Senior Citizen Savings Scheme (SCSS)

Account
• From 1.4.2015, interest rates are as follows:-

9.3% per annum, payable from the date of deposit of 31st March/30th Sept/31st December in the
first instance & thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st
December.

• There shall be only one deposit in the account in multiple of INR.1000/- maximum not
exceeding INR 15 lakh.

• An individual of the Age of 60 years or more may open the account.

• An individual of the age of 55 years or more but less than 60 years who has retired on
superannuation or under VRS can also open account subject to the condition that the account is
opened within one month of receipt of retirement benefits and amount should not exceed the
amount of retirement benefits.

• Maturity period is 5 years.

• A depositor may operate more than one account in individual capacity or jointly with spouse
(husband/wife).

• Account can be opened by cash for the amount below INR 1 lakh and for INR 1 Lakh and
above by cheque only.

• In case of cheque, the date of realization of cheque in Govt. account shall be date of opening of
account.

• Nomination facility is available at the time of opening and also after opening of account.

• Account can be transferred from one post office to another

• Any number of accounts can be opened in any post office subject to maximum investment limit
by adding balance in all accounts.

• Joint account can be opened with spouse only and first depositor in Joint account is the
investor.

• Interest can be drawn through auto credit into savings account standing at same post office,
through PDCs or Money Order.
• In case of SCSS accounts, quarterly interest shall be payable on 1st working day of April, July,
October and January. It will be applicable at all CBS Post Offices.

*Quarterly interest of SCSS accounts standing at CBS Post offices can be credited in any savings
account standing at any other CBS post offices.

• Premature closure is allowed after one year on deduction of an amount equal to1.5% of the
deposit & after 2 years 1% of the deposit.

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

TDS is deducted at source on interest if the interest amount is more than INR 10,000/- p.a.

Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act,
1961 from 1.4.2007.

Interest Calculator

Senior Citizen Saving Scheme, 2004

Senior Citizen Saving Scheme details

 It is a Government of India product

 Interest rate with effect from April 1, 2015 is 9.3%. Rate of interest is as decided by Ministry of
Finance from time to time
 The product is offered by Government of India and hence is one of the most safest investment
option
 Premature closure of account is possible after one year from the date of opening the account
(charges applicable)

Advantages of ICICI Banks Senior Citizen Savings Account

 Facility of Direct Credit of Interest to ICICI Bank Account

 In case the investor does not want to avail Direct Credit facility or ECS facility, 4 Post Dated
Cheques will be sent to Investor every year
 Account Statement containing the details of Deposit Balance & transactions
 Phone Banking Facility (for queries)
Senior Citizen Saving Scheme - Features
Minimum
Rs. 1000 and in multiples thereof
Investment
Maximum
Rs. 15 Lakh
Investment
Interest Rate 9.3% p.a. Taxable (TDS is applicable)
Interest option Quarterly
Interest Payment 31st March/ 1st April, 30th June/ 1st July, 30th September/ 1st October,
dates 31st December/ 1st January
Tenure 5 years
Extension of A depositor can extend the account for a further period of 3 years (request
Account has to be submitted within one year from maturity)
Upto 1 year - Not allowed
From 1 year - Up to 2 years - Charges @1.5% of the Balance Deposit
Premature closure of
Amount will be deducted
Account
On or After expiry of 2 years – Charges @1% of the Balance Deposit
Amount will be deducted
Cheque / Pay order / DD in the name of "ICICI BANK Senior Citizen
Mode of Investment
Saving Scheme, 2004"
Value date Date of realisation of the cheque / DD
Senior Citizen Saving Scheme - Eligibility
 An investor who has attained the age of 60 years or above
 An investor Who has attained the age of 55 years or more but less than 60 years, and who
has retired on superannuation or otherwise (Account has to be opened by such individual
within one month of the date of receipt of the retirement benefits)
 Retired personnel of Defence Services (excluding Civilian Defence Employees) shall be
eligible to subscribe under the scheme irrespective of the above age limits subject
 Retired personnel of Defence Services (excluding Civilian Defence Employees) shall be
eligible to subscribe under the scheme irrespective of the above age limits

*Account can be jointly held with Spouse.

