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The government has changed the rules related to Senior Citizens Savings Scheme i.e. SCSS. These changes have also come into effect from 9 November 2023. After which this scheme has become better for senior citizens. Earlier, from April 1, 2023, the investment limit in this scheme was increased from Rs 15 lakh to Rs 30 lakh.
Among all the small savings schemes of the government, at present the highest interest is being received on SCSS only. The interest on this scheme for the current October-December quarter is 8.2 percent. There has been no change in the interest rates on this scheme since the April-June 2023 quarter.
The interest rate for the October-December 2022 quarter was increased from 7.4 percent to 7.6 percent. Which was increased to 8 percent for the next quarter i.e. January-March 2023 and then to 8.2 percent for the April-June 2023 quarter.
From April 2020 to September 2022, the interest on this scheme was stable at 7.4 percent, whereas before this, from April 2019 to March 2020, the government was giving 8.6 percent interest on this scheme.
The government decides the interest every quarter on other small savings schemes including SCSS.
Senior citizens are very keen to invest in this scheme due to the convenience of risk-free investment, high interest rates and quarterly payment of interest. Now let's talk about the new changes:
Who can invest in this scheme?
This scheme is only for senior citizens. In this scheme, any person of 60 years of age or above can open an individual or joint account. There is no restriction regarding the age of the joint holder in a joint account.
Also, those taking retirement scheme (Voluntary Retirement Scheme or VRS) between the age of 55 to 60 years and retired defense personnel above 50 years of age can also invest in it. But before the new rules, it was necessary for these people to invest in this scheme within one month of receiving the retirement benefit.
According to the new rules, such people can now invest in this scheme within three months of receiving the retirement benefit.
If a government servant dies while on duty
Spouse can open the account: Under another change, if a government employee (Central and State Government employees who are entitled to retirement benefits or death compensation) aged 50 years or above dies during the service period. This account can be opened by their spouse (husband or wife).
account detail
The maturity period of this scheme is 5 years. According to the new rules, you can extend it for a period of three years. Meaning now you can extend this account more than once for a period of three years. Whereas earlier this account was allowed to be extended only once for a period of three years.
For extension of account for the first time, the account holder will have to fill Form-4 and submit it within one year of maturity as before. However, account extension will not be from the day you apply but from the date of maturity.
Whereas if you want to extend the account again, then according to the new provision, Form-4 will have to be filled and submitted within one year of the end of the extended period of 3 years. Whereas the account will be extended for an extended period of 3 years from the last date.
Under the new change, if you close the account within one year of the start of the period extension, then the remaining amount will be returned to you after deducting 1 percent of your deposit as penalty.
interest over extended period
If you extend this account for the first time after 5 years of maturity, you will get the same interest during the extended period as you would get on the day of maturity. This rule is the same as before.
But because there is now a provision to extend this scheme more than once in a block of three years, so if you extend this account more than once, you will get the same interest in the next extended period as in the previous period. These were the days of extended maturity.
The account can be continued even after the death of the account holder.
Joint account or if the spouse is the sole nominee – In this case, if the account holder dies, as per the new provisions, the spouse will be allowed to continue the account on the same terms and conditions. Provided he is eligible for this scheme. Earlier in such cases the spouse was not allowed to do so.
Let us now know other rules related to this scheme:
How and how much to invest?
Investment can be made in this account only once. This means that from the time you invest in this scheme, you will get interest at the same rate till the maturity period, which is decided by the government. Whether the government increases or reduces the interest rate, your interest will not be affected.
A maximum of Rs 30 lakh and minimum of Rs 1,000 can be invested in this scheme. This account can be opened in post offices, public sector banks (PSB) and select private sector banks. But it is also necessary to have a savings account in that branch. SCSS account is linked to this saving account of yours.
When will interest be received?
Given that the senior citizen requires money regularly, the returns (interest) are also regular which gets credited to the savings account linked to this account every three months. Interest is paid to the savings account on the 1st of every April, July, October and January.
Suppose you have deposited Rs 30 lakh in lump sum, then as per the current interest rate (8.2 per cent), you will get interest of Rs 2,46,000 i.e. Rs 61,500 every quarter in a financial year, which will be deposited in your savings account. ,
Can I withdraw the deposited amount midway?
If you withdraw the deposit within one year of account opening, you will not get any interest on this deposit. If interest is received, it will be deducted and the remaining amount will be returned to you. If you close the account after one year but within two years and withdraw the deposited amount, you will have to pay a penalty of 1.5 percent on the deposited amount.
In case the deposit is withdrawn after completion of two years but before 5 years, a penalty of one percent will have to be paid on the deposited amount. If after 5 years the account is in an extended period of 3 years, then in such a case the deposit amount can be closed and withdrawn only after one year i.e. after completion of 6 years. Then no fine will have to be paid.
tax exemption
In this scheme, there is a provision of tax exemption on the investment amount under Section 80C of the Income Tax Act, but in case of premature withdrawal, this exemption will not be available.
For whom is it better, for whom not?
This scheme is better for those who do not have a regular source of income i.e. pension. Or even if it is, then make sure that even after adding the interest received from this scheme, there is no tax liability on the annual income (even after taking the benefit of section 80TTB). Under Section 80TTB of the Income Tax Act, interest up to Rs 50,000 in a financial year on bank, co-operative society, post office savings accounts and fixed deposits to a person aged 60 years or more i.e. a senior citizen is tax-free. Is.
But if a senior citizen comes under the income tax net then this scheme is not good for them. The reason for this is that there is no tax exemption on the interest received in this scheme. Meaning interest is added to the annual income. As a result, tax on interest will have to be paid as per the tax slab and returns will be reduced. This scheme is not good for those who are in the upper tax slab i.e. 20 and 30 percent.
How to improve returns?
There is a possibility that interest rates on other small savings schemes including SCSS may increase further in a quarter or two. Therefore, instead of investing all at once, invest little by little. If you have an amount of Rs 30 lakh, then invest it in 2-3 times till the first quarter of the next financial year. The advantage of this will be that the benefit under Section 80C of the Income Tax Act will be available for this financial year and the next financial year also (maximum amount of benefit will be Rs 1.5 lakh in a year).
Unlike Sukanya Samriddhi Yojana and PPF, this scheme does not offer the benefit of compound interest. If you leave the interest amount in the savings account, you will get the same interest on it as you get on the savings account. So it is advisable that as soon as the interest comes into your savings account, at least transfer it to a recurring deposit account (RD).