New Delhi: Senior Citizen Savings Scheme (SCSS) is one of most attractive savings scheme in India for senior citizens. The scheme is well received primarily because it’s a government-backed one that offers higher interest rate than most of the bank fixed deposit interest rates.
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What is Senior Citizen Savings Scheme?
A senior citizen (above the age of 60) can invest a lump sum in the scheme, either individually or jointly. In addition to tax advantages, the SCSS will offer access to regular income after retirement. As of now, the scheme is offering an interest rate of 8.2 per cent.
While the minimum deposit under the scheme is Rs 1,000, the maximum deposit under the scheme is Rs 30 lakh. The proposal for enhancement of limit under SCSS from Rs 15 lakh to Rs 30 lakh was made during Union Budget 2023.
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SCSS is effective savings options for the long term and offer attractive features and unmatched security. Here are some of the benefits of SCSS:
- Tax benefits are provided.
- Safe to invest in the scheme.
- Premature withdrawal is allowed.
- The account can be transferred across the country
- High interest rates are offered
However, there are disadvantages to the scheme:
TDS on SCSS interest: If the interest from SCSS surpasses Rs 50,000 cap in a financial year, it becomes taxable unlike PPF schemes where everything is tax-free.
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Fixed interest rate: Even though the SCSS account has become an appealing investment choice for senior citizens due to the current interest rate of 8.2 per cent, those who created the account earlier at a lesser rate are at a disadvantage. This might force them to close their previous SCSS account and start a new one to take advantage of the present high rate. However, there are fees associated with prematurely canceling an SCSS account.
No interest on unclaimed interest income: Each quarter, owners of SCSS accounts must report their interest earnings. You won’t receive any further interest on the money if you don’t claim the interest that is due each quarter.
Limited Age Bracket: The SCSS scheme is only seniors over 60 years of age. Employees in the private sector who desire to retire early cannot take advantage of the programme.
Fixed Tenure: Those investments made in SCSS accounts have a five-year lock-in period. You can extend it by additional three years. The lock-in period and penalty imposed for premature withdrawal could create liquidity crisis to some investors.
