Savings scheme

Seniors Savings Plan: all you need to know about tax benefits


oi-Vipul Das


Many older people are currently looking for safe ways of investing to get a decent return on them at the same time. The preferred investment option of the elderly, the Senior Citizens Savings Scheme (SCSS), not only provides a steady stream of income, but also tax benefits. SCSS is a low risk fixed return investment option, as opposed to mutual funds. Like bank FDs, post office term deposits and PMVVY, the Senior Savings Plan is an investment vehicle with a life of 5 years and can be extended by 3 years. Remember that unlike bank FDs, SCSS is a government backed investment vehicle with guaranteed returns and therefore widely known as a stable investment option.

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Currently, an interest rate of 7.4% per annum is provided by this plan and interest is payable on March 31, June 30, September 30 and December 31. A minimum deposit of Rs 1000 is required to open a SCSS account individually or jointly and the maximum deposit amount is up to Rs 15 lakh. Remember that the amount deposited should not exceed the retirement money that has been earned. It is possible to deposit either the lower amount of Rs 15 lakh or the amount earned as retirement benefit into the SCSS account. Interest received from SCSS is credited to the investor’s linked savings account opened and maintained at the same post office. In addition to regional post offices, an SCSS account can be opened at public and private sector banks and at Indian post offices.

How to invest in SCSS?

Deposits of up to Rs 1.5 lakh per year in the Seniors Savings Scheme are tax deductible, but the interest rate is taxable for investors. In particular, if the amount of interest exceeds Rs 50,000 per year, TDS is withheld from the interest income. Under the SCSS, an early withdrawal facility is also available, but penalties apply. If the depositor leaves the system before the expiration of a period of 2 years from the date of opening the account, a penalty of 1.5 percent of the deposit amount is imposed. Likewise, if the depositor makes a premature withdrawal or exits SCSS within 2 years or less than 5 years from the date of opening the account, a penalty of 1 percent of the deposit amount is charged.

Article first published: Saturday December 12, 2020, 1:27 PM [IST]

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