SENIOR CITIZENS SAVINGS SCHEME, 2004  

Senior Citizens Savings Scheme has been notified with effect from August 2. The government in the Budget 04-05 announced the scheme. What are the salient features of SENIOR CITIZENS SAVINGS SCHEME, 2004?Main features of the scheme are as follows:- The person should be above the age of 60 years to apply for this scheme. Citizens who have retired under a voluntary or a special voluntary retirement scheme and have attained the age of 55 years are also eligible, subject to specified conditions.- The 9% p.a interest, which is payable quarterly, is fully taxable.- The scheme will have a 5-year term, extendable by 3 more years.- The maximum amount of cumulative deposit is Rs.15,00,000/- per senior citizen. - Premature withdrawal facility is available after one year. The penalty for premature withdrawal is 1.50 % of the deposit amount if withdrawn after 1 year but before 2 years. However, if the deposit is withdrawn after 2 years, it will attract penalty of 1 % of the deposit amount.- The interest will be credited to the Post Office Savings Account or it can be withdrawn in cash. The Department of Post has decided to issue post dated cheques and eventually move towards Electronic Clearing System (ECS).- PAN number is compulsory. Incase, deposit holder has not so far been allotted the PAN, attested photocopy of the receipted application form for allotment of PAN is required to be attached with the application form.- Age proof is required. Self attested copies of Birth Certificate issued by municipal authority / voter ID Card / PAN Card / passport / ration card / date of birth certificate from the school last attended or driving License can be enclosed as age proof. Original of the documents attached should be produced simultaneously for verification, which will be returned immediately. Those below 60 years and above 55 years will have to provide proof of having availed of a VRS.- If husband is applying, only wife can be the second holder and vice versa. Each senior citizen can apply for 15,00,000/-, if husband is applying and wife is not a senior citizen still she can be the joint holder and vice versa.- The depositor can appoint a nominee, but in case the first holder expires and the second holder is not a senior citizen the deposit will be paid back to the second holder or nominee. - Deposit cannot be pledged for loan.- Nomination can be cancelled or revoked.- Non-Resident Indians and Hindu Undivided Families are not eligible to invest in the scheme.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.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).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 in the account, does not arise. Whether both the spouses can open separate accounts in their individual capacity with separate limit of Rs.15 lakh for each of them?Yes. Both the spouses can open individual and / or joint accounts with each other with the maximum deposits upto Rs.15 lakh each, provided both are individually eligible to invest under relevant provisions of the Rules governing the scheme.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.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. The facility of furnishing a declaration in Form No. 15H (prescribed under the Income Tax Rules, 1962) is available to a person (payee) resident in India and who is of the age of 65 years or more at any time during the previous year (since a person who has attained 65 years or more at any time during the previous year only is treated as a Senior Citizen under the provisions of Income Tax Act, 1961). A declaration in Form 15 G can be furnished by a depositor of less than 65 years of age. In cases where a certificate under Section 197(1) of the Income Tax Act, 1961 from the Assessing Officer is furnished, the agency banks / post offices shall not deduct tax at source or, as the case may be, deduct at a lower rate as specified in the certificate. Whether any minimum limit has been prescribed for deduction of tax at source? Tax is to be deducted at source if the interest paid or payable exceeds Rs.5000/- during the financial year. 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, shall be entitled to payment due on the account.Can a nomination be made after the account has already been opened?Yes. Nomination may be made by the depositor at any time after the opening of the account but before its closure, by an application in Form C accompanied by the Pass book to the deposit office.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.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 shall arise only after the death of both the joint holders.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.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 of the deceased depositor / spouse shall not be continued and such account(s) shall be closed.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 percent of the deposit amount shall be deducted.(ii) If the account is closed on or after the expiry 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 account under Rule 4 (3), then he 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. 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 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 shall be marked as a Non-Resident account [Rule 13 and GOI letter F.No.2/8/2004/NS-II dated June 19, 2006)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, in case of change of residence. 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)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.Which banks are permitted to handle SCSS, 2004?At present there are 24 Nationalised banks and one private sector bank which are handling the SCSS, 2004. The list is given below:1. State Bank of India2. State Bank of Hyderabad 3. State Bank of Indore 4. State Bank of Bikaner and Jaipur 5. State Bank of Patiala 6. State Bank of Saurashtra 7. State Bank of Mysore 8. State Bank of Travancore 9. Allahabad Bank 10. Bank of Baroda 11. Bank of India 12. Bank of Maharashtra 13. Canara Bank 14. Central Bank of India 15. Corporation Bank 16. Dena Bank 17. Indian Bank 18. Indian Overseas Bank19. Punjab National Bank 20. Syndicate Bank 21. UCO Bank 22. Union Bank of India 23. United Bank of India 24. Vijaya Bank 25. ICICI Bank Ltd. It may be noted that only designated branches of these banks have been authorized to handle SCSS, 2004.