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Senior Citizens Savings Scheme Scores High On Tests Of Security, Return, Tax Saving & Liquidity

A secured investment, offering a reasonable return of 9% per annum (payable on quarterly basis), assuring premature encashment in case of need and enjoying the added benefit of deduction under Section 80C, have made the Senior Citizens Savings Scheme (SCSS) a popular choice of the elderly for catering to their regular income needs.


For availing the benefit of the higher personal income-tax exemption limit in the case of a senior citizen, the prescribed age limit under the Income-tax Act is 65 years.  However, SCSS 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 SCSS are required to be made with any Post Office 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. The facility of nomination is also available and the same can be changed from time to time.

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 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, jointly with the other spouse. Thus, a senior citizen couple can effectively invest upto Rs.30,00,000 between both of them and thus plan to receive annual interest upto Rs.2,70,000.

Interest at 9% per annum is payable under SCSS every quarter ending June, September, December and March.  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 is permitted before the expiry of 5 years.  However, premature closure of the account is 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.

There would be a distinct advantage of holding 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).


Investment under SCSS within the overall limit of Rs.1,00,000 u/s. 80C is treated as eligible for deduction from the gross total income of the investor. However, it needs to be borne in mind that where the benefit of deduction u/s. 80C has been availed of, 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% annual interest received under SCSS is taxable and liable to TDS if the same exceeds Rs.10,000 in a financial year. However, if the total income of the investor is below the taxable limit, he can request for non-deduction of tax by submitting such request through appropriate Form 15G or 15H.

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