The Government of India announced a 0.4 % rise in the interest rates of small scale saving schemes. From the financial quarter ending on December 31, 2018, senior citizens can avail returns on their investments at an interest rate of 8.7%.
The SCSS scheme is a government-sponsored savings scheme that was initiated in the year 2004. The main objective of the scheme is to provide financial support to the individuals after retirement without a regular source of income. Individuals can receive regular pay-outs every quarter with this scheme.
Here are 5 points you must know about the Senior Citizen Savings Scheme-
Application procedure
Senior citizens who want to invest this scheme can collect the application form from their nearest post office or financial institutions providing this scheme. Individuals can also download the application form from the official websites of the respective organization. They need to submit the form along with the essential documents to invest in this scheme.
Eligibility criteria of the SCSS scheme
 Applicants must fulfill the following eligibility criteria to invest under this scheme:
- They must be an Indian citizen. Non-residential Indians (NRI’s), Person of Indian Origin (PIO’s) and members of Hindu Undivided Family (HUF’s) are not eligible to invest under this scheme.
- Applicants should be aged 60 or above to avail benefits under this scheme. However, the age limit can be relaxed to 55 if the individual has opted for voluntary retirement or superannuation. They can only avail this scheme if they apply within 1 month of availing their retirement corpus.
- Retired defense personnel irrespective of their age can invest in this scheme provided that they fulfill all the other conditions.
- Applicants should invest with a minimum amount of Rs. 1,000.
Benefits of this scheme
 The benefits of this scheme are mentioned below.
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- This scheme comes with all the protection associated with government schemes, so it is a reliable option to invest in and increase retirement savings.
- Individuals can avail returns at a rate of 8.7%, which is higher than the gains from a savings account and many other investment options.
- This scheme comes with an initial maturity term of 5 years, which can be further extended for another 3 years.
- This scheme allows a one-time investment up to Rs. 15 Lakh starting from Rs. 1,000 only.
- Individuals have the option of availing premature withdrawal in case of financial emergencies.
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Tax implications and deductions
Individuals can avail tax deductions under section 80C of the Income Tax Act, 1961 against their investment in the SCSS scheme. However, if an individual earns more than Rs. 50,000 as their interest earnings in a fiscal year, they have to pay a TDS against that amount.
- Penalties for pre-mature withdrawal of the deposited amount
Individuals can withdraw the deposited amount before its maturity, but they will have to pay the penalty against that.Â
- 1.5% of the deposited amount will be charged as a penalty fee if a borrower withdraws the amount within 2 years of the account opening.
- 1% of the deposited amount will be charged as a penalty fee if a borrower withdraws the amount within 2 to less than 5 years of the account opening.
Along with this scheme, senior citizen Fixed Deposits from Bajaj Finance is another high return investment scheme. It offers interest returns at a rate of 8.95% along with a plethora of other favorable terms including flexible investment and tenor options. Individuals can avail an additional 0.25% benefit on renewals of such deposits.
The Senior Citizen Saving Scheme (SCSS) is a wise investment tool for retired individuals. Furthermore, they can also apply for other schemes like FDs along with it to multiply their savings without incurring any risk.