look news india
After retiring from job, the first priority of every elderly person is to keep his savings away from the ups and downs of the stock market and invest it in a place where the money is 100% safe and he gets fixed income every month or quarter to meet household expenses. To meet this need, ‘Senior Citizen Savings Scheme’ (SCSS) is operated by the Finance Ministry of the Government of India through post offices and authorized banks. Since it is equipped with the Sovereign Guarantee of the Central Government, there is no risk of losing even a single rupee. Currently, this scheme is offering an attractive annual interest of 8.2%, which is much more than the Senior Citizen FD (Fixed Deposit) of most of the big government and private banks of the country. This is the reason why this scheme for parking retirement funds is considered to be the most popular and superhit among senior citizens.
In the Senior Citizen Savings Scheme, interest is paid not on monthly basis but on quarterly basis directly into the linked savings account of the account holder. The interest in the scheme is calculated using the simple interest formula i.e. $(Principal \times 8.2\%) \div 4$:
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On investment of ₹5 lakh: At 8.2% annual interest rate, the total interest for one year comes to ₹41,000. This amount is divided into four equal installments, that is, every three months the account holder receives a quarterly interest amount of ₹ 10,250.
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On maximum investment of ₹30 lakh: When a senior citizen invests the maximum limit of ₹ 30 lakh set by the government in this scheme, the annual interest at the rate of 8.2% works out to be ₹ 2,46,000. Dividing it into four quarters, a fixed interest of exactly ₹61,500 is credited to the bank account every quarter (every 3 months).
If this quarterly income of ₹61,500 is looked at on a monthly basis, it equates to an average regular pension of ₹20,500 per month. During the entire maturity period of 5 years, a total of ₹ 12,30,000 is received only as interest on the principal amount of ₹ 30 lakh and on maturity, the entire principal amount of ₹ 30 lakh is safely returned.
The most systematic thing about SCSS scheme is its fixed payment schedule. In this, interest payment is transferred directly to your savings account on fixed dates four times a year – 1 April, 1 July, 1 October and 1 January. If an investor does not withdraw the quarterly interest amount from the bank, then there is no additional interest on that interest, hence it is wise to let the interest be auto-credited directly into your savings account so that it can be immediately used for household expenses or other needs.
The main eligibility conditions and rules for investing in this scheme are set out as follows:
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Age Limit: Generally, Indian citizens of 60 years of age or above can open an account under this scheme.
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VRS/Retirement Benefit Beneficiaries: Civilian employees retiring under VRS or superannuation between the age of 55 to 60 years can open this account within 1 month of receiving the retirement fund.
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Defense Personnel: The minimum age limit for employees retiring from the Armed Forces (Defence Services) has been kept at only 50 years.
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input range: Earlier only a maximum of ₹ 15 lakh could be deposited in this scheme, which has been increased by the government to ₹ 30 lakh per person. If both husband and wife are senior citizens, both can invest up to ₹30 lakh each (total ₹60 lakh) in their names separately, giving the family a regular income of ₹1,23,000 every quarter.
Investing in the Senior Citizen Savings Scheme offers tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act (if you choose the old tax regime). However, the interest received from this scheme is fully taxable. According to income tax rules, for senior citizens, if the total interest received from banks and post offices in a financial year exceeds ₹ 50,000, then TDS is deducted at the rate of 10%. Since the annual interest on an investment of ₹30 lakh is ₹2,46,000, TDS is certain to be deducted. But if the total annual income (including interest) of a senior citizen is less than the basic tax exemption limit, then they can completely stop their TDS from being deducted by submitting Form 15H in the bank or post office. Additionally, senior citizens can also avail additional deduction of up to ₹50,000 on interest income under Section 80TTB.
This account is opened for 5 years. After completion of 5 years, if you wish, you can withdraw the entire principal amount, or you can extend it in a block of 3 years by applying within 1 year of maturity. In case of any emergency, money has to be withdrawn before 5 years, there is also a penalty of 1.5% after 1 year of account opening and a deduction of 1% after 2 years for premature closure of the account. Overall, the high interest rate of 8.2% with no risk, timely pay-outs on quarterly basis and 100% security guarantee from Government of India makes SCSS one of the most trusted and preferred wealth schemes in India for senior citizens.