**NRIs & HUF - are not eligible to invest in SCSS.

Senior Citizen Saving Scheme - Documents

required
Age proof - Self attested copy of either of the following documents

 Passport
 Senior Citizen Card
 Birth certificate issued by MC/Gram Panchayat/District office of registrar of births and
death
 Voter ID card
 PAN card
 Ration card
 Date of birth certificate from the school
 Driving license

In case a customer who has attained the age of 55 years or more but less than 60 years, and who
has retired, can open the account within a month of the date of receipt of the retirement benefits
and proof of date of disbursal of such retirement benefit(s) along with a certificate from the
employer.

The retired personnel of Defence Services (excluding Civilian Defence Employees) shall be
eligible to subscribe under the scheme irrespective of the above age limits subject to the
fulfilment of other specified conditions.

Senior Citizen Saving Scheme

Any depositor may open an account at any deposit office by making an application in Form A
along with the amount of deposit in multiple of one thousand rupees, along with age proof.

A depositor may operate more than one account subject to the condition that deposits in all
accounts taken together shall not exceed the maximum limit of Rs.15 lakhs and provided that
deposits by depositors shall be restricted to the retirement benefits or Rupees Fifteen lakhs
whichever is lower.

A depositor may open the account in individual capacity or jointly with spouse.
Eligibility:

 An individual who has attained the age of 60 years and above on the date of opening of
an account.
 who has attained the age of 55 years or more but less than 60 years and who has
retired on superannuation or otherwise on the date of opening an account.
 who has retired at any time before the commencement of these rules and attained the
age of 55 years or more on the date of opening of an account,
 The retired personnel of Defence Services (excluding civilian Defence employees)
irrespective of the above age limits subject to fulfilment of other specified conditions.

NRI

eposits and withdrawals:

There shall be only one deposit in the account in multiple of one thousand rupees not exceeding
Rupees Fifteen lakhs.

Permitted after one year of opening the account but with penalty.

ode of Deposit:

The deposit under these rules may be made:

 cash, if the amount of deposit is less than Rupees One lakh.

 By cheque or demand draft drawn in favour of the depositor and endorsed in favour of
the deposit office.
 Interest on Deposit:
 The deposit made under these rules shall bear interest @ 9.30% p.a. from the date of
deposit payable at the end of each calendar quarter e.g. 31st March / 30th June / 30th
September / 31st December. Compounding of interest not permissible.
 Nomination:
 The depositor may nominate a person or more than one person, at the time of opening of
the account or at any time after the opening of the account but before its closure, by an
application on Form C accompanied by the passbook to the Branch.
 Nomination made by the depositor can be cancelled or varied.

Maturity

The deposit made at the time of opening of account shall be paid by the concerned deposit office
after the expiry of five years from the date of opening of the account on production of the
passbook accompanied by a written application (withdrawal form) Form E .
In case a depositor does not close the account on maturity and also does not extend the account,
the account will be treated as matured and the depositor will be entitled to close the account at
any time subject to the condition that the post maturity interest at the rate as applicable to the
deposits under the Post office Savings Accounts from time to time will be payable on such
matured deposits upto the end of the month preceding the month of the closure of the account.

Premature closure of Account

On an application in Form E the depositor may be permitted to withdraw the deposit and close
the account at any time after the expiry of one year from the date of opening of the account
subject to the following conditions:-

 In case the account is closed after the expiry of one year but before the expiry of two
years from the date of opening of the account, an amount equal to one and half percent
of the deposit shall be deducted and the balance paid to the depositor.
 In case the account is closed on or after the expiry of two years from the date of opening
of the account, an amount equal to one percent of the deposit shall be deducted and
balance paid to the depositor.

Senior Citizens Savings Scheme, 2004

1. What are the salient features of the Senior Citizens Savings Scheme, 2004?

The salient features of the Senior Citizens Savings Scheme, 2004 are given below.

Tenure of the deposit 5 years, which can be extended by 3 years.

account
Rate of interest 9.3 per cent per annum
Frequency of
Quarterly
computing interest
Taxability Interest is fully taxable.
Whether TDS is Yes. Tax will be deducted at source.
applicable
Investment to be in `1000/-
multiples of
Maximum ` 15 lakh
investment limit
Minimum eligible 60 years (55 years for those who have
age for investment retired on superannuation or under a
voluntary or special voluntary scheme). The
retired personnel of Defence Services
 (excluding Civilian Defence Employees)
will be eligible to invest irrespective of the
age limits subject to the fulfillment of other
specified conditions
Premature Permitted after one year of opening the
closure/withdrawal account but with penalty.
facility
Transferability Not transferable
Tradability Not tradable
Nomination facility Nomination facility is available.
Modes of holding Accounts can be held both in single and
joint holding modes. Joint holding is
allowed only with spouse.
Application forms Post Offices and designated branches of 24
available with Nationalised banks and one private sector
bank
Applicability to NRI, Non Resident Indians (NRIs), Persons of
PIO and HUFs Indian Origin (PIO) and Hindu Undivided
Family (HUF) are not eligible to open an
account under the Scheme.
Transfer from one Transfer of account from one deposit office
deposit office to to another is permitted.
another

