Senior Citizen’s Savings Scheme has now allows three months to open an account, up from the current one month. Further, account holders can now extend the account for any number of blocks, with each block lasting three years.The Senior Citizen’s Savings Scheme (SCSS), designed for individuals aged 60 years or employees above 55 years of age and below 60 years of age, offers 8.2 per cent interest per annum. The Department of Economic Affairs, Ministry of Finance notified the latest round of changes on November 7.

Here are the seven changes in small savings schemes:

  1. As mentioned earlier, the government has provided three months to invest in SCCS for individuals aged above 55 but below 60. Currently, investment has to be made within one month of receipt of retirement benefits.
  2. The scope of retirement benefits has been clearly defined. As per the notification, retirement benefit means 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.
  3. The new rules also permit the spouse of a government employee to invest the financial assistance amount in the scheme.
  4. Under the updated rules, a 1 per cent deduction of the deposit is applicable if the account is closed before completing one year of investment. Earlier, if account closed before one year, no interest will be payable and if any interest paid in account shall be recovered from principle.
  5. Account holders can now extend the account for any number of blocks, with each block lasting three years. Previously, the extension was allowed only once.
  6. In the case of 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.
  7. As per the notification, “The deposit made at the time of opening of account shall be paid on or after the expiry of five years or after the expiry of each block period of three years where the account was extended under paragraph 8 from the date of opening of account. Provided that after the closure of the existing account or accounts, new accounts or accounts may be opened again as required by the depositor subject to the maximum deposit limit.”

The government currently offers nine small savings schemes, including the Public Provident Fund (PPF), Sukanya Samriddhi Yojana, Senior Citizen’s Savings Scheme (SCSS), Post Office Monthly Income Scheme (POMIS), National Savings Certificate (NSC), Kisan Vikas Patra (KVP), Post Office Time Deposit (POTD), Atal Pension Yojana (APY), and Pradhan Mantri Vaya Vandana Yojana (PMVVY). Each scheme comes with its own set of features, tenures, and interest rates.  

Changes in PPF and Time Deposit accounts 

The latest notfiation also relaxed norms for the premature closure of a Public Provident Fund Account. Previously, premature closure of a PPF Account incurred a penalty, with interest allowed at a rate 1 per cent lower than the rate credited to the account since its opening or extension. 

With the modification, interest on premature closure will now be allowed at a rate of 1 per cent less than the interest periodically credited to the account from the start of the current five-year block period.

According to the notification, if a withdrawal is made prematurely from the five-year Time Deposit Account after four years from the account’s opening date, the applicable interest rate would be that of the Post Office Savings Account. 

As of now, closing a five-year Time Deposit account four years from the deposit date would entail the application of the interest rate applicable to a three-year Time Deposit account for interest calculation.