When a person crosses the age of 60 after completing long responsibilities of job and business, his biggest priority is to protect his life savings and get a fixed regular income every month or quarter. In an era of unavailability of pension for private sector employees and falling interest rates, financial security becomes a serious challenge for senior citizens. The attractive returns available in the stock market and mutual funds are tied to market fluctuations and risk, which is not possible for every elderly person to bear after retirement. In such a situation, India Post i.e. Post Office, working under the Ministry of Communications of the Government of India, is proving to be a boon for the elderly. Post Office's 'Senior Citizen Savings Scheme' (SCSS) is the most trusted and highest interest paying small savings scheme for senior citizens of the country. Since it is equipped with the Sovereign Guarantee of the Central Government, there is no risk of losing even a single rupee in it. Retired couples living in cities like Uttar Pradesh's capital Lucknow, Kanpur, Prayagraj, Varanasi and Gorakhpur to Delhi-NCR, Jaipur and Patna are living their old age respectably without any financial worries through this scheme.
The biggest strength of the Post Office Senior Citizen Savings Scheme is its excellent interest rate and transparent system of quarterly payout. At present the government is offering an attractive interest rate of 8.2 percent per year on this scheme. If a husband and wife jointly deposit a lump sum of Rs 28 lakh in this scheme from their retirement funds (for example, both invest Rs 14 lakh each), then the calculation of the interest income coming to their house every three months is very comforting:
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Total combined investment amount: ₹28,00,000 (Rs 28 lakh)
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Applicable annual interest rate: 8.2% per annum
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Total interest received in one year: ₹28,00,000 × 8.2% = ₹2,29,600
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Interest received every 3 months (quarters): ₹2,29,600 ÷ 4 = ₹57,400
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Average monthly income: Approximately ₹19,133 per month
The primary tenure of this scheme is 5 years. During these 5 years (20 quarters), the couple gets a total of Rs 11 lakh 48 thousand (₹ 57,400 × 20) only as interest. If after 5 years they extend this scheme for 3 more years, then the total interest earned in 8 years reaches approximately Rs 18 lakh 36 thousand 800 (₹ 18.37 lakh). The most important thing is that despite spending this entire amount of interest, on maturity his principal amount i.e. the entire Rs 28 lakh is returned completely safely.
In the budget, giving a historic relief to senior citizens, the Central Government had directly increased the maximum limit for individual investment in SCSS from Rs 15 lakh to Rs 30 lakh. Under this rule, a senior citizen can deposit a maximum of Rs 30 lakh in his name. If both husband and wife are 60 years of age or above, then both of them can invest up to a total of Rs 60 lakh (₹30 lakh + ₹30 lakh) by opening separate individual accounts or by opening a joint account with each other. As per post office rules, joint account in SCSS can be opened only with spouse. The entire amount deposited in a joint account is counted towards the investment limit of the first account holder, so if both the spouses open separate accounts, both can use their entire limit of Rs 30 lakh each. If a couple invests a maximum of Rs 60 lakh, then at the rate of 8.2%, they will get an assured pension-like income of Rs 4 lakh 92 thousand annually i.e. Rs 1 lakh 23 thousand every three months (approximately ₹ 41,000 per month).
Senior Citizen Savings Scheme is only for Indian citizens; Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to invest in it. Clear eligibility criteria have been set for joining the scheme. The minimum entry age for general citizens is 60 years. But the government has made a provision for special exemption for employees who retire prematurely. Employees retiring from civil services, public sector undertakings or private companies under VRS or superannuation between the age of 55 to 60 years can also open an account in this scheme, provided they apply within 1 month of receiving their retirement benefits. Additionally, the age limit has been further relaxed for ex-servicemen of the Indian Armed Forces (Army, Navy, Air Force) guarding the country's borders; Retired personnel from the defense sector can avail the benefits of this high interest scheme only after completing the age of 50 years.
Unlike other savings schemes, SCSS does not involve compounding of interest, rather it is a pure cash-flow income scheme. In this, interest is calculated as simple interest and money is transferred directly to the account holder's bank or post office savings account on the first working day of every financial quarter as per the calendar decided by the government. Payments for the four quarters of the year are made on April 1, July 1, October 1, and January 1. Account holders can get this interest auto-credited to their post office savings account or can get it directly deposited into the account of any nationalized or private commercial bank through ECS and NACH mandate. This fixed amount of ₹57,400, coming every third month, makes the elderly couple self-reliant in meeting the expenses of medicines, regular medical checkups, household bills, groceries and social obligations.
While investing in this scheme, it is necessary to have complete knowledge of income tax rules. When you deposit money in SCSS, you get the benefit of tax deduction up to Rs 1.5 lakh under Section 80C of the Income Tax Act under the old tax regime. However, the interest received is fully taxable and is added to the investor's 'income from other sources'. To provide relief to senior citizens, under Section 80TTB, direct tax exemption of up to Rs 50,000 is available on interest earned from bank and post office deposits in any financial year. If the total annual interest income of a senior citizen exceeds the prescribed limit, TDS at the rate of 10 percent is deducted by the post office. But if the total annual income of an elderly couple is less than the minimum limit of the tax slab, they can get complete exemption from TDS deduction by submitting Form 15H at the post office at the beginning of every financial year.
Senior Citizen Savings Scheme account can be opened in any Head Post Office, Sub-Post Office or authorized banks (like SBI, PNB, Bank of Baroda, ICICI, HDFC etc.) in the country. For this, application form (Form 1), two passport size photographs, identity card (Aadhar card, PAN card), age certificate and address certificate have to be submitted. Amounts up to Rs 1 lakh are deposited in cash and above through check or demand draft. The maturity period of the scheme is 5 years, which can be extended for a block of 3 years by filling the form within 1 year of maturity. If in case of emergency, the money has to be withdrawn before 5 years, then the balance amount is returned after deducting a nominal penalty of 1.5% of the principal amount if the account is closed after 1 year and 1% if the account is closed after 2 years. With safe investments, sovereign guarantee and respectable interest income every quarter, this scheme is the strongest backbone of every retired couple's financial portfolio.