2. Can a joint account be opened under the scheme with any person?

Joint account under the SCSS, 2004 can be opened only with the spouse. [Rule 3 (3)]

3. What should be the age of the spouse in case of a joint account?

In case of a joint account, the age of the first applicant / depositor is the only factor to decide the
eligibility to invest under the scheme. There is no age bar/limit for the second applicant / joint
holder (i.e. spouse). [Rule 3 (3)]

4. What will be the share of the joint account holder in the deposit in an account?

The whole amount of investment in an account under the scheme is attributed to the first
applicant / depositor only. As such, the question of any share of the second applicant / joint
account holder (i.e. spouse) in the deposit account does not arise. [Rule 3 (3)]

5. Whether both the spouses can open separate accounts in their individual capacity with
separate limit of Rs.15 lakh for each of them?

Both the spouses can open individual and / or joint accounts with each other with the maximum
deposits up to Rs.15 lakh each, provided both are individually eligible to invest under relevant
provisions of the Rules governing the Scheme. (Rules 3 and 4 )

6. Whether any income tax rebate / exemption is admissible?

No income tax / wealth tax rebate is admissible under the Scheme. The prevailing Income Tax
provisions shall apply. (GOI letter F. No.2/8/2004/NS-II dated October 13, 2004)

7. Is TDS applicable to the scheme?

Yes, TDS is applicable to the Scheme as interest payments have not been exempted from
deduction of tax at source. (GOI letter F. No.2/8/2004/NS-II dated March 28, 2006)

8. Whether any minimum limit has been prescribed for deduction of tax at source?

Tax is to be deducted at source as per the minimum limit prescribed by the Government.

9. What is the rate at which TDS is to be deducted from the account holder?

The rate for TDS for a financial year is specified in Part II of Schedule I of the Finance Act for
that year. (GOI letter F. No.2/8/2004/NS-II dated June 06, 2006)

10. Whether TDS should also be recovered from the undrawn interest payable to the legal
heirs of the deceased depositors?

Tax shall be deducted at source even from any interest paid / payable to the legal heir of the
account holder. (GOI letter F. No.2/8/2004/NS-II dated June 06, 2006)

11. Whether TDS on interest payments will be applicable with retrospective effect or
prospective basis?

TDS is applicable from the very first day when SCSS, 2004 was made operational regardless of
the fact that the Central Government or Reserve Bank of India or any authority might have
issued any Notification / circular / clarification at a later stage. (GOI letter F. No.2/8/2004/NS-II
dated June 06, 2006)

12. Whether only one person or number of persons can be nominated in the accounts
opened under the Scheme?

The depositor may, at the time of opening of the account, nominate a person or persons who, in
the event of death of the depositor, will be entitled to payment due on the account. [Rule 6 (1)]

13. Can a nomination be made after the account has already been opened?

Yes, nomination may be made by the depositor at any time after opening of the account but
before its closure, by an application in Form C accompanied by the Pass book to the deposit
office. [Rule 6 (2)]
14. Can a nomination be cancelled or changed?

Yes, the nomination made by the depositor may be cancelled or varied by submitting a fresh
nomination in Form C to the deposit office where the account is being maintained. [Rule 6 (3)]

15. Can nomination be made in joint account also?

Nomination can be made in joint account also. In such a case, the joint holder will be the first
person entitled to receive the amount payable in the event of death of the depositor. The
nominee’s claim will arise only after the death of both the joint holders. [Rule 6 (4)]

16. Can a person holding a Power of Attorney sign for the nominee in the nomination
form ?

No, a person holding a Power of Attorney cannot sign for the nominee in the nomination form.
(GOI letter No. F.15/8/2005/NS-II dated March 02, 2006)

17. In case of a joint account, if the first holder / depositor expires before maturity, can the
account be continued?

In case of a joint account, if the first holder / depositor expires before the maturity of the
account, the spouse may continue the account on the same terms and conditions as specified
under the SCSS Rules. However, if the second holder i.e. spouse has his / her own individual
account, the aggregate of his/her individual account and the deposit amount in the joint account
of the deceased spouse should not be more than the prescribed maximum limit. In case the
maximum limit is breached, then the remaining amount shall be refunded, so that the aggregate
of the individual account and deceased spouse’s joint account is maintained at the maximum
limit. [Rules 6 (4) and 8 (3)]

18. What happens to the accounts if both the spouses are maintaining individual accounts
and not any joint account and one of them expires?

