Fixed Deposit Interest Rates for Senior Citizens in Post Office

Let us learn more about the scheme in some detail. 

Understanding Senior Citizens Savings Scheme (SCSS)

The fixed income SCSS is designed for senior citizens to provide a steady income stream after retirement. You can open an account at all Post Offices across India and certified banks. The government monitored interest rates are applied and paid quarterly to the account holder. 

The scheme’s primary objective is to insulate the senior citizens from the falling interest rates, severely depleting their financial resources and independence post-retirement.

SCSS Highlights

• The scheme is backed by the government of India and governed by the 2019 Scheme Rules. 

• The minimum investment amount is Rs.1000 and in multiples of Rs.1000 after that up to a maximum of Rs. 15 Lac per individual.

• The scheme’s tenor is fixed at five years. 

• The individual can operate the account singly or jointly only with the spouse. However, the entire deposit is attributed to the first account holder.

• You can close the account prematurely, complying with the underlying conditions. 

SCSS Eligibility

The eligibility norm defined for the scheme is:

• The individual applicant must have turned sixty.

• Retired civilian employees under sixty years but over fifty-five years can open the account, provided the retirement benefits are deposited within one month from receipt. Retirement covers VRS (Voluntary Retirement Scheme) and Superannuation. 

• The same rule applies for retired defence personnel but the age criterion is fifty years to sixty years.  

SCSS Interest Rates

The government notifies the interest rates applied in the SCSS along with other small savings schemes. The declared interest is valid for a specific quarter during the financial year. Accordingly, the interest rate for the January to March 2022 quarter is 7.4% per annum. 

You must remember the significant features associated with interest application and payment to the SCSS account holder. 

• Interest is calculated and payable quarterly from the deposit date on the last day of March, June, September, and December. 

•  No additional interest is paid to the account holder if the interest lies unclaimed.

• Interest is usually paid to the savings account in the same Post Office where the SCSS account is held.

•  The effect is given through auto credit or ECS, where applicable. 

It is understood that the SCSS interest is higher than similar deposits for senior citizens in banks. It is also true for other fixed deposits offered by the Post Office. 

The following grid illustrates the difference:

Note: Interest rates are subject to change.

The senior citizen interest payable for 5-year deposits in SBI is 6.20% per annum with effect from the 15th day of January 2022. 

SCSS Benefits

The senior citizen stands to benefit as the scheme is designed to protect their financial wellbeing. Here’s the list of benefits:

• Guaranteed Returns: The scheme is one of the safest investment options for the senior citizen earning higher interest paid quarterly. 

• Simplified Application: You can open the account at any Post Office or a designated bank of your choice, complying with the prescribed norms.

• Regular Interest Payout: Interest in the account is applied quarterly and paid on the first day of April, July, October, and January. 

• Tax Exemption:  You can claim a deduction for investment up to Rs.1.5 Lac under Section 80C of the Income Tax Act, 1961 in a financial year. (*"Tax benefit is subject to changes in tax laws. Standard T& C apply.")

SCSS Account Opening

You can open the SCSS account in any Post Office by submitting the following documents:

• Account Opening Form

• KYC Form comprises the following enclosures:

• PAN card

• Address verification documents like Aadhaar, Passport, Driving License, or Voter’s ID Card

• Proof of retirement benefits for VRS retirees

SCSS Account Closure on Maturity

You can close the SCSS account at maturity at the end of the five-year tenure. The closure procedure is initiated when you submit the requisite form accompanied by the passbook at the concerned Post Office. 

However, remember when the closure request is due to the accountholder’s death. 

• The account earns interest at the PO savings rate from the accountholder’s death date.

• The account can continue until maturity if the spouse is the joint holder or a sole nominee. In addition, it implies that the spouse is not required to open another SCSS account if eligible. 

SCSS Account Premature Closure

You can close the SCSS account prematurely, provided you comply with the stipulated rules. Moreover, you can apply for premature closure of the SCSS account any time after the opening date. 

• No interest is due if the account is closed within one year from opening. Any interest paid in the interim is recovered from the principal. 

• Premature closure after one year but before two years from the opening date invites a penalty of 1.5% deducted from the principal. 

• For premature closure after two years but within five years from the opening date, you pay a penalty of 1% recovered from the principal. 

• You can close the extended account prematurely after one year from the extension date. 

In Conclusion

The SCSS account is an attractive investment vehicle under the government’s social obligation to provide financial stability to its people post-retirement. 

The government has consistently paid interest to the account than other similar schemes that better commercial banks offer. Moreover, the tax benefits are an added incentive to park your retirement benefits in the SCSS account.

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