What is Senior Citizen Savings Scheme (SCSS) Interest Rate 2023

The Indian Government has launched various financial and social security schemes to make survival easier for senior citizens in the country. Of the various financial schemes operated and managed by the Central Government for senior citizens, SCSS, or Senior Citizen Savings Scheme, is the most popular. You can seldom find a senior citizen in India who does not have an SCSS account.

This article explains the Senior Citizen Savings Scheme (SCSS) interest rates in detail. You can also find the SCSS interest rate historical trends, interest calculation, examples, the merits of investing in SCSS, tax benefits, and whether you should invest in it or not.

Senior Citizen Savings Scheme Interest Rate - A Primer

Senior Citizen Savings Scheme (SCSS) is an Indian Government investment scheme for senior citizens in India. The minimum deposit amount in SCSS is INR 1,000, while the maximum deposit amount is INR 15 lakh.

Although any Indian citizen above the age of sixty (60) can open an SCSS account, any person above fifty-five (55) can also open an SCSS account, provided the person has retired due to VRS (Voluntary Retirement Scheme), Special VRS, or superannuation and has opened the SCSS account within one month of receiving the retirement benefits. Any investor below the age of sixty (60) opening an SCSS account must submit the employer’s certificate stating the employee’s particulars, such as the date of retirement, employment period, designation, and the like, in Form-1. Also, any retired officer of the Defence Services may open an SCSS account, irrespective of age, upon fulfilling certain conditions.

Any senior citizen in India can open an SCSS account individually or with their spouse (joint account). If you open a joint account, the first account holder’s age is considered when determining the eligibility for account opening. But, the second applicant’s age limit is not considered for the purpose.

The validity of an SCSS account is for five (5) years from the account opening date. However, you can extend your SCSS account for three (3) more years by applying Form-4 to the financial institution where you opened the account. However, you must apply within one (1) year from the date of maturity of your SCSS account.

Senior Citizen Savings Scheme interest rate is calculated from the account opening date. Generally, the Government pays the interest four (4) times a year. The first interest is calculated from the account opening date and paid on 31st March, 30th June, 30th September, or 31st December. After that, the SCSS interest amount will be credited to your account on the first working day of April, July, October, and January of any financial year. If you authorize the financial institution, they will transfer the interest amount to your monthly savings account.

It is worth noting that a part of the deposit or the entire deposit amount in the Senior Citizen Savings Scheme qualifies for tax deductions under Section 80C of the Indian Income Tax Act.

Senior Citizen Savings Scheme Interest Rate - Some Interesting Facts

Before investing in an SCSS account, it is essential to know some essential facts about SCSS interest rates:

• The Central Government revises SCSS interest rates every quarter. However, while technically, the Government can revise the rates every quarter, it does not do that often. Generally, SCSS interest rates increase when the RBI (Reserve Bank of India) increases the benchmark interest rate (REPO Rate) and vice versa. But, no set rule can predict the rate change.
• The Central Government has recently increased the interest rate of SCSS to 7.6 percent from 7.4 percent in Quarter 3 of 2022.
• According to the Senior Citizen Savings Scheme Rules 2019 and 2020, if an investor does not claim an interest in any quarter, they will not earn interest on the interest amount. However, if an investor does not claim the interest on the due date, they can claim it on any date after it.
• If you invest more than INR 15 lakh in the Senior Citizen Savings Scheme, the deposit office (the financial institution where you opened the SCSS account) will send you a letter requesting you to withdraw the excess amount. It is worth noting that the deposit office will not consider the excess amount while calculating the interest every quarter. However, the deposit office will pay you the interest rate on the average savings account until they send you the letter requesting you to withdraw the excess amount.
• If any interest payment date falls on a holiday or Sunday, the previous working day will be considered for the interest payment.
• Suppose you reinvest your investment amount after the mandatory five-years lock-in period. In that case, the deposit office will consider the prevailing interest rate and not the original interest rate when opening the SCSS account.
• Suppose an SCSS account holder dies before the maturity of five or eight years. In that case, the deposit office automatically closes the account, and the maturity proceeds will be refunded to the account holder’s nominee or legal heir. The nominee must apply Form-3 to claim the amount.
• Suppose there is a delay from the SCSS account holder’s death to the time of claiming the maturity proceeds or closing the account. In that case, the account's deposit amount will earn interest per the applicable savings bank interest rate. However, if the spouse in a joint account is a senior citizen and wishes to continue the SCSS account, they can do so.
• Multiple withdrawals are not allowed from SCSS accounts. Hence, you can withdraw the investment amount only once after maturity.