If both the spouses have opened separate accounts under the scheme and either of the spouses
dies during the currency of the account(s), the account(s) standing in the name of the deceased
depositor/spouse shall not be continued and such account(s) shall be closed. The account can be
closed by making an application in Form ‘F’. Annexures II & III to Form ‘F’ can be attested by
the Oath Commissioner or Notary Public [Rule 8].

19. Whether any fee has been prescribed for nomination and / or change / cancellation of
nomination?

No fee has been prescribed for nomination and / or change / cancellation of nomination(s) in the
accounts under the SCSS, 2004. (GOI letter F. No.2/8/2004/NS-II dated October 13, 2004)

20. What is the age limit in the case of retired Defence Personnel for investment in the
scheme?
The retired personnel of Defence Services (excluding Civilian Defence Employees) will be
eligible to subscribe under the scheme irrespective of the age limit of 60 years subject to the
fulfillment of other specified conditions. (The Senior Citizens Savings Scheme (Amendment)
Rules, 2004 notified on October 27, 2004)

21. What is the meaning of ‘retirement benefits’ for the purpose of SCSS, 2004?

"Retirement benefits" for the purpose of SCSS Rules have been defined as 'any payment due to
the depositor on account of retirement whether on superannuation or otherwise and includes
Provident Fund dues, retirement / superannuation gratuity, commuted value of pension, cash
equivalent of leave, savings element of Group Savings linked Insurance scheme payable by
employer to the employee on retirement, retirement-cum-withdrawal benefit under the
Employees’ Family Pension Scheme and ex-gratia payments under a voluntary retirement
scheme'. (Rule 2 (a) of the Senior Citizens Savings Scheme (Amendment) Rules, 2004 notified
on October 27, 2004)

22. Can deposits under the SCSS scheme be made only from amounts received as
retirements benefits?

In case an investor has attained the age of 60 years and above, the source of amount being
invested is immaterial [Rule 2 (d)(i)]. However, if the investor is 55 years or above but below
60 years and has retired under a voluntary scheme or a special voluntary scheme or has retired
from the Defence services, only the retirement benefits can be invested in the SCSS. [Rule 2(d)
(ii)].

23. Is there a period prescribed for opening deposit account under the SCSS scheme, by
the senior citizen, from the retirement benefits?

If the investor is 60 years and above, there is no time period prescribed for opening the SCSS
account(s). However for those below 60 years, following time limits have been prescribed.

(a) the persons who have attained the age of 55 years or more but less than 60 years and who
retired under a voluntary retirement scheme or a special voluntary retirement scheme on the
date of opening of an account under these rules, subject to the condition that the account is
opened by such individual within three months of the date of retirement.

(b) the persons who have retired at any time before the commencement of these rules and
attained the age of 55 years or more on the date of opening of an account under these rules, will
also be eligible to subscribe under the scheme within a period of one month of the date of the
notification of the SCSS, 2004 i.e. 27th October 2004, subject to fulfillment of other
conditions. [Rule 2 of the Senior Citizens Savings Scheme (Amendment) Rules, 2004]

(c) the retired personnel of Defence Services (excluding Civilian Defence Employees) will be
eligible to subscribe under the scheme irrespective of the above age limits subject to the
fulfillment of other specified conditions. [Rule 2 of the Senior Citizens Savings Scheme
(Amendment ) Rules, 2004]
24. Can an account holder obtain loan by pledging the deposit / account under the SCSS,
2004?

The facility of pledging the deposit / account under the SCSS, 2004 for obtaining loans, is not
permitted since the account holder will not be able to withdraw the interest amount periodically,
defeating the very purpose of the scheme. (GOI letter F. No.2/8/2004/NS-II dated May 31,
2005)

25. Is premature withdrawal of the deposits from the accounts under the SCSS, 2004
permitted?

Premature withdrawal / closure of the deposits from the accounts under the SCSS, 2004 has
been permitted after completion of one year from the date of opening of the account after
deducting the penalty amount as given below.

