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.

Features of the IDBI Senior Citizen Scheme

Here are a few key features of IDBI Senior Citizen Scheme –

  • The minimum deposit under the Senior Citizen Savings Scheme is Rs.1000. Deposits can be made only in multiples of Rs.1000. The upper limit of the deposit is Rs.15,00,000.
  • The tenure of the scheme is 5 years. Depositors have the option of extending it by another 3 years.
  • More than 1 person can be made a nominee of the depositor.
  • Senior Citizen Savings Scheme accounts can be opened either in an individual capacity or on a joint basis.

Rate of Interest against IDBI Bank 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%

Eligibility to Invest into SCSS IDBI Bank

Individuals need to satisfy a few prerequisite eligibility criteria to avail of the benefits of the IDBI Bank SCSS. These are –

  1. One needs to be 60 years or more of age.
  2. Applicants need to be 55 years or more but less than 60 years of age in case of superannuation or if they have opted for VRS.
  3. Retired Defence Services personnel can opt for this scheme if they are 50 years or more of age.

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.

Invest in elss funds

Taxability of Senior Citizen Saving 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.

Comparison between Senior Citizen Saving Scheme and Fixed Deposit 

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%

Documents Required to Start Account in Senior Citizen Scheme in IDBI Bank

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 –

    1. Form A (Can be downloaded from the official website of IDBI bank or obtained from any of the bank’s branches)
    2. Age proof
    3. Address proof
    4. Permanent Account Number (PAN)
    5. Passport size photographs of the applicant
    6. Employer certificate and proof of disbursal of retirement benefits

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.

mutual fund investment