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All about Senior Citizen Saving Scheme 2020

Senior citizens above 60 years of age and looking for places to keep their savings safe post-retirement while earning a moderate rate of return on them, usually land up with investment options such as bank FDs and RDs, National Pension System (NPS), post office FDs, and RDs, Pradhan Mantri Vaya Vandana Yojana (PMVVY), and Senior Citizens’ Savings Scheme (SCSS).

Even though these are some of the best options for senior citizens, along with mutual funds, there are some investments that offer personalized services for senior citizens along with higher interest rates

For instance, the Senior Citizens Savings Scheme offers a regular stream of income for senior citizens and tax-saving benefits. Though options like mutual funds offer high-return they are also relatively high-risk, hence, experts say low-risk fixed return investment options like bank Fixed Deposits, post office FDs, PMVVY and SCSS are also needed in the portfolio of a senior citizen investor. According to experts, an ideal portfolio depends on the needs of senior citizens. For instance, to get the best return along with wealth creation, one should have the combination of both high-risk high-return funds along with low-risk fixed return investment options.

Additionally, the government-backed SCSS scheme is known to be more secure, unlike bank FDs, as the investments are held with the government. This saving scheme comes with a tenure of 5 years which can also be extended by 3 years by the investor.

Note that SCSS is a long-term saving option. Investors can invest up to Rs 15 lakh, both individually and jointly in the saving scheme. Having said that, an investor can invest the retirement benefit that they have received, or Rs 15 lakh, whichever is lower. The invested amount cannot exceed the retirement benefit that the investor has received.

The interest earned from the SCSS account is credited to the investor’s linked savings account at the same post office, hence, investors need to open an SCSS account at all India Post Offices. The current interest rate offered on SCSS is 7.4 per cent, which is taxable, and investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act, 1961.

Keep in mind, that in the case of premature withdrawal, penalties will be charged at 1.5 per cent of the deposit amount if the investor exits from the scheme before completion of 2 years from the date of account opening. If the investor exits from the scheme within 2 years and less than 5 years from the date of account opening, 1 per cent of the deposit amount as a penalty is charged.

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