(i) If the account is closed after one year but before expiry of two years from the date of opening
of the account, an amount equal to one and half per cent of the deposit shall be deducted.

(ii) If the account is closed on or after the expiry of two years from the date of opening of the
account, an amount equal to one per cent of the deposit shall be deducted.

However, if the depositor is availing the facility of extension of account under Rule 4 (3), then
he/she can withdraw the deposit and close the account at any time after the expiry of one year
from the date of extension of the account without any deduction. [Rule 9 (1) (a) (b) and (2)]

26. Are Non-resident Indians, Persons of Indian Origin and Hindu Undivided Family
eligible to invest in the SCSS, 2004?

Non resident Indians (NRIs), Persons of Indian Origin (PIO) and Hindu Undivided Family
(HUF) are not eligible to invest in the accounts under the SCSS, 2004. If a depositor becomes a
Non-resident Indian subsequent to his/her opening the account and during the currency of the
account under the SCSS Rules, the account may be allowed to continue till maturity, on a non-
repatriation basis and the account will be marked as a Non-Resident account. [Rule 13 and GOI
letter F.No.2/8/2004/NS-II dated June 19, 2006)

27. Can an account be transferred from one deposit office to another?

A depositor may apply in Form G, enclosing the Pass Book thereto, for transfer of his account
from one deposit office to another. If the deposit amount is rupees one lakh or above, a transfer
fee of rupees five per lakh of deposit for the first transfer and rupees ten per lakh of deposit for
the second and subsequent transfers shall be payable. [Rule 11 and GOI Notification GSR.(E)
dated March 23, 2006)

28. Can an SCSS account be extended?

A depositor may extend the account for a further period of three years by making an application
to the deposit office within a period of one year after maturity.

29. Does an account, which is not extended on maturity, earn any interest?

In case a depositor does not close the account on maturity and also does not extend the account,
the account will be treated as matured and the depositor will be entitled to close the account at
any time subject to the condition that the post maturity interest at the rate as applicable to the
deposits under the Post office Savings Accounts from time to time will be payable on such
matured deposits upto the end of the month preceding the month of the closure of the account.

30. What happens if an account is opened in contravention of the SCSS Rules?

If an account has been opened in contravention of the SCSS Rules, the account shall be closed
immediately and the deposit in the account, after deduction of the interest, if any, paid on such
deposit, shall be refunded to the depositor. (Rule 12)

31. Whether commission is payable to the agents under the Scheme?

Payment of commission on the Scheme has been discontinued w.e.f. December 1, 2011
(Government of India Notification dated November 25, 2011).

32. Which are the banks authorized to open an account under the SCSS, 2004?

At present, 24 Nationalized banks and one private sector bank, as per list below, are authorized
to handle the SCSS, 2004. It may be noted that only designated branches of these banks have
been authorized to handle SCSS, 2004.

1. State Bank of India

2. State Bank of Hyderabad
3. State Bank of Bikaner and Jaipur
4. State Bank of Patiala
5. State Bank of Mysore
6. State Bank of Travancore
7. Allahabad Bank
8. Andhra bank
9. Bank of Baroda
10. Bank of India
11. Bank of Maharashtra
12. Canara Bank
13. Central Bank of India
14. Corporation Bank
15. Dena Bank
16. Indian Bank
17. Indian Overseas Bank
18. Punjab National Bank
19. Syndicate Bank
 20. UCO Bank
21. Union Bank of India
22. United Bank of India
23. Vijaya Bank
24. IDBI Bank
25. ICICI Bank Ltd.

These FAQs are issued by the Reserve Bank of India for information and general guidance
purposes only. The Bank will not be held responsible for actions taken and/or decisions made
on the basis of the same. For clarifications or interpretations, if any, investors are requested to
be guided by the relevant circulars and notifications issued from time to time by the Bank and
the Government as well as the relevant provisions of the Senior Citizens Savings Scheme, 2004.

Senior Citizens Savings Scheme

Retirement brings with itself several complications and doubts, but there are savings products
that are safe and ensure guaranteed retirement income. The Senior Citizen Savings Scheme
(SCSS), launched in 2004 is a deposit scheme introduced by the government of India to provide
guaranteed returns to senior citizens through a safe investment. This scheme ensures a regular
income stream for senior citizens in retirement.

