Senior Citizen Savings Scheme is a social security scheme that provides a financial safety net to individuals above 60 years of age. In India, the number of senior citizens above the age of 60 years is estimated to touch 300 million by 2050.
The social security scheme thus provides retirees with substantial funds to support their funding requirements and make them financially independent. It is a unique deposit option offering retirees an opportunity to earn interest at high rates.
SCSS is one of the highest-earning small savings schemes that currently exist. As of 2022, the SCSS interest rate set is 7.4% per annum.
The significantly high SCSS current interest rate may be the best thing about these accounts, among other benefits they offer.
Given the current rate of interest on a Senior Citizen Savings Scheme, individuals can expect significant growth in their investment corpus over a 5-year term.
The SCSS interest rate is revised once every 3 months and thus is subject to change four times a year. The Reserve Bank of India’s Monetary Planning Committee meets at periodic intervals, and the rates of interest applicable are drawn up based on prevailing economic conditions.
Here is a brief overview of how the SCSS interest rates have varied over the previous years.
|Timeline (FY)||SCSS Interest Rate|
|Up to 2012||9.00%|
Senior Citizen Savings Scheme Interest CalculationHistorically, the SCSS interest rates have always been higher than any comparable deposit-linked financial instrument. While they have been slashed by as much as 0.9% at times, they have also been increased.
As an example, let us assume Mr. Sharma has decided to invest Rs. 15 Lakh, the maximum permissible limit, in his SCSS. After the tenure of 5 years, the total earnings (interest + principal amount) will stand at (Rs. 15,00,000*1.086)*5 = Rs. 22.65 Lakh.
Mr. Sharma can also avail quarterly payments. For example, if he decides to invest Rs. 1 Lakh for 5 years at the current SCSS interest rate, the total maturity amount will be Rs. 1.43 Lakh. Of this, the total interest is Rs. 43,000. The quarterly receivable amount will be Rs. 2, 150.
Opening such an account comes with two prime benefits, to create a substantial post-retirement corpus, and to save on income tax payable. Others include –
The returns on these schemes are assured because of Government backing along with sovereign debt protection. Unlike investments that are linked to markets and may thus fluctuate, these savings accounts are safe and will return the sums promised. Thus, as per the SCSS interest rate 20222 (Q1) of 7.4% p.a., investors can rely on assured returns as per this rate, subject to change as per periodic revisions.
SCSS is popularly known as a medium-term investment since it comes with an initial maturity period of 5 years. Also, closing the account earlier or withdrawing the sum prematurely attracts a penalty. Also, a maximum of 3 years can be added to this tenure. These are thus good options for medium-term savings given the SCSS rate of interest is not subject to market fluctuations.
A maximum of Rs. 15 Lakh can be invested and only investments in multiples and with a minimum of Rs. 1,000 are accepted. Note that only a lump sum and one-time investments are allowed.
Investment in SCSS brings certain advantages on the taxation front as well. The most important ones are:
The following are the people who can apply for SCSS.
|Citizens of India aged 60 and above||Eligible|
|People in the age bracket of 55-60 and who have applied for VRS (Voluntary Retirement Schemes) or superannuation by 60||Eligible|
|Retired defense personnel below the age of 50||Eligible|
|Non-Resident Indians of age 60 and above||Not eligible|
Anyone who is above the age of 60 years and wishes to save enough for the years post-retirement is eligible to open an SCSS account. Those who are planning to take advantage of the high SCSS interest rate in 2022 can invest in this scheme.
An SCSS acts as an investment option for those who wish to think long-term. It is also essential to remember that a senior citizen can open this account in joint ownership as well, but only with her or his spouse.
Additionally, an eligible individual can also invest in a Senior Citizen Savings Scheme via the nearest branch of India Post.
Now, take a look at some FAQs on SCSS interest rates which are rather common.
No. Under existing laws, any retired military personnel under 50 years of age may also avail of the many benefits of an SCSS account. The age bar is higher for civilians who must be at least 60 years old.
There is no time pre-set for such changes. The Monetary Policy Committee of the RBI meets four times a year – at intervals of 3 months. Usually, the first meeting is held in the first quarter of every financial year.
The account holder can opt for anyone to become the nominee, but only spouses can be joint account holders.
There are no rules on which any upper age limits for investment in SCSS can be based. One, however, needs to be 60 years of age.