On 7th November 2023, Department of Economic Affairs(DEA), under the Ministry of Finance, notified 7 changes in Senior Citizens Savings Scheme(SCSS), a government-sponsored savings instrument for individuals aged 60 years or employees aged 55 years or more but less than 60 years.
7 Changes in SCSS:
i.Extended Time for Investing Retirement Benefits
The government has provided 3 months to invest in SCSS for individuals aged above 55 but below 60. At present, the investment has to be made within 1 month of receipt of retirement benefits.
ii.Investment by Spouse of Government Employee
Following the change is SCSS rules, the spouse of the government employee is now permitted to invest the financial assistance amount in the scheme.
iii.Broadened Definition of Retirement Benefits
The rule now clearly defines the scope of retiremnet benefits, any payment received by the individual due to retirement or superannuation.
- This includes provident fund dues, retirement or superannuation or death gratuity, commuted value of pension, leave encashment, savings element of group savings linked insurance scheme payable by the employer on retirement, retirement-cum-withdrawal benefit under Employees’ Pension Scheme (EPS) and ex gratia payments under a voluntary or special voluntary retirement scheme.
iv.Deduction on premature withdrawal
The notification has relaxed the norms on premature withdrawals from SCSS.
Now, 1% of the deposit will be deducted if the account is closed before the expiry of 1 year of the investment.
- Previously, if the account was closed before the expiry of 1 year, interest paid on the deposit in the account was to be recovered from the deposit and the entire balance was paid to the account holder.
v.No limit on the extension of SCSS:
According to the revised rules, the account holder can continue to extend the account for ‘n’ number of block – the block being of 3 years each. An application has to be submitted for every extension.
- Prior to the notification, the extenion of SCSS was allowed only once.
- The extension will be considered from the date of maturity or from the end of each block period of 3 years.
vi.Interest on Extended Deposits:
As per the new rules, While extending the SCSS account on maturity, the deposit will earn the interest rate applicable to the scheme on the date of maturity or on the date of the extended maturity.
vii.Maximum Deposit Amount:
The maximum deposit amount in the scheme shall not exceed the allowed deposit limit.
- The maximum deposit limit for SCSS has been enhanced to Rs 30 lakh from Rs 15 lakh with effective from 1st April 2023. This was announced in Budget 2023.
Note: This is a clarificatory rule, since multiple extensions in the scheme have now been allowed.
i.SCSS, lauchned in 2004, is designed specifically for senior citizens to provide them with a regular income and secure investment opportunity.
ii.The SCSS offers a competitive interest rate, which is revised quarterly by the government.
- The current interest rate is 8.20% per annum, compounded quarterly.
iii.The SCSS is eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The maximum deduction limit is Rs 1.5 lakh per annum.
SCSS is one among the 9 small savings schemes offered by the government.
The other small savings schemes are
- Public Provident Fund (PPF)
- Sukanya Samriddhi Yojana(SSY)
- Post Office Monthly Income Scheme (POMIS)
- National Savings Certificate (NSC)
- Kisan Vikas Patra (KVP)
- Post Office Time Deposit (POTD)
- Atal Pension Yojana (APY)
- Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Recent Related News:
On 28th June 2023, the Ministry of Finance announced that there will be no changes in the rate of Tax Collection at Source (TCS) for all purposes under Liberalised Remittance Scheme (LRS) and for overseas travel tour packages, regardless of the mode of payment, for amounts up to Rs 7 lakh per individual per annum.
About Ministry of Finance:
Union Minister – Nirmala Sitharaman (RajyaSabha – Karnataka)
Minister of State (MoS) – Pankaj Chaudhary; Dr. Bhagwat Kishanrao Karad