To see a detailed list of these branches:CLICK HERE

Frequently Asked Questions on Senior Citizens Savings Scheme

Eligibility

You need to be a retired Resident Indian to open an account

Entry Age

 60 years
 55 years for those who have retired on superannuation or under a voluntary or special voluntary
scheme
  The retired personnel of Defence Services (excluding Civilian Defence Employees) shall be
eligible to invest irrespective of the age limits subject to the fulfilment of specified conditions

Investments

 Minimum: Rs 1,000
 Maximum Rs 15 lakh
 Deposits have to be in multiples of Rs 1,000

Interest

 9.30 per cent per annum compounded quarterly.

 Interest shall be payable from the date of deposit to 31st March/30th June/30th
September/31stDecember on 1st working day of April/July/October/January as the case may be,
in the first instance and thereafter, interest shall be payable on 1st working day of
April/July/October/January.

Tenure

5 years which can be extended by 3 more years

Account holding categories

 Individual
 Joint with spouse

Nomination

Facility is available

Interest Guarantees

The interest rates on this scheme will be notified by Ministry of Finance / Reserve Bank of India
before April 1 of that year and is aligned with G-Sec rates of similar maturity. Currently the
interest rate in the SCSS deposit is 9.20 per cent per annum compounded quarterly (w.e.f. April
1, 2013).

Liquidity

The SCSS is liquid, despite the 5-year stipulated lock-in.

The liquidity is offered in the form of withdrawals subject to conditions and penalties.
Exit Option

 Premature closing of the account is permitted with penalty.

 The facility of pledging the deposit in the SCSS account to obtain loans is not permitted as it
defeats the purpose of regular income.
 Premature withdrawal or closure of the SCSS account is permitted after completion of one year
from the date of opening the account after deducting a penalty for early withdrawal or closure
that varies from 1-1.5 per cent depending on the completed tenure of the account.
 If the account is closed after the first year and before the end of the second year, an amount
equal to 1.5 per cent of the deposit shall be deducted as penalty.
 If the account is closed on or after the second year, an amount equal to 1 percent of the deposit
shall be deducted.

Tax Implications

Interest earned on the deposit is fully taxable and tax is deducted at source (TDS) as per
applicable Income Tax Rules. However, if the income is not taxable, one has to provide form
15H or 15G so that no tax is deducted at source.

How to Open an Account

Open a savings bank account along with SCSS Account and you will need the following
documents to be tendered at Branch Counter : -

 An account opening form which the branch will provide.

 Two passport size photographs.
 Address and identity proof such as copy of the passport, PAN (permanent account number) card
or declaration in form No 60 or 61 as per the Income Tax Act 1961, driving license, voter’s
identity card or ration card.
 Carry original identity proof for verification at the time of account opening.

10 best tax-saving investments

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A key disadvantage is the limited liquidity that the Provident Fund offers. You cannot access the
money till you retire. A one-time withdrawal is allowed in special circumstances, such as
medical emergency, purchase or construction of a house, or a child's marriage. However, it may
not be possible to opt for the VPF at this juncture.

Companies typically ask their employees to submit the VPF mandate at the beginning of the
financial year. Ask your company if you can start contributing to the VPF from this month
onwards. Once you have opted for the deduction, you cannot discontinue it till the end of the
financial year, except in extraordinary circumstances. While the VPF gets tax deduction and the
maturity corpus is also tax-free, you will have to pay tax on the interest if you withdraw the
money within five years. So, opt for it only if you are sure that you can remain invested for the
long term.

Another drawback is the possibility of a lower interest rate for the PF in the coming years. The
rate is announced by the EPFO Trust after examining the interest earned by the EPF corpus. It is
likely to be 8.5 per cent for the current financial year, but there is no certainty that this will be
maintained over the longer term.

Contributing to the VPF is suitable for taxpayers in their 50s, who want to aggressively save for
their retirement but don't want to invest in market-linked options or tax-inefficient fixed deposits.

BRIGHT IDEA: Channelise at least 10 per cent of your increment to the VPF every year. The
higher savings will not pinch you.

SENIOR CITIZEN'S SAVING SCHEME

OUR RATING:

RETURNS: 9.2 per cent (for 2013-14)

This remains the best way for retirees to save tax, though the Rs 15 lakh investment limit is a
damper.

With four stars, this assured return scheme is the best tax-saving avenue for senior citizens.
However, the Rs 15 lakh investment limit somewhat curtails its utility as a tax-saving option.
The interest rate is 100 basis points above the 5-year government bond yield.

