Government launched the Senior Citizen Savings Scheme (SCSS) in 2004, specifically designed to cater the financial needs of senior citizens. The primary objective of the scheme is to provide monetary benefits to retirees by ensuring an improved cash flow, even when there is no stable source of income.
Applicants can avail the scheme through a network of Public and Private Sector banks and India Post Offices. As the scheme is backed by the government, the terms and conditions don’t vary from bank to bank. Interest on the savings scheme is compounded and credited quarterly
Well, to the convenience of the applicant, the minimum deposit is of Rs.1000, which is capped to maximum of Rs.15 lakhs. Deposits can only be made in multiples of Rs.1000. while deposits can be made in different modes, cash deposits are only allowed for value less than Rs.1 lakh. For amount above Rs.1 lakh, deposit via cheque or demand draft is mandatory.
Eligibility –Before putting your hard-earned income into a savings plan, it’s essential to check whether you even fit in the eligibility criteria.
Tax benefits – Individuals can avail tax benefits under Section 80 C of the Income Tax Act for investments up to Rs.1.5 lakh. So, instead of putting all capital at once, it’s better to invest in parts each year, thus availing the tax benefits every time.
Penalty charges – Since it is a savings scheme, investors have to take a long-term view, in order to avoid pre-mature withdrawal penalty. Scheme withdrawals are allowed only after a certain period. In case of withdrawing before the maturity period, certain penalty is imposed on the deposit amount. If in case, the withdrawal is made before completion of 2 years, 1.5% penalty is imposed, while 1% of the deposit amount is charged as penalty in case of an exit after 2 years, but before 5 years.
Usually, the maturity period of Senior Citizen Savings Scheme is 5 years from the date of account opening. However, the maturity period can be extended for an additional 3 years. The period can be extended only once and the request for the same should be made within 1 month of the actual maturity period, i.e. of 5 years.
Deposits made into a SCSS account are compounded annually on the basis of applicable rate of interest. These payouts are credited automatically to the SCSS account. The current SCSS interest rate is 8.6%.
Suppose, for instance, you have deposits worth Rs.10 lakh for maturity period of 5 years, the interest will be around Rs.15.10 lakhs.
Basically, to open an account under SCSS, you have to go the traditional route. You can download the application form online, which needs to be submitted at the networked post office or bank along with required documents.
Before submitting the application, the mandatory fields need to be filled with required details, such as: