Senior Citizen Savings Scheme: Eligibility, Documents Required and How to Apply

During the announcement of Budget 2021, Union Minister Nirmala Sitharaman proposed the introduction of Section 194P in the Income Tax Act. As per the new section, senior citizens would be exempt from paying taxes in case their only source of income is pension and interest from investments.

One of the safest and best investment instruments for senior citizens is Senior Citizen Savings Scheme or SCSS. As it is a government scheme, there is no question about lack of safety. This scheme even offers taxation benefits. 

Keep reading to learn more about Senior Citizen Savings Scheme.

Senior Citizen Savings Scheme is a government-backed savings instrument for individuals above the age of 60. This scheme was introduced by Government of India in 2004 to offer senior citizens a steady and secure source of income after their retirement. 

SCSS is one of the most lucrative retirement benefit programmes that offers comparatively substantial returns on a quarterly basis to its account holders. As this scheme is backed by the government, there is negligible risk in terms of capital loss. 

Senior citizens can invest in lumpsum either individually or jointly. This scheme has a maximum tenure of 5 years which can be further extended for 3 years. People who are willing to apply for SCSS can do so through public and private banks as well as post offices. 

You can open an SCSS account by investing as low as ₹1000 and a maximum of ₹15 lakh in a lump sum. In case you deposit more than the set upper limit, it would be refunded to your account immediately. However, you can only deposit your retirement benefits in SCSS account within one month from the date you receive these from your employer. 

In this regard, retirement benefits mean the payment you receive due to retirement or superannuation. These might include retirement gratuity, provident fund dues, leave encashment, commuted pension value, ex-gratia payment for investing in some voluntary retirement scheme, savings in any Group Savings Linked Insurance Scheme which the employer pays on retirement and retirement benefits from Employee’s Family Pension Scheme.

Interest will be generated once every quarter and you can draw it into the savings account that you have in the same bank or post office through ECS. You also get an opportunity to close the account prematurely at any point of time after the date of opening. Another feature is that a year within the date of maturity, you can extend this scheme for another 3 years.

Various Features of Senior Citizen Savings Scheme are discussed below:

• Fixed income

Interest rate does not change from what is declared at the time you invest in this scheme. It remains constant for entire tenure of scheme and is not affected by changes in interest rate in later quarters. 

Currently, the Senior Citizen Savings Scheme interest rate in the last quarter of FY 2022-23 is 8% per annum.

• Maturity tenure

Maturity tenure of SCSS is 5 years, after which it is extended for another 3 years. This brings up the tenure to 8 years. When you extend the tenure, the interest in that particular quarter will be applicable; therefore, even if the interest rate has decreased from when you invested for the first time, it cannot be revised. In case you wish to extend this tenure, you need to submit Form B. 

• Nomination

You get an option to register the name of a nominee either when you open the account or at a later date. This will be helpful in case of the untimely demise of the account holder before the scheme matures. The nominee will receive due amount in such circumstances. You also have the freedom to cancel or change the nomination.

• Premature withdrawal and account closure

You can withdraw prematurely from your Senior Citizen Savings Scheme after one year from the date you opened the account. In case you want to close the account before the completion of 2 years of account opening, a penalty of 1.5% of the deposited amount will be charged. 

After completion of 2 years, the penalty levied will be 1% of the deposited amount. In case of extension of tenure, you can close your account without having to pay any penalty after the first year onwards.

• Quarterly disbursal

Once you open a Senior Citizen Savings Scheme account, you will be eligible to receive quarterly disbursals on your deposited amount. The bank or post office will credit the interest to your account on the first day of April, July, October and January.

• Transfer of account

You can transfer your SCSS account from a post office to a bank and vice versa across India.

• Mode of deposit

You can opt to deposit the amount you wish to invest in your SCSS account in cash if it is lower than ₹1 lakh and pay in cheque in case it exceeds ₹1 lakh.

• Number of accounts

You can opt to operate more than 1 account by yourself or even open a joint account with your spouse. Joint account can be opened only with a spouse, and in case of joint account, the initial depositor would be the investor. 

Although you can open more than one account, the total deposited amount in all these accounts should not exceed the ₹15 lakh mark. Along with that, you cannot open more than one SCSS account in the same bank branch in the same month.

Public sector banks

• Allahabad Bank
• Bank of Baroda
• Dena Bank
• Canara Bank
• Bank of India
• Indian Overseas Bank
• State Bank of India
• Punjab National Bank
• UCO Bank
• Indian Bank
• Central Bank of India
• Andhra Bank
• Bank of Maharashtra
• Bank of Baroda
• Corporation Bank
• Syndicate Bank
• IDBI Bank
• Vijaya Bank

Private Sector Bank

• ICICI Bank

Apart from these, all the post office branches offer Senior Citizen Savings Schemes accounts. 