Unlike the PPF, the change in interest rate does not affect the existing investments. This year, the
interest rate has been cut by a marginal 10 basis points to 9.2 per cent. Many grey-haired
investors may not be enthused by this. Banks are offering up to 10 per cent to senior citizens
right now, almost 50-60 basis points higher than what they give to regular customers.

There's a good reason for this pampering. Senior citizens have a bulk of their investments in
fixed deposits, which makes them prized customers for banks. So, if you do not consider the tax
deduction under Section 80C, this option is not as lucrative as bank FDs. However, as a tax-
saving tool, the scheme scores over bank fixed deposits and NSCs because the quarterly payment
of the interest provides liquidity to the investor. The interest is paid on 31 March, 30 June, 30
September and 31 December, irrespective of when you start investing.

This aspect of the SCSS, and the fact that it is an ultra safe scheme backed by the government,
makes it an ideal option for retired taxpayers looking for a steady stream of income. Though the
interest earned is fully taxable, retired people usually don't have a high tax liability. Keep in
mind that the basic tax exemption for senior citizens is higher at Rs 2.5 lakh. For very senior
citizens, it is even higher at Rs 5 lakh.

The only glitch is the Rs 15 lakh investment limit per individual. If a person parks Rs 15 lakh of
his retiral benefits in the scheme, he will be able to claim deduction for only Rs 1 lakh. Although
the scheme is for senior citizens (60 years), even those above 55 years can invest if they have
taken voluntary retirement. Retired defence personnel can join irrespective of their age if they
fulfil other conditions.

BRIGHT IDEA: If you have Rs 15 lakh to invest in the scheme

The five-year Senior Citizen Savings Scheme (SCSS), which was launched in the second half
of 2004, was quite a hit because it offered higher returns.

Many investors who invested in the initial time period would find their schemes maturing now or
in the coming days. Obviously, it is important to take a relook at these schemes from the
investor's perspective.

The main question to ask: Should they reinvest in these schemes or cash out. Also, once they
have taken out the money, what should they do with it?

The rate of return earned on this scheme is 9 per cent, which is quite high, considering the
existing rates. This return is paid to the investor every quarter. Given the high rate, it would be
quite difficult for senior citizens to get a similar rate from other instruments.
For example, bank fixed deposit rates at the longer end of the maturity period are in the range of
7-7.5 per cent. A good choice, therefore, will be to continue the same instrument.

However, there would a slight difference: While the initial investment was possible for a period
of five years, the period of extension can only be done for three years. And this extension can be
achieved by filling a form in the respective bank or post office where the investment has been
done.

There are other benefits as well. While high returns and safety is one aspect, there is also a tax
benefit. Investments up to Rs 1 lakh in the scheme are eligible for a deduction under section 80C
of the Income Tax Act.

However, there is no mention of this benefit - whether it will continue or not - under the revised
Direct Tax Code. Investors need to take a call quickly if they want to continue getting the tax
advantage.

Senior citizens who are especially 65 years and above should ensure that they are able to invest
the maximum possible amount in this instrument. This is because they come in the highest tax
bracket and, if the returns from this instrument do not exceed their basic exemption limit of Rs
2.4 lakh, they stand to earn tax-free returns.

While the positives are many, there is one major negative. These instruments lack liquidity.

Investors in these instruments cannot move in and out, as and when they wish to - a big negative
if one considers that during old age, citizens may need sudden influx of cash for medical or other
needs. Also, these investments cannot be transferred.

There are fewer instruments that provide protection as well as high returns for individuals. So till
the initial Rs 15 lakh limit per person is utilised by the individual, this is a good choice.

For people, who have a higher amount of corpus, this instrument would be inadequate, both for
the purpose of investing and, thereby generating higher returns.

Other debt options have some point or the other which makes a choice difficult for the senior
citizen. For example those that have a regular return like the monthly income scheme of the post
office have a maximum investment limit of Rs 4.5 lakh for a single individual.

In addition, a monthly income plan of a mutual fund will not guarantee any return. In some
months, if the conditions are not favourable, there might not even be any payout. Other bonds
and debentures will not ensure a regular cash flow that meets a senior citizen's needs.

Looking at these alternatives, SCSS provides a regular return flow that is quite high by existing
market standards. At the same time, it provides a decent limit for senior citizens to park their
funds.
Arnav Pandya in Mumbai

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