Post retirement people look to invest their hard earned money in safe investment avenues which could offer them returns and are less risky. At that stage of people are apprehensive to try their hands in risky investments like equity based schemes. Retirees also need an investment which could help them to reduce their tax burden. For senior citizens, there comes a scheme Senior Citizen Savings Scheme.
Senior Citizen Savings Scheme is exclusively available for senior citizens offering them capital protection, as it is backed by the government. It also offers interest on your investment along with tax savings. You can open the account and start investing in this saving scheme through network post offices and designated public & private banks in India. Govt. of India had launched Post Office Senior Citizen Savings Scheme in the year 2004.
Basics of Senior Citizen Savings Scheme
Let’s understand the basics of this Senior Citizen Savings Scheme, before start to invest in it.
Who Can Invest:
An applicant need to fulfill following criteria to start investing in Senior Citizen Savings Scheme.
- Aged 60 years or above, as on the date of account opening.
- Aged 55 years or more but less than 60 years, provided he/she has retired from employment as per voluntary retirement scheme or on superannuation. The account needs to be opened within one month of the receipt of retirement benefits.
- Retired defence personnel can start investing at 50 years of age.
NRIs and HUF are not allowed to open this account.
Where to Open:
You (senior citizen) can open either an individual or a joint account (with the spouse) under the Post Office Senior Citizen Savings Scheme in any post office across India or in specified branches of nationalized and private banks.
You can start investing in this scheme by furnishing following documents.
- Duly filled ‘Form A’ for account opening.
- Deposit amount as per pay-in-slip in ‘Form D’.
- Two passport size photographs.
- Address and Identity Proof like passport, PAN card, voter ID card, driving license, etc.
- Age Proof like senior citizen card, birth certificate, ration card, etc.
- You need to carry original documents for KYC verification purpose.
You also need to provide your PAN number for opening a POSCS account. Furnishing Aadhaar number is also mandatory. In case you have existing investments under this scheme, you are required to provide the Aadhaar details at the earliest before March 31st, 2018 for becoming the account cease to be operational.
The retirees need to submit a certificate issued from the employer, mentioning the retirement was on superannuation or otherwise, designation held during employment, period of employment, retirement benefits and proof of date of payment of the retirement benefits.
How Much You Can Invest:
You can invest a minimum of Rs 1,000 and maximum of Rs 15 lakhs in Post Office Senior Citizen Savings Scheme. You are free to open multiple accounts either individually or jointly with spouse, but the maximum limit of investment for all the accounts held by you must not exceed the maximum limit specified. Moreover, the amount invested should not exceed the amount of the retirement benefits received.
Benefits of Senior Citizen Savings Scheme
You can save tax by investing in this senior citizen savings scheme.The investment made under the scheme is entitled to receive the tax deduction up to Rs 1.5 lakhs under Section 80C of the Income Tax Act, 1961. The tax benefit under section 80C can be availed only in the year of receipt of deposit in POSCS account. As per rules, only one deposit is allowed in one account. In case of extension of an existing account beyond 5 years (maturity), no tax benefit can be availed under section 80C during such period. The principal amount you receive at maturity is tax exempted.
Know When Tax is Payable
- The interest received is taxable for the depositor. There will be tax deducted at source (TDS) as per the prevailing tax laws. TDS applicable is 10% (20% when PAN is not submitted), when the interest payment is more than Rs 10,000 in a financial year. If income is not taxable, you have to furnish form 15G or 15H to prevent TDS.
- The tax benefit is not available for premature withdrawals, instead the amount withdrawn is considered as your income and will be taxable as per your tax slab rate.
- In the event of the demise of the depositor, principal amount withdrawn prematurely by the nominee or legal heir is not taxable.
- After death of the depositor, any interest paid will be taxable for the nominee or legal heirs.
Return on Investments:
The interest rate under this scheme is declared on a quarterly basis and it is compounded quarterly. The interest payable is locked, as on the date of the investment and it remains unchanged through the entire tenure, irrespective to revision in the interest rate. Upon extension of account post maturity, the prevailing interest rate for that scheme as on the date of extension will become applicable. The revised interest rate will only be applicable to a new investment done under this senior citizen saving scheme.
When opening the account in the post office, you need to have an operating post office savings account to receive the quarterly interest. In case of investment done through a bank, you also need to have a savings account in the same bank to receive the interest.
Interest Rates under Senior Citizen Saving Scheme for past years
|Financial Year||Interest Rate (per annum)|
The Post Office Senior Citizen Savings Scheme is matured after the completion of 5 years. The deposit amount along with interest can be withdrawn by submitting an application along with form E and passbook. If you don’t close the account post maturity and also does not extend the account, the account will be considered as matured. The deposits will earn the interest rate as under the post office savings account (4% per annum) and it is applicable till the end of the month preceding the month of the closure of the account.
In case of your death before maturity, the account will be closed and the deposit along with interest shall be payable to the nominee/ legal heir. In case of joint account or when spouse is the only nominee, he/she may continue or close the account. The nominee can withdraw the amount by submitting an application in ‘Form F’ for closure of account.
Features of Senior Citizen Savings Scheme
The tenure of this scheme is 5 years. You have the option to extend it for another 3 years. In order to extend the scheme for another 3 years after completion of 5 year tenure, you need to submit the duly filled ‘Form B’ regarding the extension of the scheme. Only one extension is allowed for a POSCS account. Such extended accounts can be closed after one year of extension without any penalty.
You are allowed to make premature withdrawals, but after 1 year of account opening. When you close the account after one year but before the end of 2 years, 1.5% of the deposit shall be deducted. Upon closing the account after 2 years, an amount equal to 1% of the deposit shall be deducted.
In the event of death of the depositor, no charges are levied for premature closure of the account.
You (account holder) have the option to nominate one or more than one person. You can also appoint a minor as your nominee, upon providing his/her date of birth along with the guardian details. If you don’t nominate anyone at the time of account opening, you can do so during the tenure by submitting the nomination form. Under joint account, the nomination form needs to be signed by all the account holders.
You can change your nominee any number of times before maturity and no charge is levied to avail this facility. You need to submit ‘Form C’ and carry the passbook for registering, cancelling or changing the nomination.
You are allowed to transfer your account from one post office to another or to a bank. You can avail this facility by submitting the duly filled ‘Form G’ for transfer of your account to his current deposit office or bank. A fee of Rs 5 for each Rs 1 lakh of deposit for the first transfer and Rs 10 for Rs 1 lakh of deposit for the subsequent transfers is payable.
Post Office Senior Citizen Savings Scheme is a deposit scheme available for senior citizens, which aims to ensure a regular income stream during their post-retirement life. This scheme offers the capital protection along with assured return payable every quarter, which helps you get a guaranteed regular income. This senior citizen saving scheme also offers tax benefits. You can claim a tax deduction of up to Rs 1.50 lakhs in a financial year under Section 80C of the IT Act, 1961.