Where Can You Open a Senior Citizen Savings Scheme Account?

The RBI has empowered the following financial institutions to open and manage Senior Citizen Savings Scheme accounts:

• India Post
• Andhra Bank
• Allahabad Bank
• Bank of Baroda
• Bank of India
• Bank of Maharashtra
• Canara Bank
• Central Bank of India
• Corporation Bank
• Dena Bank
• Indian Bank
• Indian Overseas Bank
• Oriental Bank of Commerce
• Punjab National Bank
• State Bank of Bikaner & Jaipur
• State Bank of Hyderabad
• State Bank of India
• State Bank of Mysore
• State Bank of Patiala
• State Bank of Travancore
• Syndicate Bank
• UCO Bank
• Union Bank of India
• United Bank of India
• Vijaya Bank
• IDBI Bank Ltd.
• ICICI Bank Ltd.

Hence, to open an SCSS account, you must approach any of the financial institutions mentioned above.

Senior Citizen Savings Scheme Interest Rates - Historical Trends and Typical Returns

When the Ministry of Finance, Government of India launched the Senior Citizen Savings Scheme on 27th October 2004, the interest rate was 9% per annum. And the interest rate was the same until 31st March 2012. However, since then, SCSS interest rates have gone through many ups and downs. The following is the comprehensive list of all major SCSS interest rate changes since 2004:

As is evident from the list containing SCSS interest rates over the years, it witnessed a sharp slash in 2020. However, the Government has started increasing the rates now.

Traditionally, the Senior Citizen Savings Scheme interest rate has been higher than most other investment instruments. Let us understand this with an example.

Suppose you invest INR 15,00,000 in an SCSS account on 20th October 2022. For simplification, let’s assume that the interest rate remains 7.6% for the entire investment tenure of five (5) years. So, your total interest income will be INR 5,70,000. It means that your quarterly income will be INR 28,500.

The following list elaborates on the quarterly income you may expect as SCSS interest rate for different investment amounts:

Senior Citizen Savings Scheme - The Salient Features

Why Should You Invest in a Senior Citizen Savings Scheme?

A Senior Citizen Savings Scheme account might be a superannuated person’s gateway to financial freedom. Since the Government of India guarantees returns, it is 100% safe. Here are the top benefits of investing in SCSS.

Higher-Than-Average Interest Rate

The Senior Citizen Savings Scheme interest rate is much higher than many other investment instruments. Currently, the rate of interest is 7.6%. The Union Government monitors the benchmark rates set by the Reserve Bank of India to modify the SCSS interest rate every three months.

Assurance

Senior citizens want assured returns on their hard-earned money. And SCSS is one of the safest investment instruments in India. Since it is launched and monitored by the Government of India, the returns are fully assured and not unpredictable like mutual funds or stocks. Moreover, only reputed financial institutions facilitate SCSS account opening. Hence, you can rest assured that your investments are in safe hands.

Invest to Fulfil Medium-Term Goals

SCSS is an ideal medium-term investment instrument. The investment term is five (5) years and can be extended by three (3) more years. Hence, it is more liquid than other sovereign investment schemes like the Public Provident Fund (PPF), Pradhan Mantri Vaya Vandana Yojana (PMVVY), etc.

