What are the rules of TDS deduction in Senior Citizens’ Savings Scheme

The Department of Posts, via a notification dated November 22, 2021, said that it has been “receiving representations from the SCSS (Senior Citizens’ Savings Scheme) account holder(s) that TDS amount has been deducted from their interest payments even after submission of form 15G/15H for the current Financial Year.”

The department has stated that, “Government of India has amended Section 194A of Income Tax Act, 1961 and accordingly the total aggregate interest income in a Financial Year payable in case of all SCSS account holders, who has not attained the age of 60 years has been revised and configured in Finacle from Rs. 10,000/- to Rs. 40,000/- for the purpose of TDS deduction”.

The Government of India has amended Section 194A of the Income Tax Act, 1961, and as a result, the total interest income payable in a Financial Year for all SCSS account holders under the age of 60 has been revised from Rs. 10,000 to Rs. 40,000 for the purpose of TDS deduction.

“It is the responsibility of concerned CBS post office for updation of form 15G/15H (if submitted) in every financial year and update correct PAN number. Quoting invalid PAN /wrong PAN number may attract penalty u/s 272B of Income Tax Act-1961,” stated the notification

Here is a look at the TDS rules regarding Senior Citizens’ Savings Schemes (SCSS).

What is SCSS?

A Senior Citizens’ Saving Scheme (SCSS) is a small savings or post office scheme that provides benefits to seniors aged above 60 years. According to the Department of Posts, “Retired Civilian Employees above 55 years of age and below 60 years of age, subject to condition that investment to be made within 1 month of receipt of retirement benefits. Retired Defense Employees above 50 years of age and below 60 years of age, subject to condition that investment to be made within 1 month of receipt of retirement benefits.”

Individually or jointly, senior citizens residing in India can invest a lump sum in the scheme and receive a regular income as well as tax benefits. Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not allowed to invest in SCSS.

The SCSS account has a limit of Rs15 lakh that you can invest and should be invested in multiples of Rs 1,000.

How is the interest paid?

For the quarter ending December 31, 2021, interest rate for the scheme has been set at 7.4 per cent per annum. The interest is calculated for each quarter up to the last day of every quarter i.e., on March 31, June 30, September 30 and December 31. The interest payable is credited to the account holder’s account on April 1, July 1, October 1 and January 1.

How are investments in SCSS taxed?

Before you read any further, do note that these tax benefits are available for only those who have opted for the old income tax regime; those who have opted for the new, concessional tax regime cannot avail these deductions.

Section 80C of the Income-tax Act, 1961 allows for a deduction for contributions to SCSS. This tax benefit, however, is limited to the present annual limit of Rs 1.5 lakh for all investments made under section 80C.

The interest received under the scheme is taxable in the hands of the depositors. However, senior citizens can claim deduction under section 80TTB for the maximum up to Rs 50,000 in a single financial year. There is a tax deducted at source (TDS) on the interest payment if the amount is more than Rs 10,000 per annum as per current tax laws.

For senior citizens above the age of 60 years, interest is taxable if the total interest paid in all SCSS accounts in a financial year exceeds Rs.50,000 (for those below 60 years it is Rs 40,000), and TDS at the nominal rate is deducted from the total interest paid. If form 15G/15H is presented and the accrued interest does not exceed the prescribed maximum, no TDS will be deducted.

According to the Department of Posts notification, TDS will be deducted from SCSS account holders under the age of 60 by non-CBS post offices in compliance with the amended limit.

If you are an account holder of SCSS, make sure to check if TDS has been deducted even after submitting Form 15G/H. Further, do make sure that you have filled up and submitted Form 15G/15H to make sure that TDS is not cut from your SCSS investments.

Also read:
All you need to know about Senior Citizens’ Savings Scheme

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