Senior Citizen Savings Scheme: Here’s all you need to know

Risk. A word that comes up with a package of a lot of emotions; excitement, fear, belief, anxiety, dismay, and whatnot. Risk is considered to be a part of life; rather, life is all about risks. Whether it's checking your luck in casinos, hiding the truth from your parents, getting out without an umbrella in monsoon, lending money to someone, investing in stock markets, etc. everything comes up with risks, either small risks or grave ones.  

However, the risk is something that is considered to be more favourable for young people, who have a lot of time left in their lives. For example, when we are young, we see a lot of opportunities for investment, and we also have a considerable period of time to allow our investment to grow. 

Talking about investing, as individuals become old and wise and near retirement, their intellect does not allow taking such great risks of investments in mutual funds and stocks. This happens because, after retirement, people tend to cling hard to their lifetime of earnings which they have been saving up for this time. It won't be wrong to say that for most people, their future lies at the hands of these savings. 

Hence, nobody wants to put these savings at high risks. Still, it's not like these people would want to shy away from investing; after all, who wouldn't want to keep earning and making money? And, this is why the old or retired people lookout for some safer and reliable investment opportunities. 

So, the question arises- Is there any type of such investment? An investment scheme especially meant for retired and old citizens?

Well, yes. The Senior Citizen Savings Scheme (SCSS) is something that comes in as a viable investment option for the retired people as well as senior citizens. It is one such parkway which aims at delivering a safe and viable investment option for senior citizens as well as retired individuals. 

Let us just peek in to have an insightful analysis of this scheme. 

What is the Senior Citizen Saving Scheme (SCSS)? 

The Senior Citizen Savings Scheme is a saving instrument for individuals who are above the age of 60 years. It is a government-sponsored savings instrument which was introduced by the Indian Government in the year 2004. As mentioned above, it tries to provide the senior citizens with a safe and secured source of income in the later years of their lives. It could be regarded as one of the most lucrative savings schemes in India. It delivers comparatively considerable returns to its subscribers.

The best thing about senior citizen saving schemes is that here, the risk of the capital loss is negligible. Public as well as private banks, from both, these schemes could be applied for.

What are the features of senior citizen saving schemes? 

• Senior citizen saving scheme is specifically designed for the senior citizen taxpayers and is a low-risk investment which generally offers high returns.
• It helps to fill the gap, which is between the pension of the retired person and his last drawn salary. 
• Senior citizen saving scheme is certified by public and private sector banks. It is certified by the post offices also. 
• Senior citizen saving scheme is a long term saving option with a period of 5 years. It could be extended till 8 years also.
• This scheme is highly effective as it offers security and expanded features that are normally linked with any government-sponsored savings or investment scheme.

What is the eligibility for senior citizen saving schemes? 

• The age of the individual investor must be at least 60 years and above. 
• For the people who have opted for the Voluntary Retirement Scheme (VRS) or Superannuation in the age between 55-60 years, the investment has to be done within a month of receiving the retirement benefits.
• It also includes Retired defence personnel with a minimum age of 50 years. 
• People who are not allowed to invest in the SCSS are the NRIs and Hindu Undivided Families (HUFs).

What are the interest rates that are provided under the SCSS?

It was also mentioned above that the interest rates of Senior citizen saving schemes are greater in comparison to the other alternatives. Here, the account holders of SCSS are benefited. 

Let's have a look at the historical interest rates that have been offered by senior citizen saving schemes.

How to open an account under the senior citizen saving scheme?

As stated, you could either go to the post office or private/public bank to open an account for the SCSS. In both cases, the procedure is the same. Let's have a look at this procedure.

• Firstly, you are required to visit your nearest bank branch or Post office branch.
• Then, you will be required to duly fill your form A. 
• You will then be asked to submit all the necessary documentation. This includes both the original documents as well as photocopies. 
• After this, you have to produce proof of age or age proof. 

What are the documents that are required to apply under SCSS?

The person seeking to invest under SCSS is required to give all the following documents. These are required to be self-attested as well. 

• Aadhaar Card
• PAN card
• Passport
• Voter ID card
• Telephone bill
• Electricity bill
• 2 passport-sized photographs
• Birth certificate/senior citizen card

Taxation under SCSS

Under Section 80C of the Income-tax (I-T) Act, the investment under SCSS is qualified for the deduction. But, this tax help is under the overall current ceiling of Rs1.5 lakh per annum, which is fixed for all those investments under Section 80C of the Income Tax act.

One thing to be kept in mind is that interest on SCSS is entirely taxable. If in case the interest amount received exceeds Rs 50,000 for a fiscal, the Tax Deducted at Source (TDS) is applicable to the interest earned. 

From AY 2020-21 onwards, this threshold is applicable for TDS deduction on SCSS investments. 

Maturity of Senior Citizen Saving Scheme

If the retiree or any other senior citizen desires to shut down the account of SCSS after the culmination of 5 years resisting the extension, he/she can do so by filling the 'Closure Form', along with the passbook. After the closing formalities are processed, the retirees or the senior citizen will be able to get their maturity amount. 

If there is a situation where the account holder has not extended the scheme on maturity or shut the account after maturity, then post maturity, the deposit will earn the post office savings account interest rate which has been applicable at that time.

Conclusion 

To end with, financial planning is a must and should be done by all. Not only till the time a person earns his regular income but also for the time when that income stops. Such planning will allow you to live the later years of your life with those standards which you had always aspired for. 

The options like EPFs, are opted by everyone, but such investments can be made by great minds. So, if you want to be one amongst them, then start planning you're after retirement savings today.