- Date : 17/06/2022
- Read: 6 mins
Senior citizens tend to look for financial products that suit their low-risk profile, yet expect inflation-beating returns. They should be able to withdraw their money without delay in case of a medical emergency or any other urgency. SBI SCSS is one such product that meets the above requirements.
A senior citizen who is looking for an investment product must consider their requirements such as safety of money, good returns, frequency of returns, liquidity, income tax benefits, etc. The Senior Citizens Savings Scheme (SCSS) offered by the State Bank of India (SBI) fulfils all the above requirements and is one of the best investment products for senior citizens. This article explores the features and benefits of SBI’s Senior Citizens Savings Scheme.
What is Senior Citizens Savings Scheme?
SCSS is an investment scheme offered by the Government of India for senior citizens under the broader ambit of National Savings Schemes (NSS). This also includes PPF account, NSC, and other post office savings products. It allows senior citizens to deposit a lump sum amount and earn regular income on it in the form of quarterly interest.
Post offices and banks offer SCSS on behalf of the Government of India. The scheme offers tax benefits at the time of investment under Section 80C of the Income Tax Act.
1) Eligibility for SBI Senior Citizens Savings Scheme
An SCSS account can be opened with the SBI by:
- Any Indian citizen who has attained the age of 60 years or above.
- An individual who has attained 55 years of age or more but less than 60 years of age and who has retired on superannuation. They have to open the account within one month of receiving their retirement benefits. Along with the SCSS application form, they need to submit proof of date of disbursal of retirement benefit(s) and the employer’s certificate mentioning details of employment and retirement on superannuation.
- A retired defence services personnel (excluding civilian defence employees) on attaining the age of 55 years.
Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to open SCSS accounts.
2) Opening an SBI SCSS account
You can open an SCSS account with any post office across the country or an authorised PSU bank or private bank branches. You can open an SBI SCSS scheme account with an authorised SBI branch in your area.
After retirement, a senior citizen can open an SCSS account with SBI by submitting a duly filled Form-1. You can do this in an individual capacity or as a joint account with your spouse. You can open the SCSS account with a minimum deposit of Rs 1000 or with any amount in multiples of Rs 1000. The maximum deposit amount that can be deposited is Rs 15 lakh.
3) Interest rate for SBI Senior Citizens Savings Scheme
SBI pays interest quarterly on the SCSS account. In a financial year, the interest amount is paid on the first day of April, July, October, and January. SBI credits the interest amount to the account holder’s savings accounts. At the end of every quarter, the Government declares the interest rates payable for the next quarter.
For example, at the end of June, the Government declares the interest rate payable for the July to September quarter. The current interest rate payable for the 1 April to 30 June 2022 quarter is 7.4% p.a. At the current interest rate of 7.4% p.a., a deposit of Rs. 15 lakhs will earn an overall interest amount of Rs. 5.55 lakhs over a 5-year period. The quarterly interest payout will be Rs. 27,750.
Image: SCSS calculator
Some of the features of the SCSS can be compared to a fixed deposit that pays quarterly interest.
4) Account tenure and extension
The tenure for the SBI senior citizens scheme is five years. On maturity, the account holder can request an extension for three years. This can be done by submitting the duly filled Form-4 within one year from the date of maturity. The account can be extended only once. The account holder can close the account any time after one year from the date of extension of the account without any deduction.
5) Nomination facility for SCSS
The SBI SCSS account holder can nominate one or more people as nominee(s). The nomination can be modified at any time during the tenure of the account. The account holder can cancel the nomination at any time during the tenure of the account.
6) Premature closure of SCSS account
The account holder can do a premature closure of the SBI SCSS account at any time by submitting the duly filled Form-2.
If the account is closed within a year of opening, the interest paid shall be recovered from the deposit amount, and the balance will be paid to the account holder.
If the account is closed after the completion of one year but before the completion of two years, 1.5% of the deposit amount shall be deducted, and the balance will be paid to the account holder.
If the account is closed on or after the completion of two years, 1% of the deposit amount shall be deducted, and the balance will be paid to the account holder.
In the case of premature closure, interest shall be payable up to one day before the account closure date after the penalty deduction mentioned above.
7) Closure of SCSS account
The SBI Senior Citizens Savings Scheme (SCSS) matures on the completion of five years. The deposit amount is returned to the account holder on maturity, and the account is closed. If the account has been extended, it will mature on the completion of eight years.
In the event of the account holder's death before account maturity, the nominee or legal heir(s) can submit the Form-3 application for account closure. The deposit amount, along with the interest amount applicable till the date of death of the account holder, will be paid.
From the date of death of the account holder till the date of account closure, the interest rate applicable on Post Office Savings Account shall be payable. In the case of a joint account, the spouse can continue with the SCSS account after the account holder's death if they meet the eligibility criteria.
Why SBI SCSS is an ideal investment product for retirement
A senior citizen can open an SCSS account at an SBI branch in their locality. It is an easy and convenient way to deposit money. It is backed by the Government of India, which makes it risk-free. The current interest rate is an encouraging 7.4% p.a. (as of June 2022). The amount deposited (up to Rs 1,50,000 in a financial year) is eligible for deduction under Section 80C of the IT Act. The account can be closed prematurely by paying a small penalty. Overall, the SBI SCSS scheme is a good investment option for retired people.