Indian Overseas Bank, founded in 1937, was established with two main objectives – overseas banking and foreign exchange business. It was the pioneer in making personal loan schemes available, thereby paving the way for consumer credit.
The IOB Senior Citizen Scheme is a government-backed instrument that offers individuals a chance to generate regular income, enjoy greater safety of investment, and tax saving as well. It is a lucrative investment option for individuals above 60 years of age to park their retirement corpus and generate attractive returns to meet various financial requirements.
Features of the Senior Citizen Savings Scheme
Here are a few primary features of IOB Senior Citizen Scheme –
- The minimum deposit amount for this scheme is Rs.1000, while the maximum limit goes up to Rs.15 lakhs. Deposits can be made only in multiples of Rs.1000
- Maturity term is 5 years, and it is extendable by 3 years.
- Nominations can be made in favour of more than one person.
- Account can be opened both on an individual basis and with a co-applicant.
- Premature withdrawal can be made against a penalty of 1.5%.
Rate of Interest against IOB Senior Citizen Scheme
The existing interest rate under the Senior Citizen Savings Scheme is 7.4%. The rate is announced by the Finance Ministry before every quarter. The interest rate may change between different quarters.
It becomes apparent by analysing the historical interest rates against SCSS, as mentioned in the table.
While the interest rate was 8.7% in Q1 of FY 2019-2020, it was 7.4% in Q1 of FY 2020-2021.
|Quarters||Rate of Interest|
|(FY 2020-21) July to September||7.4%|
|(FY 2020-21) April to June||7.4%|
|(FY 2019-20) January to March||8.6%|
|(FY 2019-20) October to December||8.6%|
|(FY 2019-20) July to September||8.6%|
|(FY 2019-20) April to June||8.7%|
|(FY 2018-19) January to March||8.7%|
|(FY 2018-19) October to December||8.7%|
|(FY 2018-19) July to September||8.3%|
|(FY 2018-19) April to June||8.3%|
Throughout the maturity period, i.e., the first 5 years, the applicable interest rate will be the one that was prevalent when the deposit was made. However, if the term of IOB Senior Citizen Scheme is extended by another 3 years, the applicable rate will be the one which was prevailing in that specific quarter when the term was renewed.
Eligibility Criteria to Invest into Indian Overseas Bank SCSS Scheme
Individuals who meet the following eligibility criteria can open an account under the IOB Senior Citizen Scheme –
- An individual must be aged 60 years or above.
- Individuals who retired from defence services and are 50 years or higher of age.
- Individuals who are more than 55 but under 60 years of age and have retired on superannuation or VRS can also avail the benefits of this scheme. However, in this instance, the account will have to be started within the first month of receiving retirement benefits.
Taxability of IOB SCSS
The deposit made under IOB Senior Citizen Scheme, under Section 80C of the ITA, 1961, qualifies for tax benefits.
However, the interest earned is entirely taxable. If the interest earned exceeds Rs.50,000 in a financial year, the tax will be deducted at source.
Comparison between Senior Citizen Saving Scheme and Fixed Deposit
IOB offers the benefits of both fixed deposits and SCSS to its customers. One can compare the two schemes with the help of the following table to choose the one best suited to their requirements.
|Senior Citizen Savings Scheme||Fixed Deposit|
|Rate of Interest
(as on September 18th, 2020)
|7.4% (July to September 2020)||3.50% to 6.20%|
|Maturity Period||5 years||From 7 days to 10 years|
|Tax Benefit (On Returns)||Can be taxed||Can be taxed|
|Tax Benefit (On Investment)||Applicable||Applicable|
|Pre-mature withdrawal||After 1 year (1.5% charge)||1% for deposits above Rs.5 lakh|
One must, however, remember that the SCSS can be availed only by eligible individuals while FDs are available to all.
Documents Required to Start IOB SCSS Account
The formality of starting an account under IOB Senior Citizen Saving Scheme is not all complicated. The application form, i.e., Form A will have to be duly filled and submitted alongside relevant documents, like –
(1) Identity proof such as passport or PAN card,
(2) Address proof such as Aadhaar card,
(3) Birth proof such as birth certificate,
(4) Passport size photographs,
Applicants should note that all these supporting documents must be self-attested.
While the interest rate under the IOB Senior Citizen Scheme is comparatively high in comparison to Fixed Deposit schemes, the maximum tenure for the former is 8 years (5 years’ maturity period, which can be extended by another 3 years). It is, thus, important to decide on other investment instruments for parking the retirement corpus before the end of this 8 years’ period.