The Senior Citizen Savings Scheme (SCSS) is a government initiative designed to provide elderly individuals with a secure investment option.
Individuals above the age of 60 can invest in this scheme, which has a duration of five years and offers an attractive interest rate of 8.2 percent.
While there are several advantages to this scheme, it is important to consider the associated disadvantages as well.
Let’s delve into both the benefits and drawbacks of the SCSS.
Advantages of SCSS
The primary advantage of the SCSS is the tax benefit it provides to senior citizens.
Under Section 80-C of the Income Tax Act, investors can claim a tax deduction of up to Rs 1.5 lakh.
Additionally, this scheme offers a high level of security as it is backed by the government.
Investors can contribute a maximum of Rs 30 lakh to this scheme and have the flexibility to withdraw their funds after one year of opening the account.
However, if the account is closed within the first year, no interest will be earned, and only the principal amount will be returned.
Disadvantages of SCSS
Under the SCSS, interest is credited to the account every quarter. However, if the account holder fails to claim the interest, no additional earnings will be accrued.
Furthermore, if the total interest earned in a financial year exceeds Rs 50,000, TDS (Tax Deducted at Source) will be deducted from the interest.
It is also worth noting that the interest rate may change under the scheme.
Existing account holders will continue to receive the interest rate applicable at the time of account opening, while those seeking higher interest rates will need to open a new account.
Additionally, only individuals above 60 years of age are eligible to avail the benefits of this scheme.
However, defense employees aged 50 to 60 years and civilian employees aged 55 to 60 years who have chosen the Voluntary Retirement Scheme (VRS) can also invest in this scheme.
Despite the drawbacks, the SCSS remains a popular choice among senior citizens due to its tax benefits, guaranteed returns, and government backing.
Potential investors should carefully evaluate their financial goals and consider the advantages and disadvantages before making an investment decision in the SCSS.
