Most seniors look for places to keep their savings safe and at the same time get a moderate rate of return. The Seniors Savings Plan (SCSS) offers the same with investment security, a steady stream of income as well as tax benefits. Compared to mutual funds, SCSS is a low risk fixed return investment. SCSS investing is similar to bank term deposits, post office term deposits and PMVVY.
Note that SCSS is a government backed savings scheme, unlike bank FDs. Hence, it is safer because the investments are owned by the government. The savings plan has a duration of 5 years which can be extended by 3 years.
The current interest rate offered by SCSS is 8.6% per annum for the period January to March 2020. The interest rate is payable from March 31, June 30, September 30 and December 31. To open a SCSS account, a minimum deposit of Rs 1000 is required, while the maximum amount should not exceed Rs 15 lakh.
In the SCSS account, individually or jointly, depositors can invest up to Rs 15 lakh. Note that the amount invested cannot exceed the money that was received at retirement. One of the lower, Rs 15 lakh or the amount received as a retirement benefit, can be invested in the SCSS account.
Interest earned on a retirement savings plan is credited to the depositor’s linked savings account held at the same post office. A SCSS account can be opened by depositors at any Indian post office. In public and private sector banks, a SCSS account can be opened, outside of regional post offices.
For depositors, investments of up to Rs 1.5 lakh per year in the savings scheme for the elderly are tax deductible. However, the interest rate is taxable. In addition, if the amount of interest is more than Rs 50,000 per year, TDS is deducted from the interest.
Depositors can also make a premature withdrawal. However, penalties are applicable. The penalty of 1.5% of the deposit amount is charged in the event of premature exit if the system is exited by the depositor before the completion of 2 years from the date of opening the account. If one leaves the system within 2 years or less than 5 years from the date of opening the account, 1 percent of the deposit amount is charged as a penalty by the depositor.