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The government scheme Senior Citizen Savings Scheme (SCSS) is a better tax saving scheme for senior citizens. This scheme is for Indian citizens above 60 years of age. The purpose of SCSS is to provide a regular income to senior citizens after retirement. Under this scheme, taxpayers can claim tax deduction by depositing up to Rs 1.5 lakh every year under Section 80C. Let us tell you, currently there are two types of tax systems in the country. New tax system and old tax system. Tax deduction of Section 80C can be claimed only in the old tax system.
SCSS is available in public/private sector banks and post offices. Being a government scheme, the returns on it are guaranteed. The deposits mature after 5 years from the date of opening the SCSS account, but this period can be extended only once for 3 years. From January 1, 2024, this scheme is paying 8.2 per cent annual interest.
Under SCSS, interest is paid every three months, ensuring maturity of your investment. Interest will be credited on the first of every April, July, October and January.
SCSS: How much tax will be saved?
SCSS is a great tax exemption scheme. Deposits up to Rs 1.5 lakh annually in SCSS can be claimed for tax exemption under Section 80C of the Income Tax Act, 1961. Tax liability on interest earned on SCSS will be as per the tax slab applicable to individuals. If the interest income exceeds Rs 50,000 in a financial year, tax deduction at source (TDS) will be made. Investment in SCSS is applicable from 2020-21 till TDS deduction. If the interest income does not exceed the prescribed limit, you can get relief from TDS by submitting Form 15G/15H.
Where will the account be opened, what will be the maximum deposit amount?
The minimum deposit amount in SCSS is Rs 1,000. While the maximum amount that can be deposited is Rs 30 lakh. Senior Citizen Savings Scheme account can be opened in any authorized bank in the country or all Indian post offices. For this, the account opening form has to be filled and submitted along with a copy of the KYC document, which includes identity card, address proof and age proof along with passport size photograph.
Under SCSS, a person aged 60 years or above can open an account. If someone is 55 years or above but less than 60 years and has taken VRS, he can also open an account in SCSS. But the condition is that he has to open this account within one month of receiving retirement benefits and the amount to be deposited in it should not exceed the amount of retirement benefits.
Know the mature and immature rules
Please note that in case of death of the account holder before maturity, the SCSS account will be closed and all the matured proceeds will be transferred to the legal heir/nominee. For death claim, the nominee or legal heir has to submit a written application in the prescribed format along with the death certificate to facilitate closure of the account.