Senior Citizens Savings Scheme (SCSS) for Defence Personnel Post Retirement

The idea behind the senior citizens savings scheme is to enable senior and retired citizens to earn a regular income similar to a salary by using their post retirement funds. The government of India currently supports two income schemes, the POMIS & SCSS.

Highlights of SCSS

  1. Investment in SCSS earns a higher return as compared to other government schemes like POMIS, NSE, PPF, etc. like every other small savings scheme, the interest rate for SCSS as we have announced on a quarterly basis. The SCSS will earn you 1% higher interest than the corresponding government bond rate.
  2. The SCSS investments have a maturity period of 5 years which can be extended by another 3 years. You can withdraw your money at the end of 5 years or apply for the extension.
  3. No penalty is levied if the deposit withdraws after completion of a year of the extension period. 
  4. An individual can invest a maximum of Rs.15 lakh in this scheme.
  5. Since senior citizens may need to withdraw cash on an emergency basis, SCSS offers the flexibility to do so. There is however a penalty involved for premature withdrawal which is lower than is scheme like POMIS with SCSS you lose 1.5% of the deposited amount if the account. The penalty is reduced to 1% of the deposit amount if the account is closed 2 years or later from the opening date.

How to invest in SCSS?

  1. You can apply for SCSS at any post office, any public actor bank that offers the PPF scheme or with ICICI Bank, the only private bank that accepts SCSS accounts.
  2. Any resident Indian citizen who is 60 years old or above can invest in this scheme. Inrestos beta is 55 years & 60 years who have retired under a voluntary retirement scheme can only invest their retirement benefits in this scheme. Retired personnel belonging to the defence services can also invest in SCSS after age 50 years of retirement.
  3. The minimum investment is Rs 1000. You can make deposits in multiples of Rs 1000. The maximum limit is Rs 15 lakh.
  4. You can open a single account, multiple account or a joint account with your spouse. However, the sum of all investments should not exceed Rs 15 lakh. In the case of joint account the age of only the first applicant is considered for eligibility of the scheme. There is no age far for the record applicant.
  5. Investments less than Rs 1 lakh can be made in cash. Any investment above that has to be made by cheque or demand draft.
  6. Nomination is allowed both at the time of opening the account as well as at any time before the closing of the account.
  7. You can transfer your SCSS account from one post office bank to another in case of a change of residence. A transfer fee of Rs 5 per lakh of deposit is charged for the first transfer. Transfers are charged at Rs 10 per lakh.
  8. You can open an account at a post office or at designated branches of around 24 nationalized banks (SBI, BOB, BOI & one private bank ICICI Bank).

Advantage

  1. SCSS offers a higher rate of interest than other government saving schemes.
  2. Your investment is 100% safe as it is guaranteed by the GOI.
  3. You can invest a large amount of money in SCSS if you wish to reject a maximum of Rs 15 lakh.
  4. SCSS offers a regular income through interest payout every quarter.
  5. Investments is every as it is available at post offices, most public sector branches and one private sector bank.
  6. The penalty for premature withdrawal is minimum.
  7. Joint accounts, nominations and account transfers are possible.

Disadvantages

Interest is darable at source unless you provide form 15G (for non-senior citizen) or 15H (for senior citizen) to ensure that you receive the interest without tax deduction.

Tax Impact

Investments up to Rs 25 lakh are SCSS eligible for tax rebate under the section of the Income Tax Act. Interest is taxable at source (TDS) at the rate of 10% if it exceeds Rs 10,000 per year. You can claim by submitting form 15G or 15H irrespective of the interest earned. You should include it as part of your annual income and pay tax based on the income tax that you belong to.

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