Father's Day: Why You Should Gift Your Dad A Senior Citizen Savings Scheme

This Sunday isn't like any other! It's Father's Day and if you're thinking as to what to gift your father, it should be something that helps him become further financially independent, even in his old age. Investment in Senior Citizens Savings Scheme (SCSS) is the perfect gift that one can give to the Father on the Father's Day. Senior citizen savings scheme is a government product that offers compelling interest rates, tax benefits and as the name suggests, is meant only for senior citizens, or the people aged 60 years or above. The interest accrued on senior citizens savings scheme is paid on a quarterly basis.

Everything you want to know about senior citizens savings scheme (SCSS):

Eligibility: An individual of the age of 60 years or more may open the senior citizen savings account. An individual of the age of 55 years or more but fewer than 60 years who has retired on superannuation or is under voluntary retirement can also open the account subject to the condition that it is opened within one month of receipt of retirement benefits. The amount, however, should not exceed the amount of retirement benefits. A depositor may operate more than one account in individual capacity or jointly with spouse.

Where to open SCSS account: Post offices across the country, key lenders such as State Bank of India (SBI) and ICICI Bank offer this scheme.

Also Read: Public Provident Funds (PPF) Are Fully Tax-Free. Details Here

Minimum amount for opening of SCSS account and maximum balance that can be retained: There shall be only one deposit in the account in the multiple of Rs 1,000. The maximum balance cannot exceed Rs 15 lakh. The account can be opened by cash for an amount below Rs 1 lakh and for Rs 1 lakh and above, it can be opened by cheque only. In the case of cheque, the date of realisation of cheque in the account shall be the date of opening of account.

Maturity period of senior citizen savings scheme: Investment in senior citizen savings account requires a minimum lock-in period of five years.

Interest rates on SCSS: The current interest rate is 8.3 per cent per annum, according to India Post's website. The interest is payable from the date of deposit of 31st March/30th September/31st December in the first instance and thereafter, the interest is payable on 31st March, 30th June, 30th September and 31st December. The interest rate on this scheme, like other small savings schemes, changes every quarter.

Also Read: Saving Schemes With No Tax Benefits But Good Returns: RDs Vs MIS Vs KVPs Vs SIPs

Income tax: The investment under this scheme qualifies for benefit under Section 80C of the Income Tax Act, 1961 from 1.4.2007. Tax is deducted at source on interest if the interest amount is more than Rs 50,000 per annum (in case of senior citizen).

Also Read: Fixed Deposits Vs Recurring Deposits: Which Should Be Your Pick And Why

Premature closure of SCSS accounts: Premature closure of SCSS accounts is allowed after one year on deduction of an amount equal to 1.5 per cent of the deposit and after two years on deduction of 1 per cent of the deposit. However, SBI charges 1.5 per cent if you close it after two years, according to its website.

Closure of SCSS accounts: After maturity, the account can be extended for further three years within one year of the maturity by giving an application in the prescribed format. In such cases, the account can be closed at any time after expiry of one year of extension without any deduction.