Flexible Investment in More Than One Account

As already mentioned, the minimum investment in SCSS is INR 1,00,000 and you can invest in multiples of INR 1,000 up to INR 15,00,000. Moreover, you can open more than one (1) SCSS account with multiple financial institutions. However, the aggregate investment amount must not exceed INR 15,00,000 under any circumstances. If the investment amount exceeds INR 15 lac, the deposit office will ask you to withdraw the additional amount.

Senior Citizen Savings Scheme - Taxation

The Senior Citizen Savings Scheme not only provides an exceptionally high-interest rate but also lets you save taxes of up to INR 1,50,000 every year. The old tax regime allows SCSS investors to claim tax deductions of up to INR 1,50,000 under Section 80C of the Income Tax Act.

Although SCSS provides tax benefits under Section 80C, the interest is subject to TDS or Tax Deducted at Source. According to the guidelines laid by the Ministry of Finance, any interest income above INR 50,000 in a financial year is subject to a TDS deduction of 10% for investors with a PAN card and 20% for investors without a PAN card.

How to Invest in Senior Citizen Savings Scheme?

You can invest in a Senior Citizen Savings Scheme by visiting your nearest post office connected to the Core Banking System (CBS). Alternatively, you may visit any scheduled commercial bank approved by the Reserve Bank of India to open an SCSS account.

To open an SCSS account, you must submit your PAN card, Aadhar card, and the deposit amount by cash, demand draft, or cheque, along with a fully filled Form-1. You can also transfer the investment amount through internet banking.

Opening an SCSS account is a quick and seamless process. Check the financial institution's working hours to expedite the account opening process.

Should You Invest in a Senior Citizen Savings Scheme?

Senior Citizen Savings Scheme is a government-backed investment scheme for senior citizens in India. The scheme provides a fixed interest rate. Presently, the rate is 7.6%, but the Government may change the rate after every quarter.

While SCSS is a good investment instrument, liquid mutual funds often provide better returns and SCSS-like stability. Liquid funds are a special type of debt mutual funds that invest in top-rated Government and corporate bonds and other money market instruments. They are more liquid than SCSS, FD, or any other sovereign investment scheme and typically provide stable returns yearly.

So, while SCSS can be an excellent investment option for senior citizens, you can also invest in liquid mutual funds to earn a little extra.

Frequently Asked Questions (FAQs):

Q. Is the SCSS interest rate fixed for five years?

No. The Government updates the interest rate of the Senior Citizen Savings Scheme every quarter. There is no predefined formula to predict the SCSS rate change. It depends on the benchmark REPO rate the Reserve Bank of India set. If the RBI increases the benchmark rate, the Government may increase the interest rate and vice versa.

Q. Can I invest more than INR 15 lakh in a Senior Citizen Savings Scheme?

No. The maximum investment cap in the Senior Citizen Savings Scheme is INR 15,00,000. Also, the minimum investment amount is INR 1,000, and you can invest in multiples of 1,000.

Q. FD or SCSS - Which is Better?

Fixed deposits are more liquid than SCSS accounts. However, the SCSS interest rate is usually much higher than the prevailing highest FD rates. For example, the SCSS rate of interest is 7.6% in Q3 2022, whereas most financial institutions are offering less than 7% on FD accounts. So, fixed deposits are a better option if you want high returns. However, opting for an FD will be a better decision if you want less expensive premature withdrawals.

Q. Can I invest in two or more Senior Citizen Savings Schemes?

Yes. There is no limit to how many SCSS accounts you can open. However, the total investment amount must not be more than INR 15,00,000 at any time.

Q. Is there any tax benefit for investing in SCSS?

Yes. SCSS investment enables you to claim tax deductions of up to INR 1.5 lakh under Section 80C of the Income Tax Act. However, if your annual interest income is more than INR 50,000, the deposit office will deduct 10%-20% as the TDS or Tax Deducted at Source.