SCSS rules and deposited the amount?
Many may break the rules in lure of higher interest rate. So if banks or post office found that there is any break of rules from depositor, then the account will be closed immediately. Amount will be refunded after deducting the entire interest paid to such deposit from starting to till date.
Joint Account Rules of Senior Citizen Savings Scheme or SCSS–
- You can open the Post Office Senior Citizen Scheme scheme jointly with spouse ONLY.
- The age of first account holder will be verified for eligibility. But not the spouse of a first account holder.
- In the event of a death of first account holder, then second account holder continue as primary account holder but with the condition that the maximum overall limit of the second holder must not cross Rs.15 lakh.
- Even though it is joint account first holder is attributed to the scheme. There is no sharing from a joint holder.
- Both individuals can open as many accounts as they can subject to the maximum ceiling of Rs.15 lakh based on their eligibility condition either individually or jointly.
- In case the first holder dies and second holder continue the scheme but if his/her limit crossed the maximum ceiling of Rs.15 lakh from all accounts, then such over and above Rs.15 lakh will be refunded to him/her.
- If both spouses holding individual accounts and either of spouse dies means the survivor can’t continue the account. They have to close the deceased spouse account.
Tax Benefits of Senior Citizen Savings Scheme or SCSS
- During Investment-One can avail up to Rs.1,50,000 as a maximum benefit under Sec.80C by investing in SCSS scheme.
- Interest Income-Interest income is treated as taxable income. Hence, there is no tax benefits. It will be taxed as per your tax slab. TDS can be deducted on interest earned if it exceeds the minimum limit prescribed by the Government which currently is Rs 10,000 and TDS is 10%.
- If your income falls before basic exemption limit (Currently, if your age is below 60 years then it is Rs.2.5 lakh and for above 60 years it is Rs.3lakh), then you can submit Form 15G (if your age is less than 60 years) or Form 15H (if your age is 60 years or above) to avoid TDS. However, in case the tax is already deducted, then you can file IT return on your own and claim the refund.
