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SCSS gets thumbs up on counts of security, return, tax saving & liquidity! 

            The Senior Citizens Savings Scheme (SCSS) has opened up a good investment opportunity for Senior Citizens desirous of making a secured investment of upto Rs.15,00,000 earning a reasonable return of 9.30% per annum (9% per annum till 31st March, 2012). With effect from F.Y. 2007-08, SCSS also having been notified as an eligible deduction for purposes of Section 80C, investment under this scheme has become even more attractive. 


            The Senior Citizens Savings Scheme permits investment for all individuals who have attained the age of 60 years or above.  Moreover, as a special case, individuals in the age group 55 to 60 years, who have retired under a Voluntary Retirement Scheme (VRS), have also been permitted to invest in the Scheme, subject to the condition that the Deposit Account is opened by them within three months of the date of their retirement and a Certificate from their employer is attached in this regard.

            Deposits under this Scheme are required to be made with any Post Office in India or authorized Banks or Institutions.  An eligible Depositor can open one or more account, subject to the condition that the deposits in all the accounts taken together shall not exceed Rs.15,00,000.

            It needs to be noted that NRIs and HUFs are not eligible to open this Account.  However, if a Resident Depositor subsequently becomes an NRI, the Account can be continued on a non-repatriation basis until maturity.


            A Depositor can open this Account either in his/her individual capacity or jointly with spouse.  It is important to note that if the Spouse of an Individual is also a Senior Citizen, he/she can separately invest in his/her name within the maximum limit of Rs.15,00,000. Thus, a Senior Citizen Couple can effectively invest upto Rs.30,00,000 between both of them.  The facility of nomination is available and the same can be changed or cancelled from time to time.           

            Interest at 9.30% per annum (effective for F.Y. 2012-13) shall be payable under this Scheme every quarter ending June, September, December and March. As announced by the Central Government, this rate would be reviewed and revised at the beginning of each Financial Year.  

            It would be advisable to also open a Savings Account in the concerned Post Office or Bank and authorize that the quarterly interest be auto-credited in the said Account.  The Depositor can then withdraw the interest via Cheque Book Facility for the Savings Account. 

            The minimum tenure of the Deposit is 5 years and the same can be extended for a further period of 3 years.  No withdrawal shall be permitted before the expiry of 5 years.  However, premature closure of the Account shall be allowed subject to the following conditions:

  • 1.5% of the deposit shall be deducted in case of closure between one to two years of account opening.
  • After two years, 1% of the deposit shall be deducted.
  • In case of death of the depositor before maturity, the Account can be closed and the deposit alongwith interest for the relevant period would be refunded to the Nominee.  However, if the Spouse of the deceased is a joint holder or nominee, he/she would have the option to continue the Account until maturity.

            A Pass Book shall be issued by the concerned Post Office or Bank to each Depositor in token of having received the amount of Deposit.  In case of change in residence, the Deposit Account can be transferred from one to another Post Office.


             Investment under this scheme within the overall limit of Rs.1,00,000 under Section 80C is treated as eligible for deduction from gross total income.

            However, it needs to be borne in mind where the benefit of deduction under Section 80C has been availed of, in that case any premature withdrawal of the relevant amount of investment before the maturity period of 5 years, will attract tax in the year of withdrawal. 

            The 9.30% annual interest received under this Scheme is taxable under the Income-tax Act. Keeping in view the above, resident investors can approach the concerned Post Office or Bank not to deduct such tax at source (if their total income is below the taxable limit) by submitting such request through appropriate Form 15G where the investor is below the age of 60 years or Form 15H where the investor is of the age 60 years or above.

            There is a distinct advantage of having multiple deposit accounts, even within the aggregate limit of Rs.15,00,000.  To illustrate, if a Depositor has three Deposit Accounts of Rs.5,00,000 each and he is in need of Rs.5,00,000 after two years, he can prematurely close one account with a deduction of only Rs.5,000 (1% of Rs.5,00,000) and continue the other two without any loss of interest.  However, if he has a Single Deposit of Rs.15,00,000 he would be required to break the whole deposit and lose Rs.15,000 (1% of Rs.15,00,000). 

            In case of death of the depositor before maturity, the Account can be closed and the deposit alongwith interest for the relevant period would be refunded to the Nominee.  However, the Spouse (though not a Senior Citizen), whether as a Joint Account Holder or even as the Sole Nominee, has been given the option to continue the account until maturity, on the same terms and conditions as specified under SCSS. 

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