Post Office Senior Citizen Savings Scheme (SCSS) – Benefits and Interest Rate

After the recent increment in Senior Citizen Savings Scheme (SCSS) limit to Rs.30 lakh from 1st April 2023, SCSS turned out to be one of the best and safest instruments for senior citizens. Let us look into the features, benefits and rules of SCSS in detail.

Post Office Senior Citizen Scheme or SCSS is 5 years one-time deposit scheme.

Post Office Senior Citizen Savings Scheme (SCSS) – Benefits and Interest Rate

Let us now look into the complete features of the Post Office Senior Citizen Savings Scheme (SCSS)

Who can invest in Post Office Senior Citizen Savings Scheme (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 the condition that the account is opened within one month of receipt of retirement benefits and the 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 fulfill other limits specified in the rules.

# NRIs and HUF are not eligible to open this account.

Where to open Post Office Senior Citizen Savings Scheme (SCSS)?

You can open Senior Citizen Savings Scheme either in the post office or with recognized 24 PSU banks and one private bank.

The list of 24 nationalized banks is 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 IDBI Bank. One private bank allowed to open this scheme is ICICI Bank.

How to open Post Office Senior Citizen Savings Scheme (SCSS)?

# Fill the Form A for account opening.

# Deposit Amount-If the 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 a passport or PAN card.

# You must carry original documents for KYC verification purposes.

How much one can invest in Post Office Senior Citizen Savings Scheme (SCSS)?

# Minimum of Rs.1,000 and in multiples of Rs.1,000.

# Up to 31st March 2023, the maximum limit was Rs.15 lakh. However, effective from 1st April 2023, the maximum limit is Rs.30 Lakh.

One can open multiple accounts either in an individual capacity or jointly with a spouse. But the maximum limit including all his accounts must not cross the maximum limit of Rs.30 lakh.

What is the rate of interest of the Post Office Senior Citizen Savings Scheme (SCSS)?

Earlier, the interest rate on SCSS used to be declared once a year. But not it is declared quarterly like April-June, July-September, October-December, and January-March. You can refer to my latest blog posts regarding the applicable interest rates. I write the latest interest rates once a quarter. The latest one is” Latest Post Office Interest Rates January – March 2023″

Even though the interest rate is mentioned as quarterly in many cases, it is wrong to assume so. Mainly because as the depositor gets the interest payout once a quarter, compounding frequency is not applicable here.

How do they pay the interest for Post Office Senior Citizen Scheme or SCSS?

Interest will be payable every quarter 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/30th September/31st December and then every quarter.

Interest is rounded off to a rupee. For if the interest is less than 50 paise is ignored and more than 50 paise is rounded off to a rupee. There will not be any compounding. So for example, if you deposited Rs.1,00,000 at an interest rate of 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 year fixed deposit kind of product. After the completion of 5 years, you have to submit the written application along with the passbook and Form E.

In case you do not close the account after maturity and also do 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 the death of the depositor?

In case of the death of the depositor before maturity, the account will be closed and the deposit refunded along with interest to nominees or legal heirs if the nomination was not made or in case of the death of the 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.

1. Letter of indemnity
2. An affidavit
3. A letter of disclaimer on an affidavit
4. A certificate of death of the depositor on stamped paper in the form 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 of 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 the 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 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. This means after the completion of 6th year, one can withdraw the amount without any penalty.

# Interest rate during such extension period will be as per the prevailing rate of interest after 5 years of maturity.

# Only one extension is allowed to the old account. This means after 5 years of completion of SCSS, you can extend only once. After that, the account will be matured.

# However, you are free to open one more account during the old account tenure or after the maturity of the old account subject to the maximum ceiling of Rs.15 lakh.

Whether one can nominate?

Yes, you can nominate one or more than one person. Also, you can nominate, change, or cancel before maturity as and when you wish. You have to submit Form C and present the passbook for registering, changing, or canceling the nomination. This service is free and there is no fee for it.

In the case of joint account deposit. The nominee will come into the picture only after the death of both joint account holders.

Whether loan facility is available?

No, you are not allowed to avail of 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 out 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 deposits can’t be transferred to others or they can’t be traded.

What if you break the Post Office Senior Citizen Savings Scheme (SCSS) rules and deposited the amount?

Many may break the rules in the lure of higher interest rates. So if banks or post offices found that there is any break of rules from depositors, then the account will be closed immediately. The 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 your spouse ONLY.

# The age of the first account holder will be verified for eligibility. But not the spouse of a first account holder.

# In the event of the death of the first account holder, then the second account holder continues as the 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 a 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.30 lakh based on their eligibility conditions either individually or jointly.

# In case the first holder dies and the second holder continues the scheme but if his/her limit crossed the maximum ceiling of Rs.30 lakh from all accounts, then such over and above Rs.30 lakh will be refunded to him/her.

# If both spouses hold individual accounts and either spouse dies means the survivor can’t continue the account. They have to close the deceased spouse’s 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 are 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 the 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.3 lakh), 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 an IT return on your own and claim the refund.