Senior citizens who live in India can invest a lump sum, either individually or collectively, in the Senior citizen savings scheme to get regular income as well as tax advantages. This scheme is backed by the government and provides retirement benefits to senior citizens. The SCSS account can be opened jointly with spouse only.
Also read: Senior citizens can invest extra Rs 15 lakh in SCSS from April 1, 2023 but PMVVY to close from same date
SCSS tax rebate
Senior Citizen Savings Scheme offers an interest rate of 8 percent with quarterly payout.
Senior citizens can claim a tax deduction of up to Rs 1.5 lakh for investments in SCSS under Section 80 C of the Income Tax Act, 1961. This tax benefit, however, is within the overall annual cap of Rs. 1.5 lakh that is now set for all investments made under Section 80C. The financial year in which the SCSS deposit is made is the only one in which the section 80C benefit is available. After five years, there will be no additional advantage under Section 80C for extending an existing account.
Is premature withdrawal of the deposits from the accounts under the SCSS, 2004 permitted
A premature withdrawal option is allowed under SCSS just after opening the account with interest forfeiture or penalty option.
- Under the following conditions, the account holder may withdraw the deposit and close the account at any time:
- If the account is closed before the year of the account opening, the interest paid on the deposit will be deducted from the deposit, and the remaining balance will be paid to the account holder.
- A sum equivalent to 1.5 percent of the deposit will be deducted out of the account if it is closed after one year but before the end of two years from the day it was opened.
- A sum equivalent to one percent of the deposit will be deducted from the account balance if it is closed on or after the two-year date of the account opening.
What is the meaning of ‘retirement benefits’ for the purpose of SCSS, 2004
According to the PNB Senior Citizen Savings Scheme FAQs, “Retirement benefits” for the purpose of SCSS Rules have been defined as ‘any payment due to the depositor on account of retirement whether on superannuation or otherwise and includes Provident Fund dues, retirement / superannuation gratuity, commuted value of pension, cash equivalent of leave, savings element of Group Savings linked Insurance scheme payable by employer to the employee on retirement, retirement-cum-withdrawal benefit under the Employees’ Family Pension Scheme and ex-gratia payments under a voluntary retirement scheme’. (Rule 2 (a) of the Senior Citizens Savings Scheme (Amendment) Rules, 2004 notified on October 27, 2004)”
Can an SCSS account be extended
By submitting an application to the deposit office within one year of maturity, a depositor may extend the account for an additional three years.
If a depositor does not close the account on maturity and does not extend the account, the account will be treated as matured, and the depositor will be permitted to close the account at any time with the proviso that post-maturity interest at the rate that is currently applicable to deposits under Post Office Savings Accounts will be paid on such matured deposits up until the end of the month prior to the month of the closure of the account.
SCSS TDS applicability
TDS is applicable to the Scheme as interest payments have not been exempted from deduction of tax at source. Tax is to be deducted at source as per the minimum limit prescribed by the Government. Tax shall be deducted at source even from any interest paid / payable to the legal heir of the account holder.