This savings scheme backed by the government aims to facilitate savings among senior citizens. Let's know about it.
Updated on: 14-Feb-2023
What is Senior Citizen Savings Scheme?
Retirement brings with itself several complications and doubts, but there are savings products that are safe and ensure guaranteed retirement income. The Senior Citizen Savings Scheme (SCSS), launched in 2004, is a deposit scheme introduced by the Government of India to provide guaranteed returns to senior citizens. This scheme ensures a regular income stream for senior citizens post- retirement.
Features of Senior Citizen Savings Scheme
Capital protection and inflation protection
The capital in the SCSS is completely protected, as the scheme is backed by the Government of India. The SCSS is not inflation protected, which means whenever inflation is above the current interest rate, the deposit earns no real returns. However, when the inflation rate is below the current interest rate, it does manage a positive real rate of return.
Investment objective and risks
The main objective of the SCSS is to provide an assured return every quarter to senior citizens, which helps them create a guaranteed regular income flow.
Suitability and alternatives
Senior Citizen Savings Scheme interest rate
Currently 8 per cent per annum compounded annually. The interest is paid on the last working day of March, June, September and December.
The interest rate for your deposit is fixed for the full 5-year term, meaning that you will receive the same rate even if the interest rates for the SCSS scheme change over time.
Guarantees
Interest rates are aligned with G-sec rates of similar maturity, with a spread of one per cent. The government has decided to review the SCSS rates quarterly. However, once a subscriber has enrolled, the rates will remain unchanged for the tenure. For the last quarter of FY22, the rate has been set as 7.40 per cent compounded annually. The payout of interest is quarterly.
Liquidity
The SCSS is liquid, despite a five-year lock-in. One can make withdrawals subject to conditions and penalties.
Tax implications
The sum invested in the SCSS on or after April 1, 2007, is eligible for a tax deduction under Section 80C of the Income-Tax Act. Interest earned above Rs 50,000 is fully taxable and is also subject to TDS. As per section 80TTB, senior citizens are allowed to take deduction of interest earned from all types of deposits with banks, co-operative banks and post offices subject to an overall maximum limit of Rs 50,000.
Where to open a SCSS account
The SCSS account can be opened at any head post office or general post office. Select branches of several designated nationalised banks - Indian Bank (including merged Allahabad Bank), Union Bank of India (including merged Andhra Bank and Corporation Bank), State Bank of India, Bank of Baroda (including merged Dena Bank and Vijaya Bank), Bank of India, Bank of Maharashtra, Canara Bank (including amalgamated Syndicate Bank), Central Bank of India, Indian Overseas Bank, Punjab National Bank (including merged United Bank of India), UCO Bank and IDBI Bank offer the SCSS. ICICI Bank is the only private bank that offers the SCSS.
How to open a SCSS account
Once you have selected the bank to open the SCSS account, you will first need to open a savings bank account. You will need the following documents:
To view the current rates on the schemes, go to vro.in/s34211
