Senior Citizens Savings Scheme (SCSS): Investment Planning Guide

Understanding Senior Citizenship in India: Understanding Senior Citizenship in India: According to the law, a Senior Citizen means any person being a citizen of India, who has attained the age of 60 years or above. Formerly, the age was 65 years. There were different ages for different purposes, such as railway tickets, flight tickets, etc. Now, for all purposes, the age is 60 years. So far as the Income Tax Act is concerned, if a person is 60 years and above on the last day of the financial year, they will be considered a senior citizen. Take an example: Mr. ‘A,’ who was born on 30th March 1963, will be considered a senior citizen for the financial year ending in 2023. However, if he was born on 2nd April 1963, he will not be considered a senior citizen for the year ending on 31st March 2023.

Taxation and Deductions for Senior Citizens

The tax slab for senior citizens is Rs. 300,000, while for other individuals, the slab is Rs. 250,000. Additionally, there is another slab for persons aged 80 years or more, which is Rs. 500,000.

In terms of senior citizens, they are entitled to deductions under sections 80C, 80D, 80DD, 80DDB, and 80G.

Senior Citizens Savings Scheme (SCSS)

Normally, senior citizens maintain their lives with the income earned from savings and investments. To support senior citizens and their safety, the Central Government announced the Senior Citizens Savings Scheme (SCSS) on 2nd August 2004. Important points of the scheme are as follows:

i. Who can invest in Senior Citizens Savings Scheme (SCSS)?

Any person who has completed the age of 60 years can invest in this scheme. An exception is made for persons who take voluntary retirement under the Voluntary Retirement Scheme (VRS) between the ages of 55 to 60; they can benefit from this scheme if they invest within 30 days from the date of retirement. Non-residents and Hindu Undivided Families cannot invest in this scheme.

ii. Where to invest?

Investments can be made in any post office savings bank deposit account in India. As of 27th October 2004, investments can also be made in any bank accepting deposits under the Senior Citizens Savings Scheme.

iii. How much one can invest?

Under this scheme, depositors can open more than one account and deposit a minimum of Rs. 100 or in multiples of one hundred. Up to the financial year 2022-23, the total investment should not exceed rupees fifteen lakhs across all accounts.

Starting from the financial year 2023-24, the limit of rupees fifteen lakhs has been increased to rupees thirty lakhs. This change was announced in the Central Government budget for 2023.

Within a calendar month, no depositor can open more than one account. To open a deposit account, the depositor will need to provide their date of birth along with the birth certificate, a self-attested copy, and a copy of the permanent account number (PAN). If the depositor is not assessed, they will need to provide a self-declaration. If the depositor and their spouse wish to open deposit accounts in the same post office, the total investment may be up to rupees thirty lakhs each.

iv. Facility of joint account and nomination:

Depositors can open an account in their name or jointly with their spouse. Additionally, the depositor can provide the name of a nominee.

v. Interest payable on deposit:

Depositors will be paid interest quarterly, on 30th June, 30th September, 31st December, and 31st March of every year. The Central Government will announce the interest rate every quarter. Currently, the interest rate is 8.2%. If depositors wish, the interest amount can be credited to their savings bank account, which comes with a cheque book facility and a passbook.

vi. Time limit and withdrawal from deposit account:

The time limit for the account is 5 years, and during this period, no withdrawals are allowed. If a depositor wishes, they may extend the due date for three years from the initial 5-year period. However, if the depositor desires to close the account, they must fulfill the following conditions:

• If the account is closed between one to two years, a deduction of 1.5% of the deposit amount will be applied, and the remaining amount along with interest until the date of closure will be given to the depositor.
• If the account is closed after two years, a deduction of 1% of the deposit amount will be applied, and the remaining amount along with interest until the date of closure will be given to the depositor.

vii. Can the deposit transfer?

If there is a change in the depositor’s address, the account may be transferred to another post office with an application for transfer and proof of residence. A transfer fee of rupees five per lakh rupees will be charged.

viii. Deduction u/s 80C is available.

The amount invested in this scheme entitles the depositor to a deduction under section 80C of the Income Tax Act.

ix. Interest on deposit is liable to tax.

Interest on the deposit is subject to tax deduction at source under section 194A of the Income Tax Act if the interest amount exceeds rupees fifty thousand.

x. Provision of TDS on interest:

On deposits with a post office or bank, any interest provided is subject to tax deduction at source under Section 194A of the Income Tax Act if the amount of interest exceeds rupees fifty thousand. This means that the post office or bank is required to deduct TDS (Tax Deducted at Source) at the applicable rate if the interest earned on the deposit crosses the specified threshold of fifty thousand rupees.

xi. Form 15H can be provide for no TDS:

Form 15H is a declaration under Section 197A of the Income Tax Act that is provided by senior citizens to banks and other financial institutions to prevent tax deduction at source (TDS) on their income if their total income is below the taxable limit.

When a senior citizen submits Form 15H to the bank or financial institution, it declares that their income is not taxable, and as a result, no tax should be deducted at source. This form helps senior citizens avoid TDS on their interest income, provided they meet the specified conditions. It essentially serves as a declaration that the individual’s total income is below the taxable limit, and therefore, TDS should not be applied.

Conclusion

Navigating senior citizenship in India involves understanding legal frameworks and making informed financial decisions. The Senior Citizens Savings Scheme (SCSS) emerges as a powerful ally, offering stability and tax benefits. By exploring taxation nuances, investment options, and leveraging tools like Form 15H, seniors can unlock financial security in their golden years.