Senior Citizen Savings Scheme (SCSS):Interest Rate, Eligibility,Benefits & Calculation
Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings scheme for senior citizens. To cover all sections society under benefit programmes, the Government of India launched this scheme in the year 2004. The primary objective of the scheme is to provide financial support to retirees in terms of ensuring a regular flow of income. The interest payment is guaranteed and received quarterly.
Eligibility For SCSS Scheme
To avail the benefits of this scheme, one needs to fulfill the following criteria:
- An individual must be a citizen of India. Non-residential Indians (NRIs) or a person of Indian origin (PIOs) are not eligible to avail this feature. Also, Hindu Undivided Family (HUFs) do not qualify for this scheme.
- As this is a senior citizen savings scheme, so any resident of India aged 60 years or above is eligible for this scheme. However, there are few exceptions to the age bar:
a. Retirees in the age group of 55-60 years who have opted for Voluntary Retirement Scheme (VRS) or Superannuation are eligible to avail the scheme if they apply for the same within one month of gaining their retirement perks.
b. Retired defence personnel can avail this scheme irrespective of their age, provided they fulfill all other conditions.
- This scheme can be availed with a minimum deposit amount of Rs. 1000.
What Is The Interest Rate of SCSS?
As this scheme is solely a government-run scheme, so the interest rate and other conditions have been set keeping in mind the financial needs of retirees. Below mentioned are SCSS interest rates for the fiscal year of 2018-19.
|4th quarter of 2018-19
|3rd quarter of 2018-19
|2nd quarter of 2018-19
|1st quarter of 2018-19
From the 1st till the 3rd quarter period of the years 2018-19 the interest rate remained low as compared to the 4th quarter of the year. It rose by 0.4% in the 4th quarter. Also, it was highest in the year 2015-16 and 2012-13, i.e., 9.3%. Since then, the 4th quarter of this year has shown the highest interest rate.
Tax Implications Of SCSS or Senior Citizen Savings Schemes Tax Benefit
Investments made under SCSS are eligible for tax deduction under section 80C of the Income Tax Act, 1961. According to the current rules, if your interest earnings from SCSS are more than Rs 50,000 in one fiscal year, you are liable to pay TDS (Tax Deducted at Source) for the interest earned.
Benefits of Senior Citizens Savings Scheme
- Being a government-run scheme, it offers safety and guarantee of your investment. It also offers reasonable returns on your investment.
- It is extremely easy to open, operate, and transfer SCSS account at any authorized bank or post office in India.
- It offers the flexibility to extend tenor. You can start with a tenor of five years, and after its maturity, you may extend it up to three more years. The tenor can be extended only once.
Calculation Of SCSS Interest Rate
It is easy to calculate SCSS interest rate. To know your interest amount, you need to calculate the compound interest on the deposit amount as per the SCSS interest rate for that particular quarter. The payment is released annually to the savings account of the account holder.
Limitations of Senior Citizens Savings Schemes
There are few limitations of this scheme as well. These are-
- Not inflation proof: Although the scheme gives guaranteed returns, it is prone to inflation in the country. In case of high inflation, you might not be able to protect your interest rate, and the returns might become zero.
- Limited tenor: This scheme is limited to five years. Only a one-time extension up to three years is possible. So, you cannot invest in it beyond eight years.
- Tax deduction: Income tax is deducted on the interest earned. This decreases your overall earnings.
- Cap on investment amount- You can invest a maximum of INR 15 lakh (individually or jointly) in SCSS account. Also, your investment can’t exceed the amount you receive on your retirement.
- Penalty on premature withdrawal- You can also close your SCSS account at any time with minimal penalty charges.
Fixed deposit is a good investment option for senior citizens looking at high, stable returns from their investments. Unlike SCSS, well-planned FD investments can earn you good returns even during inflation. Fixed deposits also offer flexible investment terms (investment amount, tenor, and premature withdrawal) as compared to SCSS. Let’s see why Senior Citizen Fixed Deposits are a better investment option than SCSS:
- High returns for senior citizens – Senior Citizen Fixed Deposit from Bajaj Finance offer an attractive interest rate. The interest rate offered is as high as 8.95%, and there is an additional benefit of 0.25% on renewals. No other fixed income investment (including SCSS) offers such a high interest rate.
- Flexible tenor - You can choose the tenor as per your needs. Bajaj Finance offers flexible tenor in the range of 12 months to 36 months. Senior citizens can protect their investment against inflation by opting for shorter tenors. Also, you can renew your FD upon the completion of the tenor. There is no limit on the number of renewals.
- Credit ratings - Company FD like Bajai Finance FDs which have a high credit rating offer assured and guaranteed returns while ensuring the safety of your principal amount. Bajaj Finance FD is rated FAAA/stable by CRISIL and MAAA/stable by ICRA.
- Periodic interest payouts - Senior citizens can avail periodic interest payouts with Bajaj Finance FD to meet their regular monthly expenses. You can choose monthly, quarterly, or annual payouts.
- FD calculator - Senior citizens can calculate the maturity amount of their FD investments with online FD calculator. This leaves no room for any confusion or ambiguity.
- Easy access - Bajaj Finance offers the ease of creating and managing an FD account online from the comfort of your home. It also has 200+ branches across India. Senior citizens are provided with a facility of doorstep document pick-up at no additional cost.
Comparison between Bajaj Finance Fixed Deposit and Senior Citizen Savings Scheme (SCSS):
||Bajaj Finance Fixed Deposit
||8.95% (additional 0.35% for Senior citizens)
||8.7% (current rate for the 4th quarter of FY 2018-19)
||Flexible ranging from 12 months to 60 months.
||Fixed at 5 years with a one-time extension up to 3 years
||It is also available for Hindu Undivided family
||It is not available for HUF
|Interest payout frequency
||Loan against FD available
||Loan facility not available