Senior Citizen Savings Scheme & SCSS Account in India


By Anupama Deshpande | Mar 05, 2023

The Senior Citizen Savings Scheme (SCSS) is a popular investment option for senior citizens in India, especially those who are retired and looking for a steady source of income. The SCSS is a government-backed savings scheme that offers a fixed interest rate and is designed to provide financial security to senior citizens.

The Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings scheme in India designed especially for senior citizens aged 60 years and above. The scheme was launched in 2004 by the Government of India, with the objective of providing a safe and reliable investment option for senior citizens. and investment in Senior Citizen Savings Scheme (SCSS) can be done through designated banks and post offices across the country.

Senior Citizen Savings Scheme & SCSS Account in India

Under the SCSS, senior citizens can invest their savings for a fixed period of 5 years, which can be extended for another 3 years after maturity. The scheme offers attractive interest rates, which are higher than those offered by most other fixed-income investment options. Here is a detailed explanation of the SCSS account and its features.

Features of SCSS Account

  • Eligibility: The SCSS is open to Indian residents who are 60 years or older, or 55 years or older for those who have retired under a voluntary or special voluntary retirement scheme. NRIs are not eligible for this scheme.
  • Investment Limit: The maximum investment limit in the SCSS account is Rs. 15 lakh, and the minimum investment amount is Rs. 1,000. The investment amount can be made in multiples of Rs. 1,000.
  • Interest Rate: The interest rate for SCSS is decided by the Government of India and is subject to change every quarter. The current interest rate for the SCSS account is 8% per annum (as of January-March 2023).
  • Opening of SCSS Account: You are allowed to open an SCSS account either with an authorised bank branch or with a Post Office branch. You can also choose the option to open the SCSS account online through the bank's website or its mobile banking app, if the bank allows for it. However, currently you cannot open the SCSS account online with the Post Office.
  • Tenure: The tenure of the SCSS account is five years, which can be extended for an additional three years after maturity.
  • Tax Benefits: Investments in the SCSS account are eligible for tax benefits under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakh. The interest earned on the SCSS account is taxable as per the individual's tax slab.
  • Premature Withdrawals: Premature withdrawals from the SCSS account are allowed only after completion of one year, subject to a penalty. If withdrawn before two years, 1.5% of the deposit amount will be deducted as a penalty. If withdrawn after two years, but before the completion of five years, 1% of the deposit amount will be deducted as a penalty.
  • Nomination: The SCSS account allows nomination facility to the account holder, which can be done at the time of opening the account or later on.
  • Transferability: The SCSS account can be transferred from one post office to another and from one bank to another.

Importance of Senior Citizen Savings Scheme

Here are some of the key benefits and reasons why the SCSS is an important investment option for senior citizens in India:

First and foremost, the SCSS offers a high rate of interest compared to other fixed income investments such as savings accounts, fixed deposits, and government bonds. Currently, the interest rate on the SCSS is 8% per annum, which is significantly higher than the rates offered by other fixed income options.

Secondly, the SCSS is a safe and secure investment option, as it is backed by the government of India. This means that the investment is not only secure but also provides guaranteed returns.

Finally, the SCSS is an important investment option for senior citizens as it helps them to earn a regular income during their retirement years. With rising inflation and increasing healthcare costs, it is important for senior citizens to have a reliable source of income to meet their day-to-day expenses and maintain their standard of living.

Pros of Senior Citizen Savings Scheme

  • Guaranteed Returns: The SCSS offers a fixed interest rate, which provides senior citizens with a guaranteed return on their investment.
  • Low Risk: The SCSS is backed by the government, which makes it a safe and low-risk investment option for senior citizens.
  • Attractive Interest Rates: The interest rates offered by SCSS accounts are higher than those offered by most other fixed-income investment options.
  • Tax Benefits: Investments in the SCSS account are eligible for tax benefits under Section 80C of the Income Tax Act, 1961.
  • Flexible Investment Options: Investors can choose to invest a minimum of Rs. 1,000 and a maximum of Rs. 15 lakhs in SCSS accounts.
  • Transferability: The SCSS account can be easily transferred from one bank or post office to another.

Cons of Senior Citizen Savings Scheme

  • Limited Investment: The maximum investment limit in the SCSS account is Rs. 15 lakh, which may not be sufficient for some senior citizens.
  • Lock-in Period: The tenure of an SCSS account is 5 years, which makes it a long-term investment option. Premature withdrawals are subject to a penalty.
  • Fixed Interest Rate: The interest rate for the SCSS account is fixed and may not keep up with inflation, which can impact the real returns.
  • Taxation: While investments made in SCSS accounts are eligible for tax benefits, the interest earned on the investments is taxable.
  • Premature Withdrawal Penalty: The penalty for premature withdrawal can be significant and may impact the overall returns.

In conclusion, the Senior Citizen Savings Scheme is a suitable investment option for senior citizens looking for a safe and guaranteed return on their investment. However, it is essential to consider the pros and cons before investing and to evaluate other investment options that may provide higher returns. It is also advisable to seek the advice of a financial expert before making any investment decisions. Senior citizens are encouraged to explore this option and make an informed decision based on their individual needs and financial goals.

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About Anupama Deshpande
Anupama is a Co-Founder of CodeForBanks.com. She is an MBA (Finance) and Chartered Financial Analyst (CFA). She also carries a Fellowship degree in Life Insurance Sector and is a Master of Computer Application (MCA). She is an expert in Finance Field with an experience of over 18 years on different managerial positions in finance industry including Stock Market, Depository and Mutual Fund Sectors. Apart from that she has remained for few years in the field of marketing as well. Her suggestions and advice for investments have been very useful to many people.
Her vast interest & expertise in the field of finance have encouraged her to write the articles so that others can also get benefitted out of them. She never loses any opportunity to learn and be creative. She is a valuable asset for CodeForBanks.com & important resource to all those around her.