According to the new rules, you can extend the Senior Citizen Saving Scheme more than once for a period of 3 years.
The government has changed the rules related to Senior Citizen’s Savings Scheme or SCSS. These changes have also come into effect from 9 November 2023. After which this scheme has become better for senior citizens. Earlier, the investment limit in this scheme was increased from Rs 15 lakh to Rs 30 lakh from April 1, 2023.
Among all the small savings schemes of the government, currently the highest interest is 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 earlier from April 2019 to March 2020, the government was giving 8.6 percent interest on this scheme.
The government determines the interest every quarter on other small savings schemes including SCSS.
Due to risk-free investment, high interest rates and the facility of quarterly payment of interest, senior citizens are very keen to invest in this scheme. 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 55 to 60 years of age 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 employee dies while on duty
Spouse can open 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 more dies during the service period. Their spouse (husband or wife) can open this account.
Account extension
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 the first time, for extension of account, 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, you will have to fill Form-4 and submit it within one year of the expiry of the extended period of 3 years. Whereas the account will be extended from the last date of the extended period of 3 years.
Under the new change, if you close the account within one year of the beginning of the period extension, then the remaining amount will be returned to you after deducting 1 percent of your deposit amount as penalty.
Interest during 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 it would on the day of maturity. This rule is the same as before.
But because now there is a provision to extend this scheme more than once in a block of three years, hence if you extend this account more than once, you will get the same interest in the subsequent extended period as in the immediately preceding period. It was 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 this.
Now let us know other rules related to this scheme:
How and how much to invest?
Only one-time investment can be made in this account. This means that at the time you invest in this scheme, you will get interest at the same rate till the maturity period, which has been fixed by the government. Whether the government increases or reduces the interest rate further, 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 Office, 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?
Considering that the senior citizen needs the 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 into the savings account on the 1st of every April, July, October and January.
Suppose you have deposited Rs 30 lakh in lump sum, then according to the current interest rate (8.2 percent), you will get interest of Rs 2,46,000 i.e. Rs 61,500 every quarter in a financial year, which will be credited to your savings account.
Can I withdraw the deposited amount midway?
If you withdraw the deposited amount within one year of opening the account, you will not get any interest on this deposited amount. If interest is received, it will be deducted and the remaining amount will be returned to you. After one year but within two years, if you close the account and withdraw the deposited amount, you will have to pay a penalty of 1.5 percent on the deposited amount.
In case of withdrawal of deposited amount after completion of two years but before 5 years, one percent penalty will have to be paid on the deposited amount. If after 5 years the account is in the extended period of 3 years, then in such a situation the deposited amount can be closed and withdrawn only after one year i.e. after completion of 6 years. Then no penalty will have to be paid.
Tax exemption
There is a provision for tax exemption on the investment amount in this scheme under Section 80C of the Income Tax Act, but this exemption will not be available in case of premature withdrawal.
For whom is it better, for whom not?
This scheme is better for those people who do not have regular source of income i.e. pension. Or even if it is, ensure 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 account and term deposits to a person aged 60 or above 60 years i.e. senior citizen is tax-free. Is.
But if any 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 the 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 for 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 (benefit will be available on a maximum amount of Rs 1.5 lakh in a year).
Unlike Sukanya Samriddhi Yojana and PPF, this scheme does not provide the benefit of compounding interest. If you leave the interest amount in the savings account, then you will get the interest on it which is available on the savings account. Therefore, it is advisable that as soon as the interest comes to your savings account, at least transfer it to the Recurring Deposit Account (RD).
