IDBI or the Industrial Development Bank of India was established with the objective of providing credit to industries, and it was initially operated as a subsidiary of RBI. In 2018, LIC became the majority shareholder in IDBI Bank, having acquired the stake of 51%. In the Indian banking sector, IDBI is well established in offering a host of financial products and services. Of these, the bank’s senior citizen savings scheme has gained rapid popularity as an investment option with guaranteed returns.
The Senior Citizen Savings Scheme (SCSS) as an investment instrument is specifically designed to meet the financial requirements of retired individuals. It is understood that the primary concern of such investors with respect to retirement benefits is to safeguard funds from any risk and ensure a cash flow from the invested sum. The IDBI Senior Citizen Scheme successfully caters to the investment needs of retired senior citizens by providing a host of benefits.
Here are a few key features of IDBI Senior Citizen Scheme –
The interest rate of the Senior Citizen Savings Scheme is declared by the Finance Ministry ahead of every quarter. For instance, an interest rate of 7.4% was announced on 1st July 2020, for the second quarter of FY 2020-2021. Hence, the current IDBI Bank SCSS interest rate, as on 16th September 2020, is also 7.4%.
Under this scheme, interest is paid out on a quarterly basis.
Take a look at the interest rates that were applicable in the previous few quarters –
|Quarters||Rate of Interest|
|(FY 2020-21 Q2) July to September||7.4%|
|(FY 2020-21 Q1) April to June||7.4%|
|(FY 2019-20 Q4) January to March||8.6%|
|(FY 2019-20 Q3) October to December||8.6%|
|(FY 2019-20 Q2) July to September||8.6%|
|(FY 2019-20 Q1) April to June||8.7%|
|(FY 2018-19 Q4) January to March||8.7%|
|(FY 2018-19 Q3) October to December||8.7%|
|(FY 2018-19 Q2) July to September||8.3%|
|(FY 2018-19 Q1) April to June||8.3%|
Individuals need to satisfy a few prerequisite eligibility criteria to avail of the benefits of the IDBI Bank SCSS. These are –
However, members of the Hindu Undivided Family, Non-Resident Indians and Persons of Indian Origin are not eligible to start an account under the Senior Citizen Savings Scheme.
Deposits made under the IDBI Senior Citizen Scheme are entitled to enjoy an exemption of up to Rs.1.5 lakh in a year, as applicable under the Income Tax Act, 1961. However, the interest earned on the investment is subjected to taxation at the end of the depositor. Tax would be deducted at source if the interest earned amounts to more than Rs.50,000 in a given financial year. Such limit for TDS deduction on the deposits made under SCSS is applicable from FY 2020-2021.
|Senior Citizen Savings Scheme||IDBI Bank Fixed Deposit|
|Rate of Interest||7.4% (July to September 2020)||Typically ranges from 3.00% to 6.10%|
|Maturity Period||5 years||7 days to 5 years|
|Tax Benefit (On Returns)||Taxable||Taxable|
|Tax Benefit (On Investment)||Applicable||Applicable|
|Premature withdrawal||After 1 year (1.5% charge)||1%|
The process of application of IDBI Senior Citizen Scheme can be initiated both online or offline. The following documents will have to be procured by the applicant to start the account –
It is important to note that these documents will have to be self-attested.
While the IDBI Senior Citizen Scheme provides such benefits that are well suited for retired individuals to park their funds, the tenure is 5 years which can be extended by another 3 years. Hence, the maximum tenure under this scheme is 8 years. It is, thus, advisable to plan for alternate investment instruments before the tenure of the scheme ends.