• Indian residents who satisfy the following criteria are eligible to invest in Senior Citizen Savings Scheme:
  • Senior citizens aged 60 years and above.
  • An individual aged 55 to 60 who has opted for Voluntary Retirement Scheme (VRS) or superannuation can opt for SCSS.
  • Retired defence personnel above the age of 50 years and below the age of 60 years.
  Non-Resident Indians, any member of the Hindu Undivided Family or persons of Indian origin or PIOs are not eligible to open an account for this scheme. Moreover, it is important to make the investment within a month from the date you receive the retirement benefits.

• Here is a list of all the important documents that you should keep handy if you want to open a Senior Citizen Savings Scheme account:
  • Proof of address like aadhaar card, electricity bill or telephone bill.
  • Proof of identity like PAN Card, passport, voter card or aadhaar.
  • Senior citizen card/Birth certificate as proof of age.
  • Two passport-size photographs.
  • Duly filled Form A.
  Copies of all the documents mentioned above should be self-attested and submitted along with Form A.

You can opt to open a Senior Citizen Savings Account either at a post office branch or an authorised bank branch. As of now, you cannot open an SCSS account online. Neither banks nor post offices offer you the option to open an account online.

Step 1: Visit the bank branch where you have a savings account or a bank branch of your choice;

Step 2: Ask for application form A and fill the form with all your personal details;

Step 3: Submit the application form along with the supporting documents. You would also require depositing the requisite amount in cash or cheque to the bank;

Step 4: After successful application, the bank will process your application for verification. Once the payment is processed, your SCSS account will be created.

In case you want to open your SCSS account at the nearest post office, you need to follow the steps below:

Step 1: Visit your nearest post office branch;

Step 2: Fill up the account opening form of SCSS given to you by the official;

Step 3: Submit the form along with copies of KYC documents which include proof of identity, address and age along with 2 passport-size photographs;

Step 4: Pay the deposit amount in cash or by cheque;

Step 5: After your application is verified and your payment is processed, your Senior Citizen Savings Scheme account will be created;

You can also download the application form in advance from the official website of India Post. Here are the steps as to how you can systematically fill up the form:

Step 1: On the top left corner of the form, write the name of the post office branch;

Step 2: Enter the account number in case you have a savings account with the post office;

Step 3: Provide the address of the post office branch under the ‘To’ section;

Step 4: Paste your photograph in the space given;

Step 5: Write your name in the first blank space given and put a tick on SCSS among the other options provided;

Step 6: Choose account holder type. Do not select anything under ‘Additional Facilities Available;

Step 7: Under field 2, enter the deposit amount in figures and words. In case you are depositing the money via a cheque, enter the cheque number and date;

Step 8: Provide the personal details asked for;

Step 9: Tick the options of the requested document proofs you will be providing at the end of the table;

Step 10: Sign in the spaces given at the end of pages 1 and 2;

Step 11: Provide the name of the nominee and all their details. In case of joint account, provide the signatures of the other account holder as well to validate this information.

As an investment instrument that offers one of the highest interest rates, SCSS might turn out to be the ideal option for senior citizens in India. Here are some of the benefits to prove the point:

• Reliable: Senior Citizen Savings Scheme is one of the most reliable options for investment as it receives the backing of the government and offers guaranteed returns.
• High interest rate: In comparison to other investment options present in the market, Senior Citizen Savings Scheme offers better interest rates. At present, the interest rate offered is 8%.
• Flexibility in investment amount: You can choose the amount that you wish to invest in SCSS. The only factor is that it should be a multiple of ₹1000 and should not exceed ₹15 lakh. Therefore, SCSS is quite an affordable scheme.
• Simple investment process: The process of investing in Senior Citizen Savings Scheme is extremely simple. You just need to visit the nearest bank or post office branch, fill up the form and submit it along with the supporting documents and deposit amount.
• Minimum paperwork: You need to do minimum paperwork in case of the SCSS scheme. For KYC, the only documents that you will require are proof of identity, proof of address and proof of date of birth.

The amount that you invest in the Senior Citizen Savings Scheme is applicable for tax exemption in this manner:

• As per section 80C of Income Tax Act of 1961, the principal amount that you invest in SCSS in a single financial year is eligible for tax exemption. However, only a principal amount of up to ₹1.5 lakh is exempt from tax. 
• The interest that you receive is subject to taxation according to the applicable tax slab. In case the senior citizen in question earns more than ₹50,000 in a financial year, it will be subjected to Tax Deducted at Source (TDS).

Senior Citizen Savings scheme is a great remunerative investment instrument. It might turn out to be a profitable investment option for senior citizens when they receive retirement benefits and invest in SCSS, instead of parking money in low-interest-yielding savings accounts or highly risky equity options.