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 Interest Rates
SCSS is one of the highest-earning small savings schemes that currently exist. As of March 2020, the SCSS interest rate is 8.6%, easily putting it ahead of every other competing scheme.
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.
Historical Trends of SCSS Interest Rates
Here is a brief overview of how the SCSS interest rates have varied over the previous years.
|Timeline||SCSS Interest Rate|
|Up to 2012||9%|
Historically, 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.
Senior Citizen Savings Scheme Interest Calculation
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.
Benefits of Investing in Senior Citizen Savings Scheme
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 –
- Assured returns
The returns on these schemes are assured because of Government backing along with sovereign debt protection. Unlike investments which 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 2020 of 8.6% p.a., investors can rely on assured returns as per this rate, subject to change as per periodic revisions.
- Act as medium-term investments
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.
- Flexible investment amounts
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.
Tax Benefits on Senior Citizen Savings Scheme
Investment in SCSS brings certain advantages on the taxation front as well. The most important ones are:
- All investments made in a Senior Citizen Savings Scheme are exempted from Income Tax under the I-T Act of 1961. The exemption is under Section 80C and the maximum benefit that can be availed in a year is Rs. 1.5 Lakh.
- Note that there has been some recent amendment in the taxability of interest accrued in a Senior Citizen Scheme. According to this amendment, if the interest amount crosses Rs. 50,000 in a fiscal, it will be subject to TDS (Tax Deducted at Source). This limit will be applicable, starting from AY 2020-21. While the Senior Citizen Saving Scheme interest rate is often tweaked, the taxation on interest is a new addition.
Eligibility Criteria for Senior Citizen Savings Scheme
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 defence personnel below the age of 50||Eligible|
|Non-Resident Indians of age 60 and above||Not eligible|
Who Should Invest in a Senior Citizen Savings Scheme?
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 2020 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.
List of Banks which Offer SCSS Accounts
- Andhra Bank
- State Bank of India
- Bank of Maharashtra
- Allahabad Bank
- Bank of Baroda
- Punjab National Bank
- Indian Bank
- Indian Overseas Bank
- United Bank of India
- Corporation Bank
- Canara Bank
- Dena Bank
- Syndicate Bank
- Central Bank of India
- UCO Bank
- Union Bank of India
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.
- Must military personnel fulfil the same eligibility criteria as civilians when availing the interest benefits of a Senior Citizen Savings Scheme?
No. Under existing laws, any retired military personnel under 50 years of age may also avail the many benefits of an SCSS account. The age bar is higher for civilians who must be at least 60 years old.
- When do yearly interest rates on these schemes change?
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.
- Are family members allowed to become nominees or co-holders of an SCSS account?
The account holder can opt for anyone to become the nominee, but only spouses can be joint account holders.
- Is there any upper age limit which might prevent one from opening an SCSS account?
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.