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June 3, 2020

How Senior Citizen can earn more Interest by shifting from FD to Senior Citizen Saving Scheme?

by Mahesh Mara in Compliance Law, Income Tax

How Senior Citizen can earn more Interest by shifting from FD to Senior Citizen Saving Scheme?

In 2004 government introduced the Senior citizen Savings Scheme in order to provide guaranteed return to the senior return and in doing so to create a guaranteed regular income flow. Investing in Senior Citizen Savings Scheme is a good opportunity for senior citizens above 60 years to generate good income. It is a long-term saving option which offers security and also some added features that are usually associated with any government-sponsored savings or investment scheme. These schemes are available through certified banks and post offices across India. In this article we will talk about the various features of the senior citizen savings scheme.

Features of investing in SCSS

1. Minimum entry restrictions: The applicant must be of more than 60 years of age and he can avail the scheme in any of the nearest authorized bank. The applicant can enter the scheme with a minimum deposit of Rs. 1000 or any sum in multiple of Rs. 1000 not exceeding Rs. 15 lakhs. It is also transferable across India.

2. Secured and Trustworthy: Senior Citizen Savings Scheme is a safe and trustworthy investments as it is a government-sponsored investment scheme thus considered as one of the safest and most reliable investment options.

3. Interest rate: In 2019 -20 the scheme offered interest rate of 8.6% Currently in FY 2020-21 for Q1 the interest rate is 7.4% The return rate is far better as compared to a savings or FD account which is in range of 5% to 6%. The scheme also offers ECS transfer of interest to savings account.

4. Nomination facility: Nomination facility is been made available at the time of opening of account by the applicant through submission of an application as part of Form C. This submission is also accompanied by the passbook to the Branch.

5. Tax benefits: Senior Citizen Savings Scheme provides a tax deduction benefit of up to Rs.1.5 lakh under Section 80C of the Indian Tax Act, 1961.

6. Tenure: The investment under senior citizen savings scheme is subject to a lock in period of 5 years. which means the applicant cannot withdraw the investment amount till the completion of 5 years from the date of opening of the account. The account holder has option to extend the tenure to a further 3 more years. Premature closing of deposit is attached with penalty.

7. Capital Protection: The capital investment in the scheme is completely protected as it is backed by the Government of India. But the scheme is not inflation protected, 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.

8. How to open an SCSS account: An SCSS account can be opened in any of the authorized banks or post office branch across India with following documents:

  1. Form A  has to be filled for opening an SCSS Account.
  2. Identity proof like PAN card, Aadhaar to be presented.
  3. Address proof such as Telephone bill, Aadhar card is mandatory.
  4. Document for proof of age is required. This could be in the form of a Passport, Senior Citizen Card, a Birth certificate issued by the Corporation or Registrar of Births and Deaths, Voter ID card

8. Banks applicable for SCSS Account

Following are the banks where an SCSS account can be opened:

  1. Allahabad Bank
  2. Andhra bank
  3. Bank of Maharashtra
  4. Bank of Baroda
  5. Bank of India
  6. Corporation Bank
  7. Canara Bank
  8. Central Bank of India
  9. Dena Bank
  10. IDBI Bank
  11. Indian Bank
  12. Indian Overseas Bank
  13. Punjab National Bank
  14. State Bank of India
  15. Syndicate Bank
  16. UCO Bank
  17. Union Bank of India
  18. Vijaya Bank
  19. ICICI Bank

To sum it up, SCSS is a very good scheme for senior citizens who want a decent risk free return on a corpus fund. At an 7.4% interest rate and an investment amount of 15 lakhs, the monthly income is stated to be Rs 9,250 per month for each investor. There is no family limit, both husband and wife can open separate account

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