The SCSS (Senior Citizen Savings Scheme), launched in the year 2004, was a considerable hit as it gave higher returns on the investment. It contains all the elements that a senior citizen investor could ask for: fixed returns, immunity of capital and regular payoffs. Under the Section 80C, the Senior Citizens’ Saving Scheme (SCSS) also provides tax benefits and premature withdrawals. Majority of the savings of a senior citizen are either deposited in FDs or in other form of investments. Even though these are the secure way of income through interest, they are nothing like the SCSS (safe and tax deductible).
The minimum age for entry in this scheme is 60 years. But this can be reduced to 55, if any individual decides to retire voluntarily. However, the VRS takers must open the account within a month of receiving their retirement benefits. Plus, the sum invested cannot surpass the amount of the retirement corpus. Depositors who fit these prerequisites can open an account at any post office or at nominated branches of 24 PSU banks and ICICI Bank.
- Limit of Investment
A person cannot deposit more than Rs.15 lakh in the SCSS and the investments can be made in several parts of Rs1,000. A person can open more than one account (with his spouse) by selecting a joint account type. However, the venture capital limit of Rs 15 lakh applies to all accounts accordingly. That is, a person’s whole investment in SCSS cannot violate the Rs 15-lakh legal price.
- Interest Rate
The rate of interest of the SCSS is linked to the market and 100 basis focuses on the 5-year government bond revenue. The rate for the present financial year is 9.3%. A deposit of Rs.15 lakh will generate a monthly income of Rs.11,625 (quarterly of Rs.34,875). When an investor locks in, the value stays constant till the scheme matures. The big influence for investors is that the scheme is administered by the government and offers ensured revenue. The lone risk is that the revenue could deflate in future as bond yield.
- Interest Amount
The interest is paid off every single quarter on scheduled dates-the first working day of January, April, July and October. This is regardless to whatever the investment date is. The quarterly pension is very beneficial for the retirees who require a steady flow of income for their daily expenses. Whereas, it might not be useful for those who is not in immediate need of such income. However, they lose the advantage of compounding because of quarterly payouts.
- Term and Foreclosure
The time period of the Senior Citizen Saving Schemes is of 5 years and could be prolonged for 3 years after the scheme matures. In the event of any predicament, a depositor could foreclose the account after a year. The penalty is of 1.5%, if the account is closed before the period of two years. After 2 years, the forfeiture is 1%. There is no forfeiture for an account which is closed in the prolonged duration after the mandatory five years.
- Tax Policy
The tax policy of the SCSS is a mixed concept for the investors. However, under Section 80C, the investments are eligible for tax deduction; the interest acquired from the SCSS is fully taxable as income. If the income surmounts Rs.10,000 in a financial year, then it is also subjected to TDS. This is a major conflict point for senior citizens who might not have taxable returns yet have to index their tax yield to gain back the excess TDS.
- Benefits of Senior Citizen Saving Scheme
The Saving Scheme, designated for individuals above 60 years of age is a providential scheme. It has the best interest rates for any government subsidized investment product in India; this scheme is customized to fit certain requirements of the investment plan of minded senior citizen. The benefits of this policy are below:
- Ease of Availability: At your local bank or post office, fill out a simple application form and you are good to go.
- Reliable: This scheme is sponsored by Indian Government and is solid and secure in all aspects.
- Multiple Accounts: Either a single applicant or with a joint investor (must be the spouse of the primary depositor) , can open multiple SCSS accounts.
- Revenue: At 8.6% per year, the profits on your SCSS accounts are stellar.
- Flexible Time Duration: This scheme has tenure of 5 years but can be stretched to add another 3 years. Thus, your scheme serves as either a long term plan or a medium range investment.
- Taxation: Under the Section 80C, Income Tax Act, 1961, the TDS can be saved.
- Choose Investment: Per SCSS account, only one investment is accredited.
- Documentation: KYC documentation that prove your age. The documents that can be submitted are: Passport/Senior Citizen Card/Birth Certificate/Voter’s ID/PAN, etc.
- Interest on Investment: The rate of interest of SCSS is 9.3%per annum.
- Type of Investment: You can make an investment by cash (if the amount is less than Rs. 1 Lakh) or by DD (Demand Draft) or cheque.
- Nominees: You may have more than one nominee.
On the off chance that the Depositor dies before maturity, his or her Saving Scheme Account would be closed and the investment would be refunded among with the interest to the nominee. If there is no nominee present, or if he or she has also expired, then the refund would be given to the legal heir of the investor. If the total sum to be refunded is up to Rs.1 Lakh, then it will be paid off to the legal heir when the individual submits the following documents:
- Letter of Indemnity
- Letter of disclaimer in affidavit
- A stamped paper including the death certificate of the investor.
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