Senior Citizen Savings Scheme (SCSS) – Interest Rate | Eligibility

1.1 Senior Citizen Savings Scheme Eligibility

The following individuals can open an account under this scheme by applying Form-1:

(a) An individual who has attained the age of 60 years on the date of opening of the account;

 (b) An individual who has attained the age ranging between 55 years to 59 years and who has retired on superannuation or otherwise on the date of opening of the account; or

 (c) A retired personnel of defence services (excluding Civilian Defense Employees) attaining the age of 50 years.

Persons mentioned under clause (b) and (c) above are required to fulfil the following additional conditions for being eligible to open an account under this scheme:

 (a) Account must be opened within one month from the date of receipt of retirement benefits; and

 (b) The proof of date of disbursal must be attached to the application form; and

 (c) A certificate from the employer indicating the details of retirement, retirement benefits, employment held and period of work must be attached to the application form.

1.3 Whether a joint account can be opened?

An individual may open an account in an individual capacity or jointly with a spouse. In the case of a joint account, the age of the first account holder shall be considered to determine the eligibility to open the account, and there shall be no age limit for the second applicant. The whole deposit amount in a joint account shall only be attributable to the first account holder.

Both spouses can open a single account and joint accounts with each other with a maximum deposit of up to Rs. 30,00,000 provided in each account; both are eligible to open the account.

2. Deposits in the scheme

 (a) The account shall be opened with a minimum deposit of Rs. 1000 or any amount of money in multiple of Rs. 1,000.

 (b) Total amount deposited in an account shall not exceed Rs. 30,00,000. However, in the case of individuals specified under clause (b) and (c) of Para 1 above (i.e., retiree and defence personnel), the maximum amount which can be invested is Rs. 30 lakhs or retirement benefits, whichever is lower.

There can be only one deposit in an account. Any deposit over the maximum eligible limit shall be immediately refunded to the account holder.

For this purpose, ‘retirement benefits’ means any payment due to the account holder on account of retirement on superannuation or otherwise, and it includes the following:

(a) Provident Fund dues;

(b) Retirement or superannuation gratuity;

(c) Commuted value of pension;

(d) Cash equivalent of leave;

(e) Savings element of Group Savings Linked Insurance Scheme payable by the employer on retirement;

(f) Retirement-cum-withdrawal benefit under the Employees’ Family Pension Scheme; and

(g) Ex-gratia payments under a voluntary or a particular voluntary retirement scheme

3. SCSS Interest Rate

The interest on the deposit shall be payable from the date of deposit to March 31st, June 30th, September 30th and December 31^st on the first working day of April/July/October/January in the first instance. After that, interest shall be payable on the first working day of April/July/October/January.

Interest on the deposits under this scheme will be paid at the following rates:

• • Interest will be paid at 8.60% per annum on the deposits made on or after 12th December 2019 till 31st March 2020.
  • Interest will be paid at 7.40% per annum on the deposits made on or after 1st April 2020 till 30 September 2022.
  • Interest will be paid at 7.60% per annum on the deposits made on or after 1 October 2022 till 31 December 2022.
  • Interest will be paid at the rate of 8.0% per annum on the deposits made on or after 1 January 2023 till 31 March 2023.
  • Interest will be paid 8.2% per annum on the deposits made on or after 1 April 2023.
  • In case the assessee has opted for an extension of the maturity of his account, in such case interest will be paid at the rate applicable to the scheme on the date of maturity.

If the interest payable every quarter is not claimed by an account holder, such interest shall not earn additional Interest. Interest can be claimed on any date if not on the due date. On authorisation of the account holder, the amount of interest shall be credited to his savings account.

Interest on the amount deposited more than the maximum eligible amount, i.e. Rs. 30,00,000, shall be payable from the date of deposit till the date of refund at the rates applicable to the Post Office Savings Account.

Where interest is payable for any period which is less than a complete quarter, it is calculated as per the following formula:

Any interest in a fraction of a rupee shall be rounded off to the nearest rupee, and for this purpose, an amount of 50 paise or more shall be treated as one rupee and any amount less than that shall be ignored.

Applicable rate of interest in different periods

4. Senior Citizen Savings Scheme Tenure

The deposit under this scheme can be made for five years. However, the account holder may extend the account for a further period of 3 years by making an application in Form-4 within one year from the date of maturity.

The extension can be availed only once. Extension of the account will be calculated from the date of maturity, irrespective of the date of application for extension. However, after opting for an extension of the maturity period, the account holder can close the account at any time after one year from the extension date without any deduction after applying under Form-2.

Where the account holder has not opted for the extension of tenure of the deposit after maturity, interest shall be payable at the rates applicable to the Post office savings account after the maturity date.

5. Premature closure of the account

An investor can close the account prematurely at any time by making an application in Form-2 subject to the following conditions:

(a) In case the account is closed within one year from the date of opening of the account, interest paid on the deposit shall be recovered from the deposit, and the balance shall be paid to the account holder;

(b) In case the account is closed after the expiry of one year but before the expiry of 2 years, 1.5% of the deposit shall be deducted, and the balance shall be paid to the account holder; and

(c) If the account is closed after the expiry of two years but before the expiry of 5 years, 1% of the deposit shall be deducted, and the balance shall be paid to the account holder.

In case of premature closure, interest shall be paid up to the date preceding the date of such closure after deduction of the amount specified above. Further, multiple withdrawals from an account are not permitted.

Where the account tenure has been extended after maturity, the account holder can close the account at any time after the expiry of one year from the extension date without deduction of any amount.

6. Closure of the account

The deposit made at the time of the opening of the account shall be paid on or after the expiry of 5 years (or 8 years where the account was extended) from the date of opening of the account by applying Form-3.

Suppose the depositor dies before maturity or extended maturity. In that case, his account will be closed, and the deposit will be refunded along with interest till the date of death to the nominee or legal heir on making an application in Form-3. In this case, no charges shall be deducted for the premature closure of the account. However, the interest on the account deposits shall be at the rate applicable to the Post Office Savings Account from the date of death of the account holder till the date of final closure of the account.

In the case of a joint account, where the spouse is the sole nominee, the spouse can continue the account on the same terms and conditions under the scheme if the spouse meets the eligibility criteria on the date of death of the account holder. However, if both spouses have opened separate accounts and either of the spouses dies, the deceased’s account cannot be continued and will have to be closed.

7. Tax treatment of investment in the scheme

Investments made in Senior Citizen Saving Schemes are eligible for Section 80C deductions. Interest earned under this scheme shall be taxable as follows:

7.1. If an investor is a senior citizen

Interest is chargeable to tax as “Income from other sources”. However, a deduction of up to Rs. 50,000 can be claimed by a senior citizen under Section 80TTB regarding interest earned from the deposit made under the scheme.

7.2. Others

Interest earned under this scheme is taxable under the head ‘Income from other sources’. If the account holder closes the account before the expiry of 5 years from the date of its deposit, the amount withdrawn shall be deemed as the assessee’s income for the previous year in which the amount is withdrawn. Only that amount shall be taxable, which has been claimed as a deduction under Section 80C at the time of investment. However, the amount received by the nominee or the legal heirs on the assessee’s death shall not be taxable.

7.3. TDS provision

Interest earned on deposits made under the Senior Citizen Saving Scheme is subject to tax deduction